Managing Cash Flow During Rapid Growth
Rapid growth sounds like a dream come true. Sales are booming. New clients are signing on. Your business is finally getting the traction you’ve worked so hard to achieve.
But here’s the secret nobody talks about: fast growth can create cash flow problems that sneak up and knock you off your feet.
If you’ve ever thought, “We’re selling more than ever—so why does my bank balance look worse?” … you’re not alone.
Let’s talk about how to manage cash flow when your business is growing at lightning speed.
Why Growth Hurts Cash Flow
Growth feels good—but it eats cash like crazy. Here’s why:
- More inventory or supplies: You need to buy more before you can sell more.
- New hires: Payroll goes up to handle extra work.
- Bigger projects: Clients might pay in phases, but your expenses often hit upfront.
- Longer receivables: As you serve bigger clients, payment terms may stretch from 30 days to 60 or even 90.
- Overhead increases: New office space, new tools, higher insurance—growth rarely comes free.
Example: The Manufacturer’s Cash Squeeze
Consider Thomas, who owns a specialty food manufacturing business.
A huge national grocery chain placed a $500,000 order. Amazing news, right? But the chain’s payment terms were Net 90—and Thomas had to pay for raw ingredients, packaging, and extra staffing upfront.
He ended up borrowing heavily to cover costs while waiting for payment.
Lesson: Sales don’t automatically equal cash in the bank.
Signs Your Growth Might Outpace Your Cash
Watch for these red flags:
- Your bank balance shrinks even though revenue rises.
- You’re using your line of credit just to make payroll.
- Vendor payments are getting delayed.
- You’re worried about fulfilling big orders because of cash constraints.
Tips to Manage Cash Flow During Growth
Growth is a great problem to have—but it still needs a plan. Here’s how to stay ahead of cash challenges:
1. Forecast, Forecast, Forecast
You can’t manage what you can’t see coming.
- Create a rolling 13-week cash flow forecast.
- Factor in large orders, payment delays, and big one-time expenses.
- Update it weekly so you’re never caught off guard.
2. Negotiate Better Payment Terms
Ask big clients for:
- Deposits upfront
- Faster payment terms (e.g. Net 30 instead of Net 60)
- Partial payments tied to milestones
Even shifting payments by 15 days can significantly improve cash flow.
3. Watch Your Profit Margins
Don’t drop prices to win big contracts without running the math. A low-margin deal can sink your cash if it requires big upfront costs.
4. Secure Financing Early
Banks love lending to businesses that don’t urgently need cash.
- Set up a line of credit before you’re desperate.
- Explore invoice financing if clients pay slowly.
5. Be Selective About Growth
Sometimes saying “no” is the smartest move. If a new deal strains your cash so much that it risks your core business, think twice.
Example:
A software agency turned down a massive corporate contract because the client wanted Net 120 terms. The agency realized taking the job would drain all its cash reserves.
Another Example: The Digital Agency’s Growth Spurt
Priya owns a digital marketing agency. She landed three major clients in one month. Her team scrambled to handle the workload, hiring freelancers at premium rates.
Invoices to clients went out—but payments wouldn’t arrive for 45 days. Meanwhile, Priya’s payroll doubled.
Her cash reserves evaporated fast. Luckily, Priya worked with a Virtual CFO who built a forecast and helped negotiate faster payments from her clients. She also secured a line of credit for extra cushion.
Today, she’s still growing—but with far less stress.
How a Virtual CFO Can Help
A Virtual CFO (VCFO) can help you:
- Forecast cash needs as you grow
- Build financial models to test “what if” scenarios
- Negotiate better client and vendor terms
- Help secure financing at favorable rates
Growth is exciting—but it’s a lot less risky when you have someone helping you look around corners.
Don’t Let Growth Sink Your Business
Rapid growth should be celebrated—but only if your cash flow can keep up.
Without a plan, growth can push your business to the brink. With a plan, it’s your launchpad to the next level.
Are you growing fast—and worried about cash? Let’s talk. Together, we’ll keep your growth story a happy one.
