According to the Cambridge Dictionary of American English, "crunch" is defined as: a difficult situation which forces you to make a decision or act. Crunch time is a point at which something difficult must be done. For example, He plays fine without pressure, but can he produce at crunch time? When there isn't enough cash to pay current obligations, it's polite to say "We're having a cash crunch." That is, we're in a difficult situation requiring hard decisions about how to disperse the cash that is available.
          In order to make survivable decisions during a cash crunch, various factors must be considered: legal, operating requirements, staff retention, and public relations to name just a few. Some of these factors are lofty and rather strategic in nature; others just plain survivorship. In fact, if you are contemplating the mixture of spending between inventory and sales activities, some may say "you don't know what a genuine cash crunch is." The crunch is really on when you contemplate whether you can run the business just using everyone's personal cell phones.
          Although every set of circumstances is different, here are some dos and don'ts for surviving Cash Crunch Time.
          Stay out of jail. It is extremely tempting, particularly if you believe things will improve relatively soon, to delay making employer wage withholding tax payments. Don't do it. It is better to pay some employees properly than to pay all workers hoping that the tax payments can be made up later. The term "net check" should not be in your vocabulary. Federal Code penalties in this area are severe; enforcement mechanisms are powerful and carry personal liability to officers. Likewise, delaying payments into 401(k) plans or cafeteria benefit plans (no matter how optimistic you might be feeling) can snowball into much larger problems.
          Revisit insurance policies. Many insurance policies (particularly product liability) are based upon estimated annual sales. If you're in a crunch, those estimates may in fact be too high.           Talk with the carrier and have the premiums recalculated based upon a lower projection. Not only will the premiums be reduced, but, you may also be able to switch from large lump sum payments to a monthly payment plan. Deductible limits may be adjusted as well-- the higher the deductible, the lower the premium. Raising deductibles does shift more risk to you, but it will help conserve cash in the near-term.
          Don't be distracted by unsecured noise. A cash crunch requires hard decisions; decisions based upon business issues, not emotional outpourings. The old adage "The squeaky wheel gets the grease," applies here. Some creditors are apt to make loud verbal threats and employ other intimidating tactics. Don't be distracted by empty verbal assaults. Rather, evaluate each requirement against the genuine damage that could be caused by the creditor. Although certainly not optimal, creditors that have a security interest in your operation need to be addressed before those that are unsecured.
          Do consider S-8 stock. If your company is publicly traded and fully reporting, you may be able to register additional shares of stock on SEC form S-8. This is a special registration of stock for the specific purpose of compensating employees or consultants for their efforts. However, be very careful of the rules regarding who may accept S-8 stock. Without doubt, S-8 is a powerful tool: it empowers fully reporting companies to register shares quickly and easily--without automatic SEC examiner review. S-8 registration allows issuers to compensate employees and some outside consultants with registered shares in lieu of cash. S-8 shares cannot be issued in connection with capital formation or promotion of the company's shares and must be issued to natural persons for bona fide services.
          Don't ignore the problem. It's a rare person or business that hasn't experienced a cash crunch. They are not fun and can be embarrassing and a severe test of patience. Nevertheless, you must communicate with each person. Left to their own devices and in the absence of any information from you, creditors will spin out the worst-case scenario and escalate their positions. It's a simple rule: return every phone call, answer every letter. During a cash crunch, "No news is not good news." A better euphemism is "love me or hate me, but don't ignore me."
          Use deposits. It's highly likely that when you entered into the office lease, initiated gas and electric service, or telephone service that you put a certain amount of money on deposit. This may be the time to request use of those deposits. Certainly not a permanent solution, but the Lessor or provider of service may be willing to use the deposit for a period of time and then allow you to build it up again.
          Request extensions. Many lenders, especially secured ones understand the cyclical nature of cash flow. During a cash crunch you may find certain lenders amenable to "extending" their loans. That is, no payments for a period of months (often 2 or 3), in exchange for putting those payments at the end of the loan. Frequently this can be accomplished by a simple phone call. Of course it will take longer to pay off the loan, but it helps you through the crunch.
          The preceding suggestions are not a permanent solution for an ailing business. Underneath these cash crunch techniques, there must be a viable business model tactically sound management practices that will eventually enable profitability. In the meantime, hang on and keep your cell phones charged.