My manufacturing company was growing rapidly, and I never had any money. Don’t get me wrong, I was asset rich, but always flat broke. In the electric sign manufacturing business it’s customary to collect 50% down on a job. From design to fabrication to installation it’s usually at least 60 days. The costs to get to that point are between 85% and 90%. I was a lender not collecting interest on that 35%-40% spread until I got paid.
From invoicing to receipt of payment it’s supposed to be net 30, but almost everyone abuses their AP, pushing it out to 60 or 90. The AP person, either born without a soul or having traded it to the devil for a cigarette at age 8, finally mails a check, and the post office takes longer than they should to deliver it.
Finally the always sympathetic bank…sorry, funds won’t be released for a week. Geez that’s awesome. I need the damned money for payroll today. 200k in unencumbered assets, 250k in B2B AR, a history of running 100k+ through the business checking account every month for two years, and you can’t make these funds available right now?
The faster we grew the worse the problem was. AR grew bigger and bigger, while cash became scarcer than Americans in Pyongyang.
If I missed one payroll I was done. It was a small industry with highly specialized labor. Everyone at my sign company knew everyone at the other 4 companies in the valley. I was young, unproven, and could barely recruit workers as it was. Word would spread across the valley in 23 seconds, or if I was lucky maybe 30 seconds, that I couldn’t be counted on. And then it would be over. Ruthlessly unforgiving.
Back to the crazy-eyed schizo. Every night I would lay awake for a long, long time until I fell asleep. Then I would dream I was working until I woke up. I honestly couldn’t tell if I had slept or not. It sucked bad.
It was Friday morning. I checked the mail and there were no AR checks. The bank account was empty. Payroll was 30k. Employees expected to pick up their check on the way out the door at 5 to enjoy their weekend. Poor fools.
In a few hours it would be over if I couldn’t come up with some money. I went and bought a suit. I put it on and drove around to customers that owed me money. I was directed to the soulless body in AP. I asked for payment. After looking past my pasty smile they were startled by the desperate look assaulting them from my eyes. They would usually cut a check just to escape the bloody eyes.
At the bank that same detached-from-sanity look either softened hearts or scared the hell out of the branch manager, because they gave me immediate access to funds. Aside from the suit, this day would repeat itself many times. It was a miserable rerun.
And then the sun shone down. Or maybe the heavens opened up and an angel blessed me. The bank approved me for a business line of credit. I could dip into the funds when cash was tight. The blood could finally retreat from my sclera. Finally I owned the night again. I’ve had a business line of credit at every single moment since then whether I needed one or not. It’s the only way to live.