Cashflow Crisis Averted

When running a business one of the things you've got to keep a close eye in is cashflow - how much money you have on hand at any one time, and how you expect it to vary over time. This is especially true of a publishing business where you have to pay for the product up front, and don't get a return on your investment until you have sold at least half of your print run.

Things are better this time round. For It's Alive! and Carpe Astra it was the first time I had dealt with those manufacturers so they wanted half the money up front (before manufacture) and the other half upon delivery. Now, since I'm an established customer of Ludo Fact's they are willing to let me pay on delivery. Still, I have to pay before I get any return other than the pre-orders (which are done through PayPal, so I get the money within a week). My first sales to shops and distributors will be on NET30 (they have 30 days to pay) so I will have to pay the manufacturer before they pay me.

The last few months have been a bit quieter than I had hoped, so I've not got enough cash on hand to pay for Sumeria - there will be a small shortfall for a month or so. Where does this leave me?

Yesterday I dressed up smart and popped over to my bank to discuss the options. My business specialist, Helen, is very supportive and also quite excited by Reiver Games as a client, so it's not hard to get my hands on some ready cash if I need it, even in these credit-poor times. Helen's advice was to get an overdraft on my business account, that way I only pay interest on the debt while I need it - they sooner it's paid off the sooner I stop paying them interest (unlike a loan, which always generates interest). There's an arrangement fee, but that's the same with a loan too.

Cashflow is what sinks most businesses. Even a successful business that's in a good position and doing well will go into administration if it can afford to pay it's creditors - i.e. if it runs out of money. It doesn't matter how short this lack of funds is, if you can't pay your debts it's game over. Being on good terms will your bank really helps - a short term overdraft is enough to get Sumeria paid for, and cover the couple of weeks until I start getting paid by my distributors.

In other news, Sumeria has been assembled in Germany and will be shipping on Monday, it should arrive at my warehouse next Friday (29th) - last chance to get 40% off for a pre-order.