Growth Eats Cash

Growth sounds great, until you realize what’s needed to achieve it.

Most businesses want to grow. They want to make more sales and keep more profit. Finding the right marketing message is not the only obstacle to achieving that growth, though.

To satisfy growing demand, companies need to buy more inventory, hire more staff, and obtain more physical space. These all require more upfront cash because these things must be secured before those sales are made and the cash is collected.

This is why it’s important to be disciplined with cash while in a growth cycle. What does this mean? It means:

• crafting your credit policy to keep accounts receivable to a minimum

• working with vendors to extend payment terms as long as possible

• reviewing expenses thoroughly for cash outflows that don’t have an adequate return on investment

• optimizing inventory levels and purchasing so that there’s enough on hand to satisfy demand but not so much that too much cash is sitting in a storeroom shelf

Growth is an exciting time in a business, but if not managed properly, it can also be a massive headache. If you need help managing growth, click the Contact button above!