Working with suppliers when cash flow is tight.

One thing you have to address - for you to do your job properly the "boss" can't go around you to the AP clerk. Otherwise nothing will change. Until you leave.

Do you prepare a real-time AP report for the boss? You should both go over that, and jointly decide what/who will get paid and when. Then stick to the schedule. That will create credibility between you two, and with the suppliers.

Perhaps if you present another solution to your boss you can better control the situation. I have, in the past, had great luck making partial payments to all vendors. This doesn't work well with standard monthly payments (such as rent and utilities), but for professional services, one time purchases, etc. you simply pay them partial payments every 2-4 weeks. If you have a primary vendor that you pay monthly for a significant amount, start paying them weekly - but pay less than 25% of the bill. If you pay them 15%-20% each week for a month or so, you have stretched the payment cycle without too much pain for them. Then, start paying them at 25% once you have them stretched to 45-60 days. Your vendors don't want to lose a client, but need some assurance of payment. In addition, having a 13 week rolling cash forecast that includes AP details allows you to manage for fluctuations in cash receipts on a real time basis - don't just use a flat amount of what you have available in the forecast, have a plan.

John and Barbara have great suggestions, in fact probably the best for the company. However, if your boss is insistent on this type of behavior you may want to look into getting a line of credit. Maybe when the bank starts charging and withdrawing thousands of dollars in interest it will change their mind.

There again, if your boss sees the line of credit as a way of cash advance it could lead to other issues.

Is it possible to accelerate A/R collections from your customers?

Thank you all for the suggestions. We have a significantly detailed rolling cash forecast that takes into account our purchasing needs based on opportunities and actual sales, plus the costs of operating. I make all the AP selections and then present the detailed list broken out by category (utility, rent, client needs, monitoring, prof services, supplies, etc). He sits on the checks until someone comes to tell him we have been cut off. The biggest issue is with our purchase of items for our customer. It costs an average $145 per unit to send to an opporuntity (via fedex no less) and then we have to wait for the end of a 90 day free introductory period before we expect to convert 50% of these opportunities to revenue. Even with the revenue, our ROI is roughly 8 months. The capital outlay is what is getting us. We have maxed out our line of credit and roughly 50% of our customers are medicaid related - so we can only do so much to speed up collections. For many of the rest of our clients, the elderly, we can't get too many of them onto automated/credit card payments as they don't trust these methods.

I do see the light at the end of the tunnel, but I also really appreciate the needs of my suppliers. I think I have a plan that works to keep our suppliers reasonably within their terms if my boss would only follow it. He is a salesperson, so to my face he says he 'gets it' and then turns around and submits his own items, or sits on items we have on qeue to get paid. In the meantime I know before I open my mouth that I might get caught in a 'lie' if I tell someone when I think they will get payment.

I lived through this for 10 years.

As other's said, I made it very clear (one owner knew how to write checks, the other knew how to use his AMEX card). That no check can be written without my knowledge, since cash flow was almost always extremely tight (our current ratio for 9 out of the 10 years was below 1:1).

Other than that, I created a dialogue with vendors and a payment schedule that I could live with, lived with it (in other words, their terms may have be Net 30, but I paid on the 65th day - always). This gave me breathing room and if I was going to have to delay a payment, the vendor knew a week in advance, not a week after it was due.

I created good will and mutual respect and managed the business when we had a current ratio of .76 without having any services or suppliers cut us off.

"The byproduct of fast growth has resulted in a cash flow issue - not uncommon in many companies."

...true enough, but I'm sure many companies would love to have the problem of pushing against the upper bounds of their SGR ('sustainable growth rate').

Any possibility of at least partially pacifying some vendors and buying a little leeway by showing them the growth numbers? Vendors want to hitch their wagons to growth customers.

The implied message that might soften a vendor's hardball stance: "Hey, at this pace it looks like our purchasing volume will be about 35% greater in 9 - 12 months than it is right now." That's a juicy plum a vendor would be reluctant to give away to a competitor.

Best of luck with it.

I have experienced this in the past at 3 employers or projects, and am experiencing it now again. Face it you will not change the owners methods. I agree best to send vendor something each week, so break a large invoice into 3 to 8 pieces and send them partial weekly. Vendor will be more happy with consistent cash receipts as opposed to weeks of nothing but broken promises.