Perhaps you have been in business for a while and are experiencing a period of rapid growth. The systems and team you have had in place until now have served you well but you are in a whole new ball game now and need to step things up to keep on top of everything.
It seems wrong to say it but you are at a greater risk of failure in the midst of success than you are in the midst of failure. Cash flow becomes critical when you are investing in stock, plant and equipment or even just in more technology to deal with the increase sales.
With rapid growth often comes increased money tied up with your customers or clients waiting for them to pay for sales you have already fulfilled.
With rapid growth often comes the need to employ more staff and it’s so easy to employ more than you need. It’s ok to do that as long as you have the money to pay them. But how do you know that you will.
With rapid growth often comes the need to spend money on stock or motor vehicles for sales people, or new premises and all the extra costs that come with that. How do you fund that?
With rapid growth and more sales comes more GST and more tax you have deducted from employees salaries and more superannuation. Most of these payments aren’t due for months after you have received the money and it is really easy to use this cash to fund your growth. This is known as making the Tax Office the lender of last resort.
With rapid growth and more staff comes more workers compensation insurance premiums. These are adjusted in arrears for the actual salaries you pay in a year as well as in advance for your next years premium so you could be hit with a “double payment” depending on how quickly things are moving for your business.
Are you catching my drift now? Can you see why periods of rapid growth are periods of real risk for your business. And the ultimate kicker is that you have even less time to devote to cash flow management because the chances are if your business is booming you are already flat to the boards just trying to keep on top of meeting the sales demand.