Growing fast and running out of cash at the same time

The most uncomfortable meetings I have had over thirty years were not with struggling businesses. They were with growing ones. Order book full, staff busy, profit on paper, and no money in the account to pay the wages at the end of the month.

You buy materials or stock before you invoice. You pay staff weekly or monthly for work a customer will pay for in sixty days. If a customer takes ninety days, you are financing them out of your own account while your suppliers expect thirty.

The bigger the growth, the bigger the gap. Doubling turnover roughly doubles the amount of cash locked in that cycle, and it happens before the extra profit ever lands.

Take debtors plus stock, minus creditors, and express it as a share of turnover. That figure tells you how much cash the next €1m of growth will absorb. Owners who know that number take growth decisions calmly. Owners who do not take them and then spend six months firefighting.

Debtor days, how long customers actually take, not what your terms say. Stock days, how long goods sit before they are sold. Creditor days, how long you take to pay. Pull five days out of debtor days and you have released real cash without touching sales.

Chase invoices as a routine process rather than an emergency. In most businesses the biggest available cash improvement is collection discipline, not funding.

Invoice finance, a working capital facility or a stocking arrangement all cost money, and all cost far less than a missed payroll or a supplier putting you on stop. The time to talk to a lender is when the figures look strong and the request is planned, not the week the pressure arrives.

Bring a thirteen week forecast to that conversation. It changes how you are treated.

Collections first, because that money is already yours and it costs nothing to go and get it. Then terms, both what you ask customers for and what you have agreed with suppliers. Then stock and work in progress, where cash sits quietly in a yard or a warehouse. Funding comes after all three, not instead of them.

Owners often start at the end of that list, because a facility feels like a solution and a debtor conversation feels like a confrontation. The facility is the expensive version of the same outcome.

Revenue rising while the bank balance falls. Payments to suppliers being sequenced rather than scheduled. Revenue liabilities being used, even briefly, as working capital. A large new contract that everybody is delighted about and nobody has costed for cash.

Any one of those is manageable if it is dealt with in the month it appears. Two or three together, left for a quarter, is how a profitable business ends up in a conversation it cannot control.

Before accepting a large order or opening a new location, work out what it absorbs in cash, in which weeks, and whether that is available without a facility. Sometimes the answer is to take the work and arrange funding in advance, sometimes it is to phase it, and occasionally it is to decline it and say so plainly.

That is a decision made better with a second pair of eyes on the numbers than alone at the kitchen table, and it is one of the more common reasons owners ring me.