The value of cash in the bank

paddyrg

Don't underestimate the value of money in readily accessible form - bad cash flow is more damaging to a business than a bad deal. Discount by a modest percentage in order to get a buffer in the bank - caviar next week means nothing if you're going to starve this week.

I'm currently working on a project where the cash flow is terrible. Worst I've ever seen. Every day the cash is coming tomorrow, and if it ever does, it's barely enough to fight the next few hours worth of fires. We've committed hard, apparently our PO's aren't actually illegal as there's some underlying asset value, but they're certainly of concern. I've managed to pay crew but not take anything like my fee yet. I've had arguments that we should use money I've protected for payroll as a short term loan as the money is always 'coming', which I've refused to do and been proved right on. Yet every week...

The director is invested to the tune of a half-mil at the moment, there's another 8x that of costs to come. Key personnel have expiry dates, but also won't start without their fees in escrow (as I wish I had) which means money NOW. We've pushed the start date 4 times, now just cancelled first 2 days of the proper production period.

There are presales with value far in excess of the total production cost but getting credit against them is costly and slow. Asking someone for £250k at 2pm on a Friday isn't likely to happen before 4:30!

So, I'm in the middle of a mess of bookings and cancellations, cannot control costs any more, best we have is to carry on the relentless crash off the rails with a slow scream of twisted metal against this £xM due 'this week for sure' for the past 12 weeks, whilst the opportunity to produce the project is vanishing fast. So much going for it in so many ways, and 3 weeks ago I'd have said we were in good shape. Now it's a very ugly shape!

So, anyone relying on the money coming ’next week for sure', don't. Cut and run now. Discount the contacts, get a factoring company, build up a nest egg, go in fully financed, or you run this risk. I honestly don't know if the money will arrive in time next week, even if we can still complete the project as designed and as promised to investors. I certainly can't deliver the original spec. We could very well be throwing good money after bad, as each and every date shift just shortens the scope of what can be done, scrabbling by trying to offer suppliers pence on the pound to keep taking to us.

Lack of cash flow could easily kill this multi-million pound project, with pre-sales already exceeding the production cost. It may even be dead already. Don't be that guy.