B1) Why does a small company's rapid growth often result in cash flow problems?

B2) What advice can you offer Douglas Roberson about his company's accounts receivable?

Douglas Roberson, president of Atlantic Network Systems (ANS), a data- and voice-systems integrating company

recalls the day he "woke up and realized we were out of cash." The company had grown so quickly -- from $100,000

in sales its first year to $460,060 the next -- that Roberson had never worried about managing cash flow. At the end

of its second year of operation, ANS's "receivables had gone through the roof," recalls Roberson. "I actually

believed that the more companies owed us, the better shape we were in." Then the company hit a long

collection dry spell. Roberson watched "our money go out and nothing come in." ANS limped along with the help

of a bank line of credit, waiting for customers to pay invoices.

It was a sobering lesson for Roberson on the difference between generating sales and managing cash flow.

"If you don't do serious projections about how much cash you'll need to handle sales -- and how long it takes to collect on invoices -- you can wind up out of business, no matter how fast you're growing," he says. In fact,

rapid growth usually compounds cash flow problems as a company spends increasing amounts of cash on

inventory, supplies, payroll, and other expenses and waits 30 to 45 days or longer to collect its receivables.

The result: a serious cash crisis that could destroy the company. ANS's foreign customers pose a special problem

for the company's cash flow because they often stretch out their payments to between 45 and 60 days. "I want

to bring them in line with our other, faster-paying accounts," says Roberson.