Growing without declining cash flow

A shortage of cash flow is the main cause of bankruptcy. Even when the numbers seem rosy, it is a challenge for entrepreneurs to constantly have money available. And start-ups in particular are struggling with this. In this article, we’ll discuss two of the biggest challenges to your cash flow. Rapid growth and expectant credit management. Of course we also share with you how to cope with them.

Growing (too) fast

Bringing in new clients, concluding that one big contract, working together with a large company. It all sounds very attractive. But growing requires investment. You have to train employees, material costs and extra overhead. They are a major drain on your cash flow.

In order not to grow too fast, it is important to focus on a positive cash flow. Profit is a good indicator of this, but despite that, a company can grow so fast that the profit is not enough to finance that growth. That means that you will have to borrow the rest of the money. This can be done at the bank against unfavorable conditions or by means of factoring. In general, this does not have the most beneficial effect on the relationship with your customers.

Another way is related to the second challenge.

Expectant debtor management

Precisely because we want to maintain a good relationship with the customer, we tend to take a wait-and-see attitude when it comes to collecting invoices in times of growth. Payment reminders are postponed and in the meantime the cash flow is visibly falling.

Many people struggle to ask for their payment. Especially if the customer provides all kinds of good reasons to postpone them for a while. Everything from the issues of the day to financial shortages can be a reason. That doesn’t make it any easier to send a friendly yet compelling reminder or warning.

But waiting for a payment comes at a high cost. Costs are added every day and if you do not collect the money at all, your costs on sales will all have been for nothing. When you write off invoices at the end of the year, the turnover actually collected can therefore look very different from the expectations based on your sent invoices.

A few questions of conscience. Do you invoice for all sales of services and products? Are you also in everything, and on time? How much time and money do you actually spend on collecting invoices? With a strategic approach to credit management, you not only keep your cash flow up to standard, but you also improve your customer relationship. In this way you ultimately ensure that you can continue to grow.

Get closer to the ball with smart software

To ensure that your customers pay on time, it is important to act quickly. If you find this difficult or you lack time, let smart software do the work for you. You automate your credit management with Payt’s software. You have a grip on the process and you keep the good relationship with your customers that you have worked so hard for.

How do I grow my business

You have your company in order. Business is going well, you have enough customers and you really want more. You want to grow. How do you tackle such an intensive process and how do you avoid making mistakes?

The life of a business consists of four phases: start-up, growth, stability and aging . During the growth phase, a lot changes within your company. To properly support that growth , you need structure , money and a good plan. Not every entrepreneur wants that. Growing your company (quickly) has a lot to do with ambition. In this article we explain which bottlenecks you encounter as an entrepreneur in the growth of your company and we give tips to prevent growing pains.

Oops, I’m growing!

Suddenly you notice that you have too much work and that you have to hire (extra)  staff to be able to cope with everything. You grow and get (more) people under your care who need to be managed. That means that your role as an entrepreneur is changing. You are no longer that pioneer who does not have to answer to anyone but suddenly has to be a manager. That requires a structured way of working, something that you as an entrepreneur are not always good at. Moreover, it is difficult to let go of ‘your child’. Yet that is necessary if you want to grow further. After all, you cannot always keep everything under control and you have to learn to trust employees.

Make a plan

To avoid problems you have to grow well prepared. That starts with determining your goal. What do you want to grow in ? Do you want more turnover, do you want more customers , do you want to offer more products or services, do you want more staff? And which strategy fits in with this? Is your company structured? Can you get well-trained personnel? Do you have the facilities and technical necessities to keep your business running smoothly, even as it gets bigger? These are questions that you should consider extensively. For that you need time, to take a step back from your company and think about business operations and the future. Often entrepreneurs do not have that time, because they are busy with their company and operational matters. So try to make time conscious to make plans.

Financing

Growing costs money. New personnel, new computers, extra products to be produced, more investment in machines. You can get money in different ways. The usual way through the bank does not always work, because banks are still not as generous as they were before the economic crisis. Prepare yourself well when you go to the couch. Make a financing plan and get your business plan in order. Inquire about the possibilities of the Growth Facility , a government scheme in which the government guarantees a certain percentage. Are you unable to get money through the bank? Try it with informal investors , Business Angels or through private equity .

Talk to fellow growers

Because you are so busy doing business, it is sometimes nice to talk to fellow growers. This way you quickly get tips and advice, you can learn from each other and consult with each other. A platform where you can go for this kind of thing is Port4Growth. Since 2004, entrepreneurs who are growing or have the ambition to grow can come here for training, advice and meetings.

A good tip from Port4Growth is: Make a clear picture of where you want to be in five years . Which market do you want to serve, how many customers do you want and what is your role in this process. Translate this back to four, three, two and one years. Entrepreneurs who do this are almost always successful.