The cash flow woes of my sole client seems to be continuing. More than that, he is now running out of projects. So we are heading towards a permanent death of cash flow and it seems that with that my business might also wind up! My client hasn’t landed any new projects and the ones we are working on are coming to an end. This puts him in a position of no work in a couple of months and even now I have only a 50% utilization of my resources.
I’ve spent a significant time this month going through the accounts and figuring out where I stand. My main worry is I have some outstanding statutory payments pending which may put me in a legal quandary. And I don’t have enough cash in the bank to meet them. I’ve been pestering my client for the payment at least to cover these statutory payments but that payment also keeps getting postponed. As of now, I have two and half months full operating expense invoices pending for the company and three and a half months worth of my salary pending.
Thankfully I received a partial payment a week ago that enabled me to pay my staff’s salaries. Maybe I am being a bit unrealistic by not sharing the actual financial situation of the company with them. I’ve thought long and hard about being frank with them, but being the optimist I am, I am hoping for some good luck that will keep us going and at the same time I have started my search for other clients and projects. I do not wish to see my enterprise fail. If only I had some cash in the bank, I would have used this as an opportunity to build some of the application ideas I’ve been toying with. But due to the cash flow situation, I am forced to sell the services of my team.
On a personal front I was also asked to cut down the hours I was billing him. It was imperative but hearing it was hard. Less hours means less pay for me so I had to find a way to supplement my income. Luckily I managed to find a short term gig that I can do on the side. Hopefully it will last a couple of months.
I have also been actively bidding on work for the team as well. The rate I am bidding for is a very competitive rate for the clients and at the same time a more profitable rate for the company than the fixed rates that my developers are being paid for currently. It’s just that on the risk vs. profit equation I preferred to take less risk and less profit at that time. When I agreed for the terms with my current client, I declined the option of working on project basis as I feared that in such an arrangement he would simply have to pay us only if there is work. My assumption that he will take on the burden of paying the team when the work becomes low, was simply an incorrect assumption.
Because lately, we’ve had discussions about preparing for the worst, which means that when the projects run out, we are simply going to get cut out. So in this light, had I opted to work on project basis I would have earned better margins and would even be in a position today to sustain the team for a while.
So now, if I do manage to find work on better terms, I am simply going to give priority to such projects. That should increase the profitability of the company. I can simply pull the people from the payroll of the my current client and place them on more profitable projects. But I will have to manage this pretty openly and diplomatically as it was he (my client) who paid for them all this time including the infrastructure costs. But I don’t see an issue in doing what I am hoping to be doing as it was made pretty clear to me that it is me who is responsible for the staff and will have to face the consequences of letting them go (in the view of outstanding statutory payments). And it is my company and as the director, I , will be left to sort them up. So I will have to look after the interest of the company and my self personally, before I look after the interest of the client.
I am pretty emotionally charged and tensed right now as I write this. It is hard to watch your dream and desires (in this case my company) going down. So I am not going to watch idling. I am going to do whatever it takes, to survive this storm. This storm of cash flow woes. And the risk I knew I was running all along. Being dependent on a single client. So these woes should result in my business becoming more robust and vibrant.
0 comments:
Post a Comment