With inflation and currency devaluation, delays in payment are causing us to lose real money

When we wrote our business plan and figured out our working capital, we thought we would be paid within 30 days of sending out the invoice. To be safe, we used 45 days in our models and made sure to have funds available.

The inflation rate is now over 10% and there has been a 40% devaluation of the currency. This means it is really important to collect cash quickly.

We just signed a new agreement with a mobile platform and it stated they would pay within 30 days. They did on the first three invoices, but then they took 60 days and now are up to 120 days. They are much bigger than us and we need them to survive but with a 120 delay in payments we are running out of cash every month. The banks won’t help. In real terms, we never get our money back. We can’t delay our payments out to 120 days.

I had to make some difficult decisions, but our company weathered major macroeconomic shocks

It all happened so fast. The price of oil dropped, the currency fell 30%, and inflation shot up to 14%. The forecasts for the future were even worse, with some analysts suggesting we would have hyperinflation – over 3% per month.

I remember my father telling about the 1980s when people were paid weekly and even daily. You bought things when you had money because it would cost more the next day. He told me you could not get lines of credit and that no more imported goods were coming in. He worked for Unilever and a lot of their raw material came from abroad and he had to pay cash when collecting them.

I had no idea what to do. I decided that I had to talk with all my customers and work out immediate payment schedules. I withdrew our price list and told people we would give them quotes over the phone. I tried to get as much cash out of the country and into dollars and Euros. I ruthlessly reviewed all my costs and people and cut back to bare essentials.

At the end of the year, we had lost money but our customer base was in tact. We had gained a lot of market share and refused to sell anything at a loss. We paid more attention to stock, stock turn, and logistics and I reviewed the cash position everyday myself.

One day our major competitor called and said he wanted to sell his business to me. He was out of cash. He could either declare bankruptcy or sell the business. I offered to buy his accounts but said I did not want ay assets or people. To my surprise, he agreed subject to him joining my company. Today, we work together and dominate the market. We leaned hard lessons but we are beginning to see a brighter future.