Mike’s morning had been great until his phone rang. He heard Laura, his accountant, on the other end of the line. “Hey Mike, I’m not going to have enough money to run payroll this week.”
Not again, Mike said to himself. He knew Laura didn’t often get bent out of shape. But she was as tired as he was of what had become a recurring problem.
“Okay, send over a balance sheet and receivables, and I’ll see what I can do.” He poked his head into a few of the offices. “All-hands meeting in 15 minutes!”
Mike stepped aside for a quick minute. Inside, he was fuming. He hated this pattern. But he knew he didn’t have anyone to blame but himself. And he knew his frustration would only drive the team away.
Collecting himself, he returned to his office and grabbed Laura’s reports off the printer. Then he ducked into the conference room. Anticipating the awkward conversation, he was grateful he’d brought homemade donuts this morning!
“Hey guys, I’m sorry, but we’re short on cash again and can’t run payroll. So we need to do two things. First, we need to do some quick work to collect funds to cover payroll. Second, we need to make sure this stuff doesn’t happen again. Let’s go through some of our receivables.”
“Mike, I’m not going to have enough money to run payroll this week.”
Operation Cash Collection
Mike worked his way down the list of receivables, asking questions as he went. He started jotting a list on his flip chart:
- Jeremy Richards – $18k deposit – CC processor didn’t work. Mailed check last Thu.
- Simon Waters – $80k balance due – Gave check to foreman who can’t find it
- Amanda St Hilaire – $64k balance due – Refused to pay due to incomplete repairs
- Juan Soto – $45k balance due – Foreman on vacation; nobody collected
- Eileen Talburt – $11k retainage – Issues resolved 2 weeks ago; no followup since
He ripped off the sheet and stuck it to the wall. “That’s helpful. Now, let’s put these in order of the fastest, surest way to bring cash in.” He made a second list:
- Call Juan & pick up check in person
- Call Eileen & pick up check in person
- Have the team spend an hour turning the truck and office upside down for Simon’s check
- If nobody finds it, call Simon for resolution (stop payment + pick up new check in person?)
- Schedule repairs for Amanda tomorrow & pick up check in person
“The first two will get us $56k in our bank. If we can find Simon’s check, that bumps it up to 136. I can pull a line of credit if I need to, but I’m tired of going through this. We can do better!”
Once again, he tore off the sheet. He put it beside the first one.
“While this is fresh on our minds, how can we make sure this never happens again? Let’s think about this. And by the way, no ideas are off the table!”
Marv suggested that mobile payments might help with cashflow.
Easy to Pay
Marv, the sales manager, jumped in. “Well,” he said, “one of the rules of selling is you should never make it hard for someone to pay. Let’s put a QR code on the quote. Let’s send payment links by text message and email. And if someone wants to pay by check, let’s give them a stamped priority mail envelope if we can.”
Laura, the accountant, chimed in on the conference line. “I’ve got an idea,” she said. “The worst number in business is one. Let’s sign up with a second payment processor as a backup. That way we’re always able to take payments.”
“Anyone else?” Mike asked.
Jonas, the general manager, started off. “I’m not sure how this would work. But is there any way the crews could see the balance and know how much to collect? Most times, we use 10% retainage, but it would be nice to know if we had offered something else. And is there any way we could deposit the check while we’re right there?”
Laura immediately objected. “Our accounting software doesn’t let us do that. And besides, we shouldn’t give access to the bank account like that.”
Mike knew it was time for him to speak. “Hold on. Jonas may be on to something. I don’t know how we could do that, but let’s keep our options open. Laura’s concerns are valid, but maybe there’s a way. I don’t know the answer, but I know someone who might.”
“I just had another thought,” Jonas said. “It’s a little off-topic, but I thought I’d mention it. Sometimes we need repairs and they don’t get scheduled for a while. It’d be nice if we could catch them in the office, and get them scheduled sooner. I don’t like projects like that hanging around.”
Mike nodded. “Thanks. Let me check on these things and see what I can do.”
The Compliment of the Year
Later that year, Mike’s phone lit up with a phone call. “Hello, this is Mike.”
“Hi Mike, this is Simon. I don’t know if you remember, but I wanted to say, you guys have stepped up your game. Jonas and his guys wrapped up a project on my new rental property yesterday. Your guys do it right. Jonas took a picture of my check, and gave me a receipt right on the spot. I’m impressed!”
Mike worked hard to bury his grin. “Thanks Simon. That means a lot. I appreciate you sticking with us, after what you went through.”
“No problem,” Simon said. “By the way, you know I run my own business. Any chance you can tell me who helped you? I’d like them to put the same system in place for me.”
Mike chuckled. “As long as you don’t tell the guys across the street, I’d be happy to. As soon as I get off the phone, I’ll send an email to put you in touch with the people who helped me.”
As Mike put down the phone, he jumped up from his chair and danced a little jig. He’d always respected Simon as a business leader. Although he’d never admit it to anyone else, having Simon’s respect made him walk a little taller.
And as far as the payroll? Well, he hadn’t gotten a call from Laura since that meeting. In fact, the only time he’d thought about cash flow was when he’d doubled down on expansion.
He couldn’t wait to tell his team this story and thank them again for their help.
The Takeaway
If accounts receivable is leaving you short on cash, why not take a minute to call us?
We’re looking forward to helping you determine if Silverloom software is right for you. Call us today to learn more.