How to Manage Your Finances During Rapid Business Growth

Learn how to manage your finances during rapid business growth, avoid–the all too common–financial turmoil and thrive!

As a small business owner, you probably dream about a thriving business. One where clients are banging down the doors and vying for your services. The problem is that such rapid business growth isn’t always as delightful as it sounds.

Your business has to assess a whole set of new challenges while determining whether this is a glut or a sustainable pattern and also delivering on workload not seen before.

Some of the unique challenges and questions that might arise during a period of rapid business growth can include:

  • Making decisions about adding new staff or contractors
  • Assessing whether your current systems and software serve your growing needs
  • Making sure you have enough working capital to cover those investments
  • Tracking and managing more complex finances and accounting challenges
  • Ensuring continuity of day-to-day accounting tasks like invoicing and expenses

Thankfully, these challenges don’t need to stand between you and business growth. As with many things, a little preparation goes a long way!

If you prepare for the growth and manage your finances carefully, you can sustain this growth. In this post, we share strategies to help you do precisely that.

1. Manage Customer Accounts Better to Protect Yourself from Risk

When you were small, every customer counted. You probably spent considerable energy finding new business, stressed about overdue invoices and even lived through a bit of cash-flow drama every month.

The good news is that a rapidly growing business can think beyond day-to-day survival. Odds are you can relax on desperately seeking new business (of course, you should always ensure new business is coming in). And you can definitely become more discriminating about the kind of work you do and for whom.

Of course, there are challenges you shouldn’t overlook:

  • There are more clients to manage
  • Not all customers will pay you on time
  • Bigger clients and projects may mean longer billing cycles

But, with the right strategies, you can easily resolve these challenges, so they don’t impact your cash flow. Here are several easy-to-implement strategies:

  • Do a credit check on new clients so that you know whether the can pay you.
  • Implement systems so you can focus on what you do best. Systems that let you:
    • Send invoices in a timely fashion
    • See what invoices are outstanding so you can better manage billing cycles
    • Automate late payment reminders
  • Ensure clients understand your payment terms. Be specific and avoid ambiguous payment terms such as “net 30″
  • Reward early payment with a discount, e.g., 5% of the invoice value

2. Assess Your Growth to Determine How Much Working Capital You Need

Many businesses wrongly assume that if your sales are increasing, your profits will be too. But if your costs to get new customers is high, your profit margins may be lower.

You should understand your financials beyond only revenue. Analyze sales, overheads, inventory, assets, liabilities and your operating costs to understand the health of your business. Also, make future projections so that you can determine how much working capital you need.

You use working capital to fund your day-to-day operations like payroll, investment in equipment or tools that won’t provide returns until work is complete. It’s the money you have available for a rainy day, and you calculate it by subtracting liabilities from current assets.

If you have more assets than liabilities, you have a positive working capital. If you have a deficit, however, you may have problems paying creditors.

The higher your operating costs, human capital costs, and infrastructure costs, the more working capital you’ll need to finance growth.

Operating Costs

You should review your current operating costs and forecast how this will change as your company grows.

By having a firm grasp of your costs, you’ll better understand how it affects your margins and also how much cash you need to sustain it.

Potential Human Capital Costs of Growth

You’ll also need to plan for the costs of adding team members or restructuring your entire team. Also, make sure you’re hiring the right people.

Hiring the wrong people in haste can impact the bottom line. It’s easy to hire the wrong employees when you’re growing and urgently need staff to fill positions.

Furthermore, if you’re not sure whether your growth permanent, consider hiring contractors rather than staff. Onboarding new employees can become expensive and has challenges of its own such as increased demands on payroll and HR.

Understand Possible Infrastructure Costs

Rapid business growth places higher demands on infrastructure and systems. Fast-growing companies often discover that they’ve outgrown their existing premises. Moving to a larger office may be a wise decision.

However, make sure that the growth is sustainable before you pack up your desk. If not, consider renting an office for a short period.

Alternatively, focus on having a remotely distributed team that doesn’t need offices. A company such as Buffer runs its entire operation through a remote team.

Similarly, growth often requires updates to existing systems, which brings us to our next point.

3. Invest in and Simplify Your Accounting Process

When you’re small, you may be able to get away with using a manual accounting process. But as you grow, managing taxes and accounting becomes more difficult and time-consuming.

The sheer growth in the number of transactions – and even employees on your payroll – requires that you invest in new accounting systems.

In fact, it’s wise to invest in business accounting software from the start – even before the growth kicks in.

Software that:

  • Grows with you
  • Helps you track the increasing amount of receivables, expenses, and revenue
  • Creates reports for you and provides an at-a-glance summary of the company’s financials

FreshBooks Select is an example of such software. Built especially for small business owners, but with different plans depending on the volume of usage, FreshBooks Select grows with you and your business.


Rapid growth is exciting; it’s what you want as a small business owner. But, in periods of rapid business growth, there can be challenges.

Increased operating demands can quickly lead to increased costs and working capital requirements. Managing finances can also prove challenging.

But this doesn’t have to be the case for you. In fact, you can easily thrive by implementing a few simple strategies:

  • Assess your growth to see how much working capital you need
  • Invest in better accounting processes to make managing finances a breeze
  • Manage your customer accounts so that you have a constant stream of cash

Are you experiencing rapid growth in your business? How do you manage your finances?

about the author

Freelancer & FreshBooks Customer Nick Darlington is a FreshBooks customer and small business owner who's been running a writing business for close to four years now from his home in sunny South Africa. When he’s not sharing his knowledge and experience about how to successfully run, manage and grow a small service business, he’s helping aspiring and established writers succeed at WriteWorldwide.