$11,000,000 Company Can’t Pay Their Bills

Summary

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Podcast Summary: EntreLeadership – "$11,000,000 Company Can’t Pay Their Bills"

Podcast: EntreLeadership (Ramsey Network)
Host: Dave Ramsey
Guest Caller: Janet, CFO of a Philadelphia-based engineering firm
Date: July 1, 2026

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Episode Overview

This episode delves deep into the real-world challenges of running and scaling a multimillion-dollar business, with a focus on the tension between profitability and cash flow. Dave Ramsey responds to a listener named Janet, who is the CFO of an $11 million engineering firm struggling with paying bills and making payroll, despite high revenues. The discussion is rich with practical advice, war stories, leadership principles, and battle-tested financial strategies for entrepreneurs.

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Key Discussion Points & Insights

1. Identifying the Root Cause of Cash Flow Issues

[00:35 – 01:51]

• Janet describes the company's cash flow problems—difficulty making payroll and paying vendors—even at $11M revenue.
• Reveals 2025 as a down year ($11M vs. $13M in previous years), but expects revenue to recover.
• Dave immediately asks about accounts receivable (AR) and payment terms from customers.

Notable Quote:

• “If you got the money every month within 10 days of when it was owed, you wouldn't have a cash flow problem most of the time. That would be most small businesses.” – Dave Ramsey [03:22]

2. Accounts Receivable and Payment Terms

[01:51 – 03:22]

• Janet admits AR averages between $1M and $2M, with major customers paying in 60–90 days.
• Large manufacturers dictate tough payment terms; little wiggle room for negotiation.

Notable Quotes:

• “Their terms are 90 days to pay a small business?” – Dave Ramsey [03:00]
• “Sometimes some of them offer early pay, which is nice... but our median is 60 days.” – Janet [03:05]

3. Profitability vs. Cash Flow

[03:58 – 06:38]

• Dave distinguishes between cash flow (timing of receipts/payments) and profitability (overall margins).
• Janet acknowledges break-even performance last year due to increased fixed/operating costs but projects improved profitability for 2026.

Notable Quotes:

• “There's a difference in profitability and cash flow. Okay. You can be highly profitable and have a cash flow problem because of the terms with your customers.” – Dave Ramsey [04:21]
• “You let your overhead creep up and it ate up your margin... and that's a profitability issue, am I right?” – Dave Ramsey [05:06]
• “That's true, yes. I think it's both.” – Janet [06:26]

4. Operational Discipline: Overhead Creep & Controls

[06:38 – 07:48]

• Dave highlights dangers of “overhead creep”—how growth and prosperity sometimes lead to lax purchasing controls.
• Stresses need for scrappy, disciplined spending, drawing a parallel with his own company's challenges.

Notable Quotes:

• “You need to institute some metrics to where you don't let overhead creep up. You don't let people just go buy crap just because we've got some money right now...” – Dave Ramsey [06:38]
• “Keep everybody going back to scrappy. This is a small business. We're not running a $10 billion operation.” – Dave Ramsey [07:14]

5. Negotiating Payment Terms with Big Clients

[07:49 – 08:55]

• Dave urges business owners not to let large customers treat them as a bank.
• Recommends stronger negotiation on payment terms; consider increasing prices if forced to act as “the bank.”
• Suggests automatic bank drafts for customer payments to shorten AR lag.

Notable Quotes:

• “I don't like a mammoth, huge manufacturer treating an $11 million engineering firm as a bank where they're riding on, they're banking you, they're not paying you what they owe you when they could.” – Dave Ramsey [07:53]
• “We can't do 90 day terms unless it's the only way we get your business. And then we'll have to into the pricing because now we're in the banking business...” – Dave Ramsey [08:14]

6. The Cost of Taking Bad Business (Customer Selection)

[08:56 – 11:48]

• Warns that not all business is good business, especially when large customers demand unfavorable prices or terms.
• Shares a cautionary tale about refusing a low-margin offer from Saturn, illustrating that a “big name” isn't worth unprofitable work.
• Advocates for saying “no” to deals that erode profit or operational stability.

Notable Quotes:

• “You're better off to be a 9 million dollar company and not have 2 million dollars worth of work to do... going to spend $2.1 million doing the work.” – Dave Ramsey [10:17]
• “I don't need to lose money to do business with you. That's dumb.” – Dave Ramsey [11:10]
• “Every piece of business is not good business. I'll turn down some stuff occasionally and I'll be more profitable and have much more joy because I did.” – Dave Ramsey [11:40]

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Notable Quotes & Memorable Moments

• On Overhead Creep:
  “When we were scrappy and everything mattered, we're buying stuff at bankruptcy auctions, you know, and then all of a sudden we're paying retail for it because we're making a little money. ... It's easy to lose the scrappy and get over into the spoiled.” – Dave Ramsey [07:18]

• On Client Terms:
  “We depend—our very existence, our survival, our sustainability depends on our customers paying us within 30 days.” – Dave Ramsey [08:21]

• On Saying No:
  “So I'm not really selling you our kits, I'm really buying advertising. ... I think I'll pass. And that's a good lesson to just look up and go, you know, every piece of business is not good business.” – Dave Ramsey [11:27]

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Timestamps of Important Segments

• [00:35] Janet introduces her engineering firm's cash flow concerns
• [01:51] Breakdown of accounts receivable and discussion of payment terms
• [03:58] Dave discusses profitability vs. cash flow
• [06:38] The danger of overhead creep during growth periods
• [07:49] Negotiating better terms with large clients
• [08:56] The risks of accepting unprofitable business
• [11:10] Saturn story—saying no to bad deals

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Actionable Takeaways

• Institute strict controls and metrics to prevent overhead creep as revenue grows.
• Negotiate customer payment terms aggressively; consider price increases when forced to accept slow payment.
• Implement systems (like bank drafts) to expedite accounts receivable.
• Evaluate the true profitability and operational impact of every large client; be willing to walk away from bad business deals.
• Stay “scrappy”—maintain cost discipline even during prosperous times.

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This episode offers practical wisdom for business leaders to maintain financial health during growth, highlighting real pitfalls and mindsets that make or break a company.

Transcript

[A]

From the headquarters of Ramsey Solutions, this is ENTRE Leadership. I'm Dave Ramsey, your host, with over 30 years of experience leading in the trenches right alongside you. If you got a question you want to ask on this show, well, click the link in the description and we'll make you a caller right here. Janet is in Philadelphia. Hi, Janet. How are you doing?

[B]

Well, hi. Dave Ramsey. It's an honor to speak with you.

[A]

You too. What's up?

[B]

Well, thank you. Thank you for speaking with me, first of all. So I'll get into it. We are an engineering firm based in the Philadelphia area. I am the CFO of the company. We have about 25 employees, and we did 11 million in revenue last year.

[A]

Cool.

[B]

And my question for you is, how do we determine the root cause of our cash flow issues?

[A]

Hmm. Well, I mean, if you're the cfo, I would suspect you're already looking at things like accounts receivable being a problem, right?

[B]

Yes. So we have. So in 25 was a down year for us, and we had 11 million revenue. But, you know, we had been tracking about 13 million the year before that. And, you know, and that was more of our steady state. And we're tracking then again, that again to that this year. But in 25 and kind of coming into 26, just because of the aftermath, we've just. It's been difficult every month, you know, in terms of, you know, making payroll, paying vendors, and just fulfilling. Just even. Just.

[A]

How heavy is your ar. How heavy is your account receivable?

[B]

Okay. Yeah. So accounts receivable. So now it's good. It's. We have about. I mean, I would say right now we have about one and a half to 2 million in accounts receivable. Like, at the current state, I think it got low. I would say their average is about 1 million, maybe a little bit above that Is.

[A]

Are you getting paid in 30 days from billing?

[B]

I would say it depends. I mean, I would say smaller, you know, smaller purchase orders, I guess, get paid out in 30 days, but our larger ones are 60 to 90 most of the time. And.

[A]

Okay, so who is it that would pay you in 60 to 90? The contractor, an architectural firm. Who is it that's paying you late?

[B]

Oh, well, we work with large manufacturing companies, so they're typically, you know, we typically have to go follow the standard terms of those companies. We don't necessarily have a lot of wiggle room there.

[A]

And their terms are 90 days to pay a small business.

[B]

They can be, yeah, 90 days or 60 days. We definitely. Sometimes some of Them offer early pay, which is nice, which can accelerate that. But I would say kind of our median is 60 days.

[A]

Yeah. I mean, so assuming you're profitable on your 11 million, the first place I go to, as you can tell, to figure out a cash flow problem is you're not getting paid what's owed to you on time. If you got the money every month within 10 days of when it was owed, you wouldn't have a cash flow problem most of the time. That would be most small businesses. And that's where I go to first. When you tell me you have a cash flow problem. That's assuming you're profitable. And I don't see any reason why an engineering firm with 25 team members shouldn't be profitable with $11 million or $13 million gross revs. Right. This seems like you got margin.

[B]

We do. We do. We had a fair amount of fixed costs last year, so we were actually break even last year.

[A]

You had a fair amount of what?

[B]

Fixed costs? We just had a fair amount of operating expenses last year, so we were actually break even. We're not break even. I mean, we're tracking profitability in 26, but, you know, it was just tight.

[A]

Well, there's a difference in profitability and cash flow. Okay. You can be highly profitable and have a cash flow problem because of the terms with your vendors. Okay. And the terms with your customers. That's one example. Okay. But what you're saying is you guys let your purchasing run away with you on software and hardware purchases and other things, your fixed cost, you let your overhead creep up and it ate up your margin, and now you're just recovering from that, and that's a profitability issue. Am I right? We'll get right back to our episode. You run a business, so you already know that bad information leads to bad decisions. And everyone is talking about AI. But AI is only as good as the data behind it. The best AI is built on the best data. That's why I recommend NetSuite. NetSuite is the number one AI cloud, ERP, and more than 43,000 businesses run on it, including us here at Ramsey Solutions. Their AI isn't bolted on, it's built in. And it connects everything that runs your business. Accounting, inventory, customer data, all in one place. Because when your numbers are connected, AI actually works like it's supposed to. NetSuite's AI helps flag cash flow problems, spot inventory issues, close your books faster, and cut down on manual reporting. No more guessing, no more spreadsheet chaos. Just clear numbers and real Insights so you can lead with confidence. An investment in NetSuite is an investment in clarity. If your revenue is at least seven figures, go to netsuite.com Ramsey for a free product tour. That's netsuite.com Ramsey let's get back to the episode. You let your overhead creep up and it ate up your margin and now you're just recovering from that. And that's a profitability issue, am I right?

[B]

That's true, yes. I think it's both. I think we're feeling the cash flow on a daily basis, but the overall kind of underlying is the profitability issue.

[A]

Yeah. So it sounds like you had fairly substantial growth in the last five, six years and that then you got a little bit sloppy, which would be normal on some of your purchasing systems, some of your overhead controls. You need to institute some metrics to where you don't let overhead creep up. You don't let people just go buy crap just because we've got some money right now, finally, because people will spend it. There's somebody inside that organization will spend it if they know it's there. Same and true. At Ramsey, we fight the exact same stuff. You can tell by the way I'm voicing this. And so, yeah, so you gotta put institute controls and go, okay, just because we started making a little money doesn't mean we need to get sloppy then. The second thing is I'm gonna tighten up on my terms with my customers. I don't like a mammoth, huge manufacturer treating an $11 million engineering firm as a bank where they're riding on, they're banking you, they're not paying you what they owe you when they could. And so therefore they're using your money for the next 60, 90 days because you guys didn't tighten up on terms. And so when I'm cutting some of these deals going forward, I'm gonna say, hey, listen, we're a small business. We depend our very existence, our survival, our sustainability depends on our customers paying us within 30 days. We can't do 90 day terms unless it's the only way we get your business. And then we'll have to into the pricing because now we're in the banking business and we don't want to be in the banking business. And with our rates, you don't want us in the banking business because we're going to raise our fees considerably to cover our cost of capital because you're not paying us on time. And so I cut the terms differently. And in most cases I've been able to Change the terms with most of our customers over the years to where we get paid within that 30 day period. And sometimes even quicker and stuff like we'll just do automatic draft when the account. We'll set up a draft account with a customer and just draft their dadgum account when the bill's due and we don't have to sit around bill somebody, wait on an invoice, wait on their payables department to get their act together. So I don't know how much of that you can do, but I think you can do better job with that than you've been doing. And I think you do a better job of fighting the overhead creep. That can happen as soon as you start having a little growth and making a little money. And then if there's a slight downturn, it exposes that weakness immediately. So, Janet, I think you're probably doing a better job than you feel like you're doing. The lack of profitability is what's bit you more than cash flow has bit you. I think it's revealed some of the other stuff though, so. Good question. Thanks. Thanks so much for calling. So to recap, guys, here's the deal. Anytime you start growing, I don't care who you are, you start looking in the mirror and going, you're pretty smart. You start thinking everything's good. Like, I mean, we got a little room and the team gets a little swagger and they go, hey, I think I need a new computer. Hey, I think we need a new, I think we need a new piece of equipment. I think we need some new software. And they half butt look at stuff. They don't, they crunch it. When we were scrappy and everything mattered, we're buying stuff at bankruptcy auctions, you know, and then all of a sudden we're paying retail for it because we're making a little money. And, you know, you just gotta go back to scrappy. Keep everybody going back to scrappy. This is a small business. We're not running a $10 billion operation. We don't have six venture capitalists funneling money in here that have more money than brains. We're a small business. We gotta watch what we're doing. We have to manage every dime. And it's easy to lose the scrappy and get over into the spoiled. As you get a little bit of growth and a little bit of profitability, get a little fat and sassy is what happens. So don't do that. And then the second thing is, always watch and decide carefully. Is this new customer really worth the pain? They're going to cause me. So let's say we've got an $11 million company and the customer is going to give us $2 million. Well, they're freaking 20% of our operation. Now. Is the tail going to wag the dog? Are they now going to tell us what to do because they're the big dog. Are they going to set our terms and set our prices so low and our terms so bad that we lose money doing business with them? At the end of the day? I've done that and I've seen people do it. There's a large major retailer in America that's known for selling things at a very good price to its customers. The way they do that is they buy them at a very good price from the vendors. And some people, in order to get distribution through that large major retailer are willing to sell their stuff almost at a loss. I'm not. So you don't see my stuff in there. I gave up on them. I'm not going to sell it to you at 0 margin so you can get a great deal to the consumer. If I'm going to do that, I'll put it on my own website, give it a great deal to the consumer and I'll still make more money. Might sell fewer of them because I don't have a store in every dead gum nook and cranny in the world. But I'll be okay. I don't need to lose money to do business with you. That's dumb. And so you can't let the large customer dictate terms and dictate prices that make you wish you didn't do business with them. You're better off to be a 9 million dollar company and not have 2 million dollars worth of work to do that you're gonna make. You're gonna spend $2.1 million doing the work. And that's easy to do. It's easy to do. So be careful how much you value some of these customers because I got to tell you, they value themselves. There was a little car company down the road from us that went out of business down here called Saturn. And we were. Saturn called us up and wanted to teach our classes one time, but they wanted to buy the classes per person at less than our cost to produce the kit was. And the guy's comment was, yeah, but you can tell everybody you're doing business with Saturn. And I'm like, so I'm not really selling you our kits, I'm really buying advertising. And he said what? And I said Well, I don't think you're going to understand because I don't understand what you're saying. And so I think that Saturn's not going to be able to teach our stuff. And so the Saturn employees never got Financial Peace University, and now Saturn's broke, which had nothing to do with not getting Financial Peace University, but it was just, they were a big deal. They were the hot, they were the, they were the kid in town everybody wanted a date with, you know, and everybody would do anything to get to say they were doing business with Saturn. Except this hillbilly. And I just said, nope, I think I'll pass. And that's a good lesson to just look up and go, you know, every piece of business is not good business. I'll turn down some stuff occasionally and I'll be more profitable and have much more joy because I did. If you enjoyed today's episode, be sure to, like, share and subscribe for real world leadership content. I'm your host, Dave Ramsey, and this is Entree Leadership.