Rapid growth and expansion is just an illusion without effective credit control to make sure you are getting paid on time, according to one entrepreneur.
Daniel Long, co-founder of on-demand waste removal business Clearabee, was recently named among the top 20 start-ups in the UK, and spoke to Startups.co.uk about his experiences over the first two years in business.
Significantly, Clearabee’s expansion has been funded entirely by its own cash flow and receipts, and the company is about to reach total nationwide coverage, with depots in north-east England and Scotland – proof of the potential to be found in effective credit control.
Last year, the company’s turnover was £2 million; in 2015, Clearabee is on course to hit £5 million, but this rapid growth has had its ups and downs.
Mr Long says his biggest business mistake so far came last winter, during a time of fast expansion, when his company took on several big-business clients.
“As we sought to grow account work we let some of our larger corporate customers get a little away from us in terms of credit and weren’t initially diligent enough in chasing payments,” he told Startups.co.uk. “This led to a brief cash flow crunch last winter.
“We sorted this out quickly and learnt a valuable lesson – strong growth and healthy profit figures are worth nothing if you aren’t getting paid.”
However, Clearabee had taken a careful approach to their own outgoings – trucks were hired on flexi-lease agreements, so that they could be handed back if things got tough or the workload dropped, and where possible rentals were arranged with zero deposit, to avoid locking up company cash.
“We’ve managed to grow our account list considerably and engage more with larger companies that tend to pay on 60 to 90-day terms,” Mr Long added. “We’ve had to pay greater attention to credit control and cash flow management.”
Although not everyone can be in the 20 most successful start-ups, it’s clear that a sensible approach to credit – both income and outgoings – has helped Clearabee to weather the storms faced by almost all new companies as they grow.
Whether you are in your first three years of business, or are a more established company looking to fund future expansion without taking on debt, there are lessons to be learned from Mr Long’s cautiously entrepreneurial approach to credit control.
If you would like to talk to a member of our team about outsourcing your credit control, don’t hesitate to call 0808 252 5156