Corporate Turnaround Artistry

Chapter 3Controlling Cash

Let's say you've got a great company with solid revenues and reliable profits. Everything is just grand: you're paying all your bills on time, reinvesting in the business, and able to maintain a nice cash reserve. Then things get better. Years of hard work have netted you that one big customer. Bookings and shipments jump 30% and you're scrambling to ramp up. You've got that big surge of adrenaline going. You've finally hooked the white whale you've been chasing for years.

Your bank line of credit helps fund the business's growth as you're ramping up inventory purchases, adding payroll, enduring learning curves and high scrap rates, and adjusting to new equipment. It's all working as expected: the customer keeps consuming your product and ordering more. Fortunes surely await you at the end of this journey, as long as you can continue paying your bills. Then something happens: the new customer pays more slowly, an old customer withholds payment over a quality issue, a critical piece of equipment breaks.

Cash gets tight but you've got a great and growing business so you go see about a bridge loan or some temporary accommodation to help you get through this 60‐ to 90‐day cash shortfall. Your bank is cold to the idea and having second thoughts about what you've done with the money they already lent you. You've maxed out your lines of credit and your other assets are already collateralized. You and your business have taken on the smell of risk and the ...