Growth Can Kill a Business

It sounds counterintuitive, but growing too fast is one of the most common reasons businesses fail. You need to pay suppliers, staff, and overheads before customers pay you. The faster you grow, the bigger the gap between spending money and receiving it.

Understand Your Cash Conversion Cycle

Map the time between paying for inventory or services and receiving payment from customers. If you pay suppliers on 14 day terms but your customers pay on 45 day terms, you have a 31 day gap that you need to fund. As your revenue grows, that gap gets proportionally larger.

Invoice Immediately and Chase Early

Do not wait until the end of the month to invoice. Send invoices the moment work is delivered or goods are shipped. Set up automated payment reminders at 7 days, 14 days, and 30 days past due. Many late payments are simply forgotten, not deliberately avoided.

Negotiate Better Payment Terms

Ask suppliers for longer payment terms. Even moving from 14 days to 30 days gives you more breathing room. Simultaneously, offer small discounts for early payment from your customers. A 2% discount for paying within 7 days often accelerates cash collection significantly.

Build a Cash Reserve

Aim to have at least three months of operating expenses in reserve. This buffer protects you during slow periods, unexpected costs, or when a large customer pays late. Build it gradually by setting aside a percentage of every payment received.

Use Variable Cost Sales Models

One way to manage cash flow during growth is to use commission only sales agents rather than salaried salespeople. With platforms like Zepys, you only pay sales commissions after revenue is received, keeping your costs aligned with your income.

Forecast Weekly

Monthly cash flow forecasting is not frequent enough for a growing business. Create a 13 week rolling cash forecast that projects expected inflows and outflows each week. Update it every Friday. This gives you early warning of potential shortfalls so you can take action before they become crises.

Know When to Say No

Not every opportunity is worth taking during high growth periods. A large order from a slow paying customer can actually hurt your cash flow. Be selective about the work you take on and the payment terms you accept.