After months of deteriorating sales, Richmond, Va.-based Circuit City Stores Inc. pulled the plug on its 567 outlets in January as it failed to find a buyer or secure adequate working capital. A few days earlier, the 104-year-old regional department store chain Gottschalks Inc. filed for bankruptcy protection as it sought a buyer or additional capital. Other blow-ups could follow, analysts say, as retail sales remain soft and credit remains tight. Meanwhile, more businesses–even those in far healthier sectors–are bracing for possible cash flow shortages, recent surveys show. Nearly 80% of U.S. companies say economic turmoil has hurt business with 67% citing tightening cash flow as a top concern, according to the Credit Research Foundation, which represents financial and working capital executives of manufacturing and banking companies.

This finding is backed up by a KPMG LLP poll showing that slightly more than 80% of the 550 U.S. and European senior financial executives surveyed cited working capital management as their highest, or high, priority. That's not surprising considering two-thirds reported flat or deteriorating capital, compared with three years ago and only 37% of those respondents had a working capital improvement program in place during the past five years. Of those who lacked a program, 70% predicted working capital will stay the same or decrease. "There is no doubt that companies have heightened cash management concerns today as compared to just a few months ago," says Brad Hillier, a managing director in KPMG's advisory services practice.

Contributing to these problems are unreliable cash flow forecasting systems, says KPMG. Only 14% of the financial executives surveyed by the consulting company reported achieving accurate projections in the past 12 months–even though almost all (95%) said they have forecasting mechanisms in place.