We've all heard of Murphy's Law: "Anything that can go wrong, will go wrong." But what about the cash-flow law? "No matter how much money you have coming in, it never comes in soon enough to cover your expenses." Chalk this phenomenon up as one of the dirty little secrets of running a business that no one really talks about. Then, suddenly, you're up to your ears in bills with a near-empty bank account, and you don't know where to turn.
My first experience with the cash-flow blues happened in my second year of business, once we had a staff, an office, equipment and the usual overhead of any growing business. My partner pulled me into his office one day and announced, "If we don't get a check in by Friday, we won't make payroll." Not make payroll? That couldn't be possible! We had a slew of clients, a ton of work in production. How could our bank account be so depleted that we were in jeopardy of not paying our staff?
We had nearly a quarter of a million in accounts receivable and less than $10,000 in the bank. Whatever money came in immediately went to paying down bills that had accumulated from several months back. No matter how much revenue we generated, we could never get ahead.
That first cash-flow scare ended with a check coming in by messenger literally midday on Friday. We ran the check to the bank before they closed, and the bank manager put the check into our account as cash. We all wiped the sweat from our brows and joked about needing a stiff drink. Wow, we said, we'll never let that happen again. But it did.
Aliza Sherman is an entrepreneur and author of Cybergrrl: A Woman's Guide to the World Wide Web (Ballantine Books, $12, 800-726-0600). She is currently working on her next book and new company.