Getting through a cash flow squeeze: making it visible, consulting early and using public supportWhat do you do when money looks likely to run short?
When cash flow becomes tight, the first things that matter are to make visible in numbers when and how much will run short, and to consult early. Public support includes the cash flow consultation desks that the Small and Medium Enterprise Agency lists, Yorozu Support Centers (free management consultation), the Safety Net Guarantee of the credit guarantee associations, and the national tax deferment systems for when taxes cannot be paid in one sum. Following government guidance, this article sets out the general order of action. Responses change with individual circumstances, so consult a professional or a desk at an early stage.
- 1. Make visibleLine up receipts and payments month by month and check the months and amounts that will run short
- 2. Receipts and paymentsBring receipts forward, for example by invoicing earlier and checking collections, and review unneeded spending
- 3. ConsultConsult early with the financial institution, credit guarantee association, Yorozu Support Center and tax office
- 4. FundingConsider publicly guaranteed loans and changes to repayment or tax payment terms (deferment)
- 5. Review the planCheck the break-even point and rebuild the plan for fixed costs and sales
Key points
- Make a cash flow table, line up receipts and payments month by month, and find in advance the periods when the balance goes negative (a funds shortage)
- As places to consult about cash flow, the Small and Medium Enterprise Agency lists Yorozu Support Centers, the Japan Finance Corporation and the credit guarantee associations. Yorozu Support Centers are free management consultation offices in all 47 prefectures
- The Safety Net Guarantee covers small and medium-sized enterprises whose management has become unstable owing to the bankruptcy of a business partner, a disaster, a worsening of business conditions and so on, and guarantees them under a separate frame from the ordinary guarantee limit. Use requires certification by the municipality
- When national taxes cannot be paid in one sum, a deferment of realization and similar relief may be granted on application to the tax office if requirements such as application within 6 months of the due date are met. Delinquent tax arises from the day after the due date, so consult early
- Do not stop payments to business partners or repayment terms without notice; consult first. Avoid dealing with the situation by putting off salaries, taxes and social insurance premiums
What to do in practice
- Use the free tool "Cash flow table" to build a forecast of month-end balances up to 12 months ahead and check the months in which it goes negative (also make a table for the case of lower sales)
- Use "Break-even point and required sales" to check the relationship between fixed costs, variable costs and profit and identify costs that can be reviewed
- Consult early with your financial institution, the credit guarantee association, a Yorozu Support Center and the tax office (collection section)
In a shop or a company, even when there are sales, the time money comes in and the time it is paid out can be out of step, and money can run short for a while. When this looks likely, it is important to make a table early of "when and how much will run short" and check it. After that, if you talk to the consultation desks of the government and public organizations, they can tell you about ways to borrow money and ways to discuss the time of payment. Do not worry alone; it is important to consult early.
- ○Applies: Make a table of the money coming in and going out each month and check it
- ○Applies: Consult early, before you run short
- ○Applies: You can also use the government's free consultation offices and the tax office desk
- ×Does not apply: Quietly stop paying without getting in touch
Points
- Make a table of money coming in and going out month by month and find in advance the months when it will run short
- You can consult early at the free consultation offices the government provides (such as Yorozu Support Centers)
- When you cannot pay tax right away, there is also a system that lets you wait on the time of payment, so consult the tax office
What the words mean
- Cash flow (shikin-guri)
- Managing by looking at when money comes in and goes out so that you do not run short
- Credit guarantee association
- A public organization that pays the bank in place of a company when the company cannot repay borrowed money
- Deferment
- Being allowed to wait on a set deadline under set conditions
- Small and Medium Enterprise Agency: Small and Medium Enterprise Agency, Consultation on cash flow
- Small and Medium Enterprise Agency: Small and Medium Enterprise Agency, Safety net guarantee system
- Small and Medium Enterprise Agency: Yorozu Support Centers national headquarters (Organization for Small & Medium Enterprises and Regional Innovation)
- Small and Medium Enterprise Agency: National Tax Agency, No. 9206 When you cannot pay national taxes by the due date
This article summarizes and explains materials published by government agencies and is not advice on any individual case. Rules can change, so for actual procedures and decisions always check the latest original materials and consult professionals such as tax accountants or labor and social security attorneys. English, Simplified Chinese and Traditional Chinese versions are translations prepared from the Japanese articles for convenience. If anything differs, the Japanese text and the original source take precedence.