Douglas Mills has started a business that provides convalescent homes, chronic care facilities and hospitals with temporary help in the form of qualified registered nurses. Mills customers all have their own nursing staff, but need extra help when they have unusually large patient loads or particular problem or terminal patients.

The past three months has been unusually busy for Mills, with all ofhis nurses placed almost every single day. This is great for the profitability of his business but surprisingly, has caused some serious financial problems.

Many of Mills nurses do not want full-time work. Some are raising families or living in semi-retirement but they enjoy the extra cash and the variety of occasional work. Mills pays his employees immediately, at the end of each work week. However, he bills his clients at the end of each month, and then gives them an additional thirty days to pay their invoices. (Some take considerably longer).

Those customers that are chronically late in paying almost always come through after his second or third reminder call. However, Mills has been scrambling around so much to find and place nurses, that he hasnthad time for following up on overdue accounts. And many of them are way overdue.

The large payroll over the past while has totally depleted all of the cash that Mills had on hand. It has also used up all of the $50,000 line of credit that he has with a local bank. To make matters worse, Mills has avoided paying his own bills, for the last three months so that he could give priority to paying his employees.

He is now being harassed and even threatened with re-possession by the companies that he leases his computers and automobile from. Furthermore, the landlord says that the lease for his office is in default for non-payment. She has notified Mills that she can now evict him and find a tenant that will pay a higher rent. (Mills hopes that this is just a ploy to raise the rent).

The phone company is warning of service termination and Mills has to come up with almost $16,000 to meet his payroll on Friday. The insurance company that handles the liability coverage for the nurses (without the insurance, Mills clients will not use him) has sent a registered letter reminding that the coverage lapses in 30 days. On top of all that, one of Mills largest clients, a nursing home chain has not paid the last 6 months of invoices and looks like it may be headed for bankruptcy.

It is Tuesday, the day after Mills went to his banker to ask for an additional $30,000.00 on his line of credit. He brought along his accounts receivable, to demonstrate that his customers owed him over $140,000, and this did not include the outstanding balance from the failing nursing home (which he expects to write off).

The interview did not go as Mills had expected. The banker seemed overly concerned about the credit extended to the failing nursing home company and was not impressed by the huge growth in Mills business. She kept repeating that Mills should have come to her much, much sooner and ultimately she refused to extend the line of credit. She also reminded him that the bank was within its rights to demand immediate repayment of the current line-of-credit balance at any time. (The banker did not go so far as to actually call the loan).

Mills is feeling extremely frustrated. He is making more profit than ever but his businesses is about to go bankrupt because he cant pay his bills. He is particularly worried about paying the temps and has only three days to come up with the money.

1. What should Mills do now? List several steps he should take and explain why.

2. If Mills survives this crisis, what procedures can he put in place to avoid future cash shortages?

3. Speculate on why the banker was not more supportive of Mills.