When growth breaks your cashflow

Growth looks great on a spreadsheet but it can adversely affect day-to-day cash. Successful firms can start to struggle when things are going well. New orders, new hires and more stock all drain cash. The numbers look good yet the bank balance tells a different story. Most owners know that feeling: the business is doing well but for some reason, it’s starting to feel a little bit tight. 

Why can rapid growth affect cash flow when your sales are strong?

Growth means that you need to spend money before you expected to.  Stock, wages and kit have to be paid for long before your client pays you. When orders suddenly grow, that gap tends to widen. Even firms with clean books and good margins can feel the stretch when they jump from small runs to larger ones or take on more work than before. 

What signs show that growth is putting pressure on day-to-day cash?

You leave payments until the last day. You refrain from buying that kit that would speed up work. You don’t hire new staff as quickly as you first wanted to.  You check your bank balance more than you did.  None of these are warning signs on their own, but they can point to a firm growing quicker than its cash allows. 

Why do successful firms still get caught out by long payment terms and upfront costs?

Because they do not feel it at first. You win the work, pull everything out of the bag to deliver and hope for payment sooner rather than later. The problem arises later on when you have already paid for materials and staff. Long-term contracts from big clients can put a real burden on small or mid-sized firms. You’re not running your business badly; it’s just the timing that is off.  

Why do big contracts create cash gaps before a company is paid?

A large order often needs stock, staff and materials upfront. You may even have to hold more stock than you would like. This creates a dip in cash that can last longer than you want. By the time the client pays up, you are already into the next job. A lot of owners tell us they felt more stretched winning a big contract than losing a deal. 

What can make cashflow issues worse?

Saying yes to every order. Adding staff before sorting funding. Using the old kit for a bit too long. Letting debtors run long because you do not want to push. None of this feels like a big issue in the moment, but they chip away at headroom and slow down growth.

When should a business step back and check its funding lines?

When growth outpaces cash. When you feel busy but tight. When you win new work that is good for the long term but tricky in the short term. The best time to fix this is before the gap hits, not after you feel the squeeze. 

What types of funding give growing firms the headroom they need?

Short term loans, invoice finance, asset-based lines, trade finance and supply chain support can all provide space to breathe. The right route depends on where the struggle appears. If you hold stock, a stock line helps. If you are waiting on payment, invoice finance works. If the work is large or staged, an asset-based or trade line may fit better.

How does working with a broker stop short-term strain from turning into real trouble?

Good brokers can spot troublesome situations in advance.  They know the right funders  – particularly those who will back a fast-growing firm and the ones that may not. They can help find a deal that supports the work you are doing rather than providing you with a one-size-fits-all solution. Here at Evolve we speak to lenders each day, so we know who has appetite, who moves fast and who supports firms during busy spells.

If your sales are rising but your cash flow doesn’t feel right, it is worth talking to a broker early. Contact  Stef Radymski or Nilima Begum – they deal with this every day, so are likely to be able to come up with a solution!