My team was brought in to help a fast-growth company in the construction industry that was getting ready to crash and burn. They knew they had a major issue when they were getting ready to process payroll every other week and kept realizing they didn’t have sufficient funds in their checking account. That’s when they reached out to us.
Their books were a mess, they were low on cash, and they couldn’t tell how profitable they were. They were growing fast, but spending a lot on labor, commissions, and inventory, and not seeing the cash on their books. When we assessed the situation, we knew they needed to make big changes.
They had a severe mismatch of cash flow timing. Their profitability was good, but cash was going out way more quickly than it was coming in.
Three of the biggest things we did were: making tweaks to when commissions were paid, changing payment terms on inventory, and changing terms with their customers to get an appropriate down payment with contract acceptance. Together, those three things increased their cash flow and put them on the right side of their cash on an ongoing basis.
In fact, they grew so quickly that they were just bought out by private equity looking to roll up in that industry!
Are you a fast-growth company struggling with cash flow (or wanting to avoid a future cash flow problem)? Click here for 10 common pitfalls to avoid so you don’t fall off the cash cliff.