"If you want to stop losing money, stop performing."

This was my tongue-in-cheek advice to the artistic director of a non-profit choral organization. Each concert was costing them $10,000+ more than the ticket sales took in.

The same is true for almost every non-profit. Stop doing what you exist for and your financial problems will be solved.

Obviously, that's not a great option.

The challenge of balancing mission fulfillment with financial sustainability is at the heart of every non-profit organization's struggle. While "just stop" might technically solve the financial equation, it completely misses the point of why these organizations exist in the first place. Instead, let's explore some world-class strategies for managing cash flow while continuing to serve your mission.

1. Master Your Revenue Planning

The foundation of financial stability begins with understanding your revenue streams. Start by identifying your minimum guaranteed receipts - these are the funds you can count on...

The hard truth about traditional accounting might surprise you. While accrual accounting is the gold standard of financial reporting, it could be unknowingly setting small business owners up for failure. Here's why.

The Hidden Disconnect

Let me start by saying: I deeply respect accountants. Their expertise is invaluable, especially regarding tax compliance and financial reporting. But there's a critical disconnect between accurate accounting and actionable business insights that's hurting small business owners.

The problem isn't that accrual accounting is wrong – it's that it can paint a dangerously deceptive picture for business owners who need to make real-time decisions.

Why Small Business Owners Are Vulnerable

Think about it: Most entrepreneurs don't start businesses because they're passionate about bookkeeping. They launch companies because they're experts in their field – whether that's construction, consulting, or crafting artisanal chocolates.

These business...

Many people are surprised to learn that becoming a proficient cash flow and profit advisor can take years. But when you think about it, it's not so surprising. After all, it's like learning a new language and a completely new way of thinking. As Sandler Selling aptly puts it, "You can't learn to ride a bicycle at a weekend seminar." This principle applies to any significant life skill, including mastering the intricacies of financial advisory.

Let's consider an example to illustrate this point. What's the first thing that comes to your mind when you look at financial reports? If you're truly fluent in cash flow advisory, your immediate thought should be: "Are these accrual or cash-basis accounting?" This distinction is crucial because if the reports are accrual-based, they're almost entirely useless for cash flow purposes, especially the Profit and Loss statement.

Now, you might argue that you can create a "statement of cash flows." But that's missing the point entirely. The real...

Let's talk about what clients really want from their financial professionals. As someone who specializes in cash flow advisory, I've gained some insights on this topic that I'd like to share with you.

It's All About Improvement

So, what do clients really want? They want help improving their business in the future. That's right. Whether it's from their bookkeeper, accountant, CPA, or finance people, they're expecting ways to show improvements.

But here's the issue - and I see this far too often - instead of providing improvement advice, many financial advisors are just pointing out problems. "Here's a problem. Here's another problem." Sound familiar? They're adept at spotting issues, but not as skilled at saying, "This is how you can fix it." And that's where the ball is often dropped.

A Personal Analogy

Let me share a personal experience that illustrates this point perfectly. When my daughter got married, it was a wonderful event. We had a photographer there, capturing every moment....

When it comes to improving cash flow, many articles suggest strategies that give the illusion of control. However, the final decision often lies with someone else – your client, vendor, or creditor. While these strategies may work for companies in financial trouble, stable and profitable companies can focus on proactive strategies they can control. By doing so, they can gain a competitive advantage and increase both cash flow and profits.

Many popular cash flow strategies, such as getting a loan, increasing pricing, selling more, or offering discounts for early payment, depend on the decisions of others. Your bank decides whether to lend, your client decides whether to pay more or buy more, and your client decides whether to take advantage of early payment discounts. 

Short-Term Gains, Long-Term Losses: Some cash flow strategies can actually decrease long-term cash flow and profits while providing short-term cash infusions. Factoring or selling receivables, taking out...

As a financial professional, one of the most important things I've learned is that business owners value control in every aspect of their operations. This desire for control can sometimes be the reason why they haven't started working on their cash flow management. Our job as advisors is to help them understand that they have more control than they think over when money comes in and out of their company.

Many business owners are stuck in a box when it comes to how they get paid. They may not realize that there are various options available, both in terms of the mechanics and timing of payments from clients. Similarly, they may not be aware of the options they have when it comes to paying their own bills, such as paying late if needed or taking advantage of early payment discounts from vendors.

To be an effective cash flow advisor, I recommend learning how to manage cash flow using a spreadsheet. While automated software can be helpful, starting with a spreadsheet...

Understanding Cash Flow Reports: A Guide for Small Business Owners

Cash flow is the lifeblood of any business, large or small. Knowing how money moves in and out of your company is crucial for survival and growth. Today, I want to delve into the world of cash flow reports, highlighting the ones that are truly beneficial for your business, the ones that might not be as useful, and one that you might even want to avoid altogether. Let's break down this complex subject into manageable pieces, suitable for anyone managing their own small business finances.

1. The Cash Flow Forecast: A Starting Point

First up is the cash flow forecast. Many small business accounting tools, like QuickBooks, offer features or third-party services to help predict your future cash flow. These forecasts are based on a static model, meaning they use your past financial activity to estimate future spending and income. While this approach can offer a basic overview, it's important to remember that it's somewhat...

I Learned Some Great Business Lessons from Chef Gordon Ramsay

I love reality TV cooking shows. In particular, I enjoy and appreciate two shows featuring Chef Gordon Ramsay: Hell’s Kitchen and Kitchen Nightmares.

Why? Because while I’m learning new things about cooking, I also learn about achieving outstanding performance in business and in life. (Yes, I really enjoy cooking, but I’ll save that for another blog post…)

Here are some of the things I’ve observed, and what I learned about achieving outstanding performance.

People

• Chef Ramsay demands teamwork. I learned… achieving outstanding performance requires group cooperation, in addition to outstanding individual performances.
• Chef Ramsay is not trying to be popular. I learned… to do the right thing for the circumstances at hand, regardless of what people will think of me.
• Chef Ramsay calls it like he sees it. I learned… Being honest with people raises their level...

In the world of business, understanding the flow of cash is akin to navigating the vast seas. It's all about cash flow management—a term that goes beyond mere numbers, representing a crucial strategy for entrepreneurs and business advisors alike. This isn't just about tracking cash flow; it's about taking the reins and ensuring that your business thrives through meticulous planning and execution. Let's delve into the essentials of cash flow management and how mastering it can transform your business operations.

The Essence of Cash Flow Management

Cash flow management is the art and science of monitoring, analyzing, and optimizing the movement of money into and out of your business. It's about recognizing that as a business owner or an advisor, you have the power to influence how money flows, making strategic decisions to either speed up income or manage expenses more effectively. This proactive approach ensures that your business isn't just reacting to financial situations but...