• Dave Webb

Money and Your Business

I recently talked to a prospective client and after some discussion, gave him some pointers. I thought I'd share them with you too. Some of them will apply, some of them might not…

Keep a VERY sharp eye on cash flow (as I’m sure you are).

The second victim of growth is cash flow (the first is customer service…just as important if not more).

· See if you are eligible for financing from your local bank. However, do not sign a loan package that is “barely enough” (or worse, “not enough”), because you’ll be tied up and without sufficient money for growth. You’ll just be postponing the problem.

· If all you need is working capital, I would NOT bring-in an additional partner. You’ll be giving up too much equity, control and profits AND it will be impossible and unethical to get rid of them when the situation improves.

In your case, cash flow from operations is going to be determined by the following variables (and some strategies to address them).

Accounts Receivable: Keep them as low as possible.

o Set expectations early in the relationship. You can tell your customers “I’m VERY excited about our relationship…here is our agreement: we are going to bend over backwards for you, and we expect you to pay our bill when due, OK?”

o Enforce Agreements (giving leeway sets the precedent for the future).

o Underwrite their credit. Just because they want to order from you doesn’t mean they are a good risk.

o Be proactive; jump on problems before they become giant.

o If a client wants an increase in credit limit and you don’t feel too comfortable with it, have a backstop (credit card number or post-dated check).

Accounts Payable: Keep them as high as possible, without jeopardizing your relationships.

o Don’t pay penalties (they are usually VERY expensive).

o Stretch the last pre-penalty date.

o ASK…negotiate longer terms.

Inventory: Keep it as low as possible.

o Favor just in time vendors.

o Work on reorder frequency.

o Discount items that don’t turn as fast.

o Consignment.

o Hidden costs/freight, etc.

Company owners’ withdrawals: Keep them as low as possible.

I cannot stress enough the importance of having good, reliable numbers. Once you do, closely track each one of the above variables (remember, what you can change you can measure). If necessary, track weekly in a graph each one of them and place in a very conspicuous place for you to see.

If banks are not an option in the short term (or they take too long), then don’t hesitate to let me know. I can give you a quick response as to whether we can be of help by providing you with working capital to get the company to the “next level,” like a stepping stone, until you become eligible for traditional financing.

Feel free to call me on my direct line at (239) 247-1096 or email

All the best,

Dave Webb

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