These actions are all perfectly appropriate at the outset, but perhaps the very, very first thing you do is log into the company bank account, look at how much cash you have and how much the company is eligible to borrow under its line of credit – the company’s “dry powder.” Then look at upcoming cash obligations in order of priority, and these are your priorities, which may differ from those who provide goods and services to your company. First and foremost, payroll, then rent, utilities, interest on the company’s debt and everything else.

Working capital measures how much liquid assets a company has to operate its day-to-day business and build its business. The amount of a company’s working capital is too often glossed over, but for the CFO and Controller it is a daily juggling act, especially for small to mid-sized companies that don’t have the luxury of big bank balances and credit lines at the ready. Every day is a judgment call: who are we going to pay today? And that’s when times are good!

You have a limited number of opportunities to “go to the well” with your investors and lenders when you’re doing a new financing – a new deal, a refinance – so you need to plan carefully for liquidity over and above what’s needed for the transaction. Going back for a do-over post- closing is very difficult, embarrassing and painful.

There is no simple rule of thumb or one-size-fits-all formula to manage working capital and oversee the relationship between a company’s short terms assets and its short term liabilities. Here are several suggestions to keep you out of harm’s way:

* Review your company’s credit and collection policies, procedures and, especially, results. Sales and collections are a balancing act. You don’t want to turn away business but you want to make sure you get paid. This is especially true for big advertisers and agencies who know that they have some leverage, especially when times are lean. There is no cardinal rule here other than to know when your cutoff point is. As with your investors and lenders, it’s all about relationships.

* Look at monthly receivables aging over the previous 12 to 18 months. Such a review can be useful in forecasting collections over the next 12 months. Review the over 120 day accounts with the station managers to identify potential write-offs as well as lax credit policies.

* Assuming the status quo, what are your cash collections and disbursements? Project them out over the next year. Run some downside scenarios. What if you bust covenants? Do you have enough dry powder to see your way through without going back to the well? If not, what do you need to feel safe?

* If you’re completing a refinancing or an acquisition, it’s a good time to bring payables current. If you are buying a media company without receivables, you’ll need to plan for the new property’s expenses for two to three months before you can collect and deposit the revenue for your own account.

* Unless you have a bullet-proof source of no-questions-asked funding (most companies don’t), you always need to be on the alert, always thinking 12 months out, for your working capital needs. Everyone hates surprises, but sometimes surprises are unavoidable, so it’s best to be prepared to avoid that 24 hour capital call if at all possible.

Cash is the lifeline of a company. The amount of cash or working capital is critical to maintaining a flourishing business and to producing a profit. The better a company manages its working capital the less it needs to borrow.