Fixing the Cash Flow Pipe

Fixing the Cash Flow Pipe
 
I step into my office as the April sun starts making its presence felt. It has been a delightful roller coaster ride these last two years for my services company, but the cash flow cycle has been the toughest challenge to check. We have always had receivable delays and purchases exceeding expenses for months on end- thus burning into our capital. It won’t be long before the reserves dry out and we live hand to mouth. Do the increasing popularity and happier customers mean anything to the ruthless struggle for existence?
 
This might seem like a story of a small business gasping for breath. We live in interesting times where there are multiple parameters to gauge how your business is performing. Initiatives revolving around customer service and social media might often project an entirely different scenario as compared to the P&L statements. Fortunately, that keeps the entrepreneur’s head above the water and helps him keep his hopes alive. It is plain silly giving up on yourself and your business purely because it doesn’t perform financially, because it always has the potential to. That’s where hard work and pragmatism comes in.
 
 It was 6 months back, when our war chest was flush with funds with the investor who had recently stepped in. We invested in new marketing material, upgraded all the infrastructure and carved out a new identity. Business was running as usual and we wrote cheques as if a grander tomorrow was certain. Checking if we were burning money never crossed my mind, everything was going so well. Big customers, bigger media features and the world adored us (still does). ‘Coolness’ galore.
 
Rushing water in a pipe is a welcome scenario, and your delighted self might pay least attention to small leaks because they are of little consequence then. Rushing water means wealth, and you’d be prancing around directing its flow, watering the right plants and doing away with settled dirt. The leaks exist, the weak pipe joints squeak every now and then but rushing water captures your imagination.
 
Then suddenly, the flow stops, and it is beyond your control. The only thing you can do is to look at the pipeline lying dry. There are spurts of water that comes in every now and then, but the weak joints and the leaks halve the flow down. You now realize how serious the situation is, when every drop is important for your very existence.
 
Brushing exhaustion off my brows, I have a word with a couple of my managers resolving to understand how the entire business cycle is functioning. It was something I had ignored in my obsession with my service offering, but it was high time to know how things run in order to fix the situation. I realized that due to certain gaps in our communication, customers didn’t find it convenient to pay immediately and took their own time. There were loopholes in the way petty cash on the field was handled and there were methods (which we were not employing) to check excess expenditure. Damn, why had I not inspected the pipeline before? Better late than never, right?
 
This is when you sit down on your haunches, in the good old earth you stood on all this while, and fix the darn pipe with your bare hands. This is when you bring out the tools, blow the dust away, understand your pipe from all aspects and fix the darn thing. You ensure that it saves every drop, you ensure that the system is now tight. And as you walk towards the source of the flow aiming to fix that too, relieved lies the head that sports the crown.
 
:)

  2 comments for “Fixing the Cash Flow Pipe

  1. Kashish
    May 28, 2014 at 4:58 pm

    Great post Sushrut. I prefer to work under the mantra that each project should fund itself, and I try not to ever let one project carry the financial burden for another. We go by “net30” payment terms, so clients get 30 days to make the payment after the service is delivered. I often extend the client a 2% discount if they pay within 10 days and there have been times where they don’t pay at all.

    One quick question, how do you manage clients who are not satisfied with quality of service at the end and refuse to pay? Do you take any advances?

    Also, have you considered accepting online payments and introducing GPRS-enabled swipe machines? Keep writing Sushrut :)

    • Sushrut Munje
      June 22, 2014 at 7:31 pm

      Hey Kashish, thank you! I like and agree with the way you go about it. For us- it’s like having each cleanup fund itself. Thus making sure each sale is profitable. Proving to be tricky at the moment but figuring a way out. While we do have customers who don’t pay, it’s not due to the quality delivered. If it is, we won’t insist on a payment. Nope, no advances. And yep- exploring ways to take things online :) Thanks again.

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