I am the bookkeeper for my husband’s business.  We have a professional accountant look at the books and help with taxes once a year, but the rest of the year the responsibility lies with me.  And frankly, I’m worried about the way things are going.  We are short on cash, and accounts receivables are slow, but our sales are going really well.  In fact, it looks like we will need to buy more equipment and expand our workforce, but for that we will need to increase our  line of credit substantially.  These growing pains are tough, and kind of scary.

We’ve been with our bank a long time, and have a good relationship with our lender.  My husband is terrific at sales, is well known in the community, and serves on the boards of quite a few local and regional organizations.  I am very proud of him, and he has provided well for me and our kids.  But he has a blind spot when it comes to dotting i’s and crossing t’s.  He leaves the financial side of the business entirely to me, but won’t give me the power to make decisions.

He and his sales force have brought in a lot of new customers in the last couple of years, but the problem is many of them are small companies that have a tough time paying on time.  Most of our receivables are close to 90 days out, some much more than that.  In the meantime, our suppliers are clamoring to get paid on time.  It’s becoming a shuffling game, but I can only shuffle so long.  My complaints to my husband fall on deaf ears, and I don’t want to antagonize him.  

Between a rock and a hard place

Dear Between,

You say you have a good relationship with your lender, so why not have a frank talk with him/her about your concerns?  Your lender wants the best for your company, it is in his and the bank’s best interests to keep you solvent and assure that the company’s growth is sustainable.  Give him the opportunity to do a thorough review of your documentation.  He will have to do this anyway, when considering whether to increase your line of credit.  

Your lender should be able come up some ideas to generate extra cash.  They might include selling unused or under-used assets, tightening your credit policy for your customers, or streamlining operations.  Perhaps you and your husband can sink more owners’ equity into the company.  Perhaps you need to raise prices, or lower expenses.  Enlist your banker’s help in getting hubby to take the financial health of the company seriously, and include him in the planning.

Apparently the situation is not desperate yet, or your professional accountant would have said something while doing last year’s taxes.  Especially in today’s business climate, take preventative measures before things spin out of control.