Do you ignore the new client and wait to start until you have the money?

Do you ignore the new client and wait to start until you have the money?

In addition, whether you choose to do so or are forced to, you will lose customers if you fail to keep your promises to them and don’t pay your suppliers, vendors, and employees on time.

Let’s look at an illustration: On any given day, your service company typically has around ten active customers. And based on how you’ve run your business over the years, five of those customers pay while you start with the other five and pay for them. That’s fine.

The following day, you acquire yet another client (growth). Even though you’re pleased with the new company, you don’t have enough money to start that new job, which needs to start right away. What do you do then? Do you ignore the new client and wait to start until you have the money? Do you start this new job with those funds from another customer’s job? Do you simply disregard them all?

One or two additional customers can typically be handled. Even though you have additional sales—booking sales and collecting revenue are two different things—if you start receiving more than your company can handle, you will run out of working capital to service those jobs. At that point, the money coming in—which is used to start and finish other jobs—is not keeping up with the money going out—which is used to pay bills and other obligations. As a result, you begin experimenting with your accounting and perhaps even your actual cash, which could buy you a day or even a week.

However, in the end, you will fail to meet a deadline or a payment, and your business will begin to spiral out of control. You begin to lose customers in groups rather than just one or two as a result of missing deadlines. Or, if you don’t pay a supplier on time, you lose that supplier, or if you don’t pay a payroll, you end up in jail. In either case, your business expands, but you run out of money because you are unable to control that expansion. How do you deal with this issue? You can’t do nothing at all. You must simultaneously manage multiple aspects of your business, particularly your working capital. A brief list of things to focus on is as follows: To ensure that you are paid when you anticipate or anticipate being paid, have an excellent payment and collection policy. This could be accomplished by offering discounts to speed up payments, requiring upfront payments, or any combination of the two.