It was the rapper Notorious B.I.G. who once penned that famous American quote: ‘Mo Money. Mo Problems.’ In 2018 I learned Biggie was right. Because as my young advertising and idea agency was growing at an exciting pace, we also faced mo money problems. Or was it less money problems? Maybe it depends on whether you’re more East Coast or more West Coast.
Go With The Cashflow
In 2018 The Weaponry, faced a cash flow problem. It wasn’t as if I hadn’t been warned. My posse of entrepreneurial homies, including Dan Richards of Global Rescue and Jeff Hilimire of Dragon Army, warned me that as you work with larger and larger clients they will use their financial muscle to get longer and longer payment terms. So instead of our standard 30-day terms, new clients began requesting, pushing for or demanding 45, 60 and even 90-day terms. #WhatWouldSugeKnightDo?
The 60 and 90-day terms put growing businesses like mine in a conundrum. Obviously we want to work with the biggest and best companies in the world. The problem is that while we wait to get paid for the work we have completed, we still have to pay the Weapons, vendors and freelancers who work for us. Which means that like a leaky bucket, more money is leaving the system than coming in. #DearLizaDearLiza
By June of 2018 we had been in business for 2 years. We could clearly feel the momentum build. There was sharp rise in the demand for our work. But with all the new work, longer payment terms, and invoices that seemed to have taken the slow boat to PayMe Town, we started carrying between $500,000 and $700,000 in our monthly accounts receivable stack.
For a business that bootstrapped its way into being just 24 months earlier this was an interesting turn of events. It is nice to be owed that kind of money. But cash is the life blood of a business. And there were serious demands on our blood supply.
We were always able to pay our salaries and all of our bills. But the depleted cash on hand meant that we weren’t able to invest in our own growth. We had started looking at space for our Columbus office in June, then hit pause on our plans to sign a lease in order give ourselves some breathing room. We waited on transitioning some of our freelance help to full-fledged Weapons. And we postponed the company offsite meeting in Monaco.
It Was All A Dream.
When I shared our mounting money challenge with our team, they once again stepped up to solve the problem. Simon Harper, one of our outstanding account directors, shared how we could adjust our invoice timing to make sure we were paid by our clients sooner. Other account leads also contacted their client contacts about the outstanding bills. Which helped get the money ball rolling.
Our accountant, slash bookkeeper, slash egg dealer, Sally Bretsch, recommended another adjustment to our billing process that would ensure that our invoices got into our clients’ accounts payable systems faster, with greater accountability. Which is either totally meta or just a nice word play (Did I mention I used to read Word UP! magazine?)
From Negative To Positive (And it’s all good.)
With these team-driven enhancements in place, suddenly we dramatically decreased the turnaround time between work performed and payments received. We had our own Black Friday moment, when suddenly, following months of increased billing, but decreased cashflow, we started seeing the fruits of our labor manifest in our bank account.
Business is a team sport. As an entrepreneur, leader or department head, it’s important to understand that your team will find ways to solve problems and improve performance faster, and in better ways than you would be able to unearth on your own. Share information with your team. Make them part of the solution. If you’re thinking about starting a business, surround yourself with a strong crew who knows more about their specialties than you do. Then give them a mic and let them flow. That’s how small teams make big things happen.