A shortfall is a financial term whereby the obligations and liabilities of an organization or an individual are greater than the available cash or assets needed to meet them. A shortfall can be seen as short-term or ongoing depending on the situation and could indicate serious financial mismanagement.

Due to the nature of shortfalls and the vast range of factors that could be affecting the situation, a variety of strategies can be employed to suit the needs of a particular individual or organization. For sudden temporary shortfalls, these may include short-term loans, issuing bonds and hedging against price movements. The latter involves reducing the risk of adverse price movements on future investments and can help manage negative cash flow situations.

In the case of recurrent shortfalls due to ongoing mismanagement of finances, strategies such as inputting capital from other sources or equity injections may be required. These allow the organization or individual to be able to meet their liabilities and further arrears in the future. This situation also requires improved cash management procedures in order to ensure that sufficient cash is available to meet current and future obligations. Additionally, budgeting and forecasting can be integral in understanding and forecasting future liabilities.

Although a shortfall is a serious financial situation, it can be resolved with the right approach and procedures tailored to meet the needs of the particular organization or individual. With sound financial management, the situation can be recovered and should become a distant memory.