Like many small business owners in the service industry, Derrick Olson has periodic cash flow problems. Projects are bid on and won, but there isn’t always enough cash in the account to procure materials for jobs. The problem? In a word, timing.
Most of Derrick’s customers pay their invoices in 30, and at times, 90 days. But to keep operations humming along, he has to invest in materials while waiting to be paid. Of course, there’s the expense of running a business (rent, payroll and utilities) to account for, too. So when the timing of cash inflows and outflows is off, Olson Custom Blasting can quickly find itself, as he puts it, “in a world of hurt.”
“I have jobs coming up and material I need to buy, but my deal is this: I have to wait 30 days to get paid,” says Olson. “I’m not a big business, so sometimes it’s hard to make it through until you get that check.”
And when a critical piece of equipment fails, as was the case when Derrick’s welder went down days before a big welding job, the crunch can become crippling. “The welder machine I had was going down on me, and I had a big welding job coming up.” For Derrick, there was only one option, “I had to buy one.”