The Wake-Up Call: A Cash Flow Crisis

It starts with a late-night email. A growing tech startup, thriving in every way, except financially reaches out to us in panic. Sales are climbing, customers are happy, and investors are showing interest. But their bank balance? Dangerously low.

Like many startups, they’re so focused on growth that cash flow takes a backseat. That is until payday looms and they realise they might not have enough to cover salaries.

Sound familiar? You’re not alone.

Why Even Successful Businesses Struggle with Cash Flow

Cash flow problems don’t just happen to failing businesses. In fact, growing companies are often the most vulnerable. Why? Because:

• Revenue is not the same as cash – Invoices sit unpaid for weeks (or months!), while expenses roll in daily. This can also be affected by the prevailing market conditions and economic cycles, outside the control of the business owners.
• Scaling brings unexpected costs – Hiring, equipment, software, marketing, and it all adds up, fast.
• Investors and lenders move slower than your expenses – Even if you have funding lined up, there’s often a delay before it hits your account. We’ve seen it several times; clients obtaining bridging finance, just to fund the gap between cash running out and funding or government credits hitting.

Without a solid plan, even profitable businesses can suddenly find themselves struggling to pay the bills.

How We Step In (And Step Up)

After we get the urgent call, we get to work. Here’s how we can help a growing startup get its cash flow back on track:

1. Diagnosing the Problem: Where Is the Money Going?

First, we deep dive into the financials. The problem is rarely a lack of revenue, but moreso a mismatch between money coming in and money going out.

• Slow-paying clients means cash is tied up in unpaid invoices, creating unpredictable gaps in the startup’s income.
• High upfront costs for software, marketing, and recruitment were draining reserves before revenue had a chance to catch up. A startup can often get sucked in by a discount offered for payment upfront, which can save long term costs, without factoring in how much cash this ties up, reducing what’s available for short term working capital requirements.
• Unmonitored spending on “nice-to-haves” expensive office perks, unnecessary subscriptions, and impulse purchases, quietly chips away at runway. We’ve seen it time and again. The lack of centralised or management purchasing, particularly with software subscriptions, leads to unwieldy and mismanaged costs.
• Lack of a cash flow plan means startups make decisions without a clear picture of their upcoming financial obligations. They can get so caught up on the decisions and operations, working ‘in’ the business, they forget or lack the time to step back, and look at the big picture. Working ‘on’ the business.

2. Quick Wins to Improve Cash Flow Immediately

Some changes can have an instant impact:

• Faster invoice payments – We can set up systems for automated client invoice reminders and early payment discounts. Additionally, we can encourage startups to introduce stricter payment terms for new clients, reducing the likelihood of late payments. We can also setup credit checking for new clients, to minimise the likelihood of taking on clients with limited funds and the inability to pay.
• Smarter expense management – Cutting non-essential costs frees up immediate cash. By reviewing software subscriptions and renegotiating supplier contracts & providers, we can find savings clients hadn’t noticed before.
• Short-term financing – We can arrange temporary funding solutions to cover payroll and other short-term working capital requirements while longer-term fixes take effect. This includes flexible credit facilities, allowing clients to bridge gaps without high-interest emergency loans or ‘payday lenders’.

3. A Long-Term Strategy for Sustainable Growth

Fixing cash flow isn’t just about patching holes. We help clients build systems to stay in control as they grow:

• A rolling cash flow forecast – We’ve created simple yet powerful forecasting tools that track expected income and expenses. This gives clients visibility over the next 6–12 months, helping them plan ahead.
• Better payment terms – We’ve negotiated with key suppliers to extend payment terms, giving clients more breathing room. At the same time, we’ve introduced incentives for customers to pay sooner, striking a balance between incoming and outgoing cash.
• Clearer financial oversight – We scheduled regular financial check-ins, ensuring that any potential cash flow issues are identified and addressed before they became crises.
• Profit-first thinking – We guide clients to set aside a percentage of their revenue as a financial cushion, preventing future cash flow emergencies.

The Outcome: From Panic to Confidence

Within weeks, these steps can rectify immediate cash crunches and resolve the associated stress for business owners. They no longer have to scramble to cover payroll or delay essential investments.

More importantly, they then have financial systems in place that allow them to grow with confidence. No more sleepless nights wondering if they can afford their next expansion, or if that dip in revenue is going to require drastic cost cutting measures.

A few months later? They can then then secure a major investment round, without the stress of a looming cash crisis hanging over them.

What You Can Learn From This

If you’re growing fast but your bank account isn’t keeping up, take action before it’s too late:

1. Know your numbers – If you don’t have a rolling cash flow forecast, make one today. A simple spreadsheet can help you predict financial shortfalls before they happen.
2. Get paid faster – Review your invoicing process. Are you sending invoices promptly? Following up on overdue payments? Offering discounts for early payment?
3. Control your outgoings – Identify costs you can reduce, delay, or renegotiate. It’s easy for unnecessary expenses to creep in as you grow.
4. Plan ahead – Scaling up is exciting, but it needs to be financially sustainable. Factor in unexpected costs and cash flow gaps before making big decisions.
5. Ask for help – You don’t have to do this alone. A second pair of eyes can uncover solutions you might miss, whether that’s negotiating better payment terms, restructuring expenses, or improving financial forecasting.

Let’s Make Your Business Financially Secure

At RedBrick, we help businesses grow safely, without nasty cash flow surprises. If you want to build a better home for your business finances, email us at hello@redbrickaccounting.com