Profit does not mean that there is cash in the bank. A growing bank account does not mean that you are making a profit.

Surprised? You're not alone. Most schools, CPAs, news reports, etc. focus on a company’s earnings, profits, and sales. That’s because those same institutions are geared toward teaching, working for, and reporting for BIG big businesses and public companies.

But if you are a small business, your most important measurements for the next 3 months or so have to do with cash:
 

• How much cash is coming into or going out of the company?
• What is your cash balance projected to be?
• Do you have cash or credit reserves to get you through cash shortfalls?

So don’t be fooled by “the establishment” into thinking “profit, profit, profit.”

Think: “Profit with sustainable cash flow!”

Let me know if “profit without cash” is a new concept to you, or if it’s not, how you learned about the concept!

E-mail me...

No money to pay your bills? Don't borrow money, just don't pay your bills.

You have to pay them at some point, but there are tactics to slow down money flowing out of your bank account.

But FIRST... here are some bills you need to pay on time:
Payroll.
Payroll.
Payroll.
Anything that puts you in breach of contract and puts your business, your home, or your health at risk.

Other than that, most bills can be postponed past the due date without dire consequences.

Look at bills that you owe large corporations, who are used to delays. Telephone, internet, utilities, insurance companies. You may be able to wait up to 60 days without consequences. Let them know when you'll be paying.

Suppliers: Make sure that you talk with them. Make payment arrangements. Don't surprise them. Make a partial payment. Many times your relationship is more important than delaying payment.

Mortgages and rent: Most have a no-penalty grace period. Use it when you need to.

Please, be careful with solo-entrepreneurs and...

On this episode of Fortnight Cash Flow, David talks with DryRun's Jeremy Burke discussing simple cash flow optimization techniques that you can implement in your own business. 

Are you a cost center or do you provide a documented return on investment (ROI) for your clients?

Most companies, non-profits, and government institutions view accounting, bookkeeping, tax preparation, and financial analysis as an expense that needs to be endured. Because of this, they often look for a low-cost provider that meets a minimum standard, like a certification.

Examples would be a QuickBooks Advisor, accounting degree, or CPA or Chartered Accountant.

There are literally millions that have certifications of each type.

What if you could show an ROI to clients?

Show them that for every dollar, pound, Euro, lira, or peso they spend they get to save or make 5x, 10x, 100x, or even 1,000x what they spent?

The best way to do that is through advisory services which help improve a company's financial performance.

If this interests you, register here for the on-demand webinar which explains this opportunity further. It could be a perfect fit for you and your practice.

The quality of your team can have a HUGE impact on your cash flow. You are much better off paying ABOVE market wages and benefits to a smaller number of "A" and "B" players than trying to save some money hiring average people at lower wages.

Here are two examples:
- A manager at a bridal shop who ran all sales and marketing. She was not paid in line with the results, asked for more, was told "no", so she left. When the store owner realized how much work was being done, a sales manager and a marketing manager were hired. The sales manager wasn't up to the job and quit after a few months.

- We reorganized a division that was losing a LOT of money. We laid off 50% of the workforce that did not have the skills or attitude that was needed. We rehired back 25% of the headcount with people with the right skills. We needed to pay much more per person, and saved very little on compensation. The smaller team produced much better results and we were profitable within 1 year.

People think that this...

Most business owners' eyes glaze over when I talk to them about the "chart of accounts."

Then we talk about what they are trying to understand about their business's finances. They generally want the same thing:

- How much money am I making?
- How do I know if I'll have enough money to pay the bills?
- Which products and services make the most money?
- Do I have extra expenses that I can cut?
- Do I have enough capital to grow?

When I explain that the chart of accounts is the foundation for understanding each of those questions, they get more interested.

I explain that the chart of accounts is a list of categories.

Then I tell the business owner:
• Where sales come from
• Where expenses go
• What the assets are (what's owned)
• What the liabilities are (what's owed to others)
• What the difference is between what's owned and what's owed. This is called the “equity” in a company.

They quickly understand that with the right chart of accounts they can...

“Automation applied to an inefficient operation will magnify the inefficiency.” 

- Bill Gates

I am constantly asked, "What software do you use to implement cash flow management?"

My answer: "I start with an Excel model."

Usually, people are surprised and even disappointed. They want to believe that there is a "silver bullet" that magically picks up their accounting data and will automatically tell them how to improve their cash flow.

It just doesn't work that way.

Why? Because....

Most companies have a very inefficient operation when it comes to managing their cash flow.

Building out an Excel model becomes a conversation about how all the pieces of cash moving into and out of the company fall into place.

After you understand the movement then you can automate the model.

Do you use automation in your business? I'd love to know how, and if it took some time to make it efficient.

Let me know in the comments below!

Cash flow management isn’t about money. It’s about getting your life back.

I’ve worked with business owners who were sick with concern, fear, and doubt about how they will make payroll, meet bank covenants, and literally keep the lights on. They've told me with tears in their eyes that they don't know if they can survive past another payroll. Their spouses express concern about the health and well-being of their partner.

By focusing on cash flow - when and where cash was coming and going from the business - they were able to turn around the business completely, or stay afloat long enough to sell the business.

And yes, some businesses fail, but it’s because of a fundamentally unsound and unsustainable business model.

If you or someone you know have good sales and margins, but are struggling to have the cash to pay the bills, get help.

Open up to someone who can integrate and monitor a cash flow model with your company’s financials and help you make decisions...

Want to solve 80% of your bookkeeping needs to solve cash flow management issues?
Then do two simple things:

1. Reconcile your books every week without fail. Do it on Friday, last thing so you are ready to update your cash flow projections on Monday.

2. Create bookkeeping reports that give you insights into the key cash flow indicators that you need. One example: Accounts receivable aging.

Too simple?

Is there something else that you think needs to be done?

Let me know in the comments.

#tcmp #bookkeeping #reporting

Why don't employers see the huge CASH cost of losing their best people, and give them what they need to stay?

Employers spend a lot of extra money when they lose their best people. Here are some of the incremental hard costs:
- Training costs for a new person
- Recruiting costs

Even bigger are the "hidden" costs:
- Employer's time to recruit
- Lost productivity
- Emotional cost to the team

What would it take to keep the best people?
1. Ask them. They'll tell you.
2. Some money. Less than replacing them.
3. Recognition. Get creative and see #2.
4. Bonus idea: Reward them with something that benefits their significant other and/or family.

Back to the cold hard cash facts. Studies show it costs you 33% of someone's annual salary to replace them. You can keep people for a lot less.

Am I right? Wrong? What's your experience?

Let me know in the comments below.

#wtcfg #humanresources #finance