This year may have been filled with a bit of emotional turmoil from all fronts in our daily lives. The results of inflation for business owners are costing sleepless nights worried about juggling vendor bills and how they will make payroll each month.
Closing the books on 2023; the 3 biggest financial problems I am seeing are:
1. Draining Bank Accounts – Caused by Inflation? Owners are spending more than they are bringing in cash collections. Everything appears to cost substantially more in 2023 from supplies to paying for employee wages. On the other side of the equation, sales seem to be flat with not much of an increase over this time last year. Net effect is more money is going out each month than is coming in, which takes a toll on CASH FLOW!
2. Accounts Receivables are Becoming More Challenging: If you as the business owner are struggling with cash flow; consider how your customers are also struggling. Several of my client’s clients have gone into bankruptcy this year making it harder to collect on A/R. What are your processes to collect more money faster with your customers so you may have a positive impact on accounts receivable? Struggling to collect money from your customers results in reduced monthly revenue.
3. Credit Card Debt and New Loans: Looking at your Balance Sheet, are you seeing credit card debt increasing? Did you have to draw on a Line of Credit because of monthly shortfalls in cash? Did you take on a new business loan in 2023 to help pay the bills and make payroll? The time is now to create a debt servicing strategy to help stop the bleeding of cash!
A HOLIDAY FULL OF FINANCIAL JOY
Going into 2024 with more debt, less cash, and revenues that are not producing a minimum of 10% Net Profit to Revenue Ratio will result in more anxiety and stress.
The #1 action that I want to encourage business owners this holiday season is to think about ONE money habit you are willing to change to make a difference in your financial story.
Often compared to the lifeblood of a business, cash flow remains as perplexing as it is crucial. It’s the liquid asset that fuels your operation, yet it’s also a convoluted concept that can lead to the downfall of otherwise promising enterprises.
The 4th quarter of any fiscal year is a labyrinthine maze for business owners — it is complex, but it is not impenetrable.
There is no time to waste if you see your business struggling financially. The easiest approach is to seek out a leader to help. Investing in professional Cash Flow Services is like having a compass, a map, and a seasoned guide in this complicated journey.
Guide to Cash Flow Management
Through careful planning, real-time tracking, and strategic foresight, business owners can navigate effectively. Keep these tips on hand:
Keep a Cash Flow Forecast: This is the business equivalent of reading maps. Know what lies ahead.
Monitor Receivables: You can’t solve a puzzle with missing pieces. Ensure that all expected payments are on track.
Streamline Payables: Recognize when to hold back and when to release. Timing is crucial.
Emergency Reserves: Store the acorns for winter; an emergency fund is vital.
Regular Review: Constantly scrutinize your financial records as if they are riddles waiting to be solved.
Consult the Experts: Seek professional cash flow services to show you the path to a profitable future months.
A cash flow expert is a game changer in making owners masters of their financial maze. As a partner, I offer my knowledge and can change owners financial attitudes, habits, and management to lead them to their finanical goals.
Start the road to financial freedom and cash flow confidence using Debra’s methodology to forecast 8 months into the future. Here is a quick video to learn more about cash flow forecasting: CRM Cash Flow Forecasting – YouTube.
Gain confidence with a 5-Minute Read. Update your cash flow knowledge in a library full of monthly blogs from Debra’s resourceful Knowledge Bank. Such blogs discuss:
How Much Cash on Hand is Enough? Cash reserves/cash on hand are the amounts of cash accessible to a business once outstanding balances have been paid. It’s an important metric to measure and determine what amount is enough for emergencies or dips in business. How much do you need on hand? Read More...
The Bad Money Habits You Need to Break – I’ve seen those bad habits broken with big payoffs. What follows is a selection of some of the most common bad habits I’ve encountered during my time as a cash flow specialist, as well as how to address them. Read More…
The Role of your Bookkeeper – Most business owners think of their CPA as a go to expert for financial reporting, when in fact they should be going to their bookkeeper – The keeper of the cash flow. Read More…
Where is your Company positioned in the Cash Flow Arena? It is not uncommon for a company to show a net profit on their income statement and still find that they are having shortfalls of cash each month. Why is that? The art of managing cash flow is to look 90 to 120 days into the future. My cash flow optimizing package forecasts 8 months into the future to predict a likely outcome. Full Article…
Centennial Revenue Management works with small business owners across industries whose needs extend beyond the basics of revenue management into total control and fiscal health.
What is your definition of cash flow? Simply put, it’s money in and money out of your business = CASH FLOW. Would you say your company is having good cash flow? Are you profitable, and you think that means you must have good cash flow? Are you accruing credit card debt and that means you are experiencing poor cash flow? From my seat at “your table” I would tell you as a CFO/Cash Flow Strategist, that to have good cash flow means:
Your Net Profit is a minimum of 10% of your Gross Revenues. If your sales are $100k/month, your Net Profit should be a minimum of $10k/month.
Your Net Profit % needs to be higher if you are servicing debt and/or taking owner distributions. These items are posted on your Balance Sheet and do NOT affect Net Profits!
You are adding more money each month to your bank accounts that helps you achieve 3 times your monthly payroll expense. If your payroll is $50k/month, your total cash available to you should = $150K at the start of each month.
Key Strategies for Optimizing Cash Flow in Today’s Business Environment
From my experience in today’s environment, most business owners are spending money as fast as it is coming in and then some. Being accountable and aware of the movement of money in and out of your business is the most important step toward optimizing cash flow.
Top 5 Strategies that I highly recommend paying attention to optimizing cash flow are:
Bring outside eyes to your financial arena: Take the time and consider investing your money into a Fractional CFO / Cash Flow Strategist. I help my clients understand how to read their Profit and Loss and Balance Sheet from a CEO’s perspective rather than from your CPA’s perspective.
Learn to “follow the money” from a Profit and Loss to the Balance Sheet:I defer to #1 above. Do you know how to read your P&L and Balance Sheet on a monthly basis?
Implement an Accounts Receivable Process (Money In):This is the money that you have earned and want to come in as fast as possible. How do you ask for money owed?
Implement an Accounts Payable Process (Money Out):This is money going out that you want to slow down and control how you pay your vendors.
Work from a Budget that is created from proactive strategies:I say it often; cash flow is not about the next 30 days as that money is already in play. You need to plan for the next 90 to 120 days from now.
Optimizing cash flow will take creating some proactive strategies! Partnering with an Outsourced CFO / Cash Flow Expert can help to empower you to increase your cash reserves and profitability. What if you could learn to manage the outflow of money against your revenue trends and make a profit and optimize cash flow?
Want to understand how to read your financials from a CEO’s perspective and not rely on your CPA and/or Bookkeeper to interpret your financial story? Connect with me for an hour and I will tell you what your financial story is from a CEO’s perspective.
We’re thrilled to announce the exciting rebranding of our SWOT package as the Cash Flow Optimizer Package!This offering still provides all the incredible benefits you know and love, including the delivery of an eight-month cash flow forecast directly tied to your current financial story, guidance on maintaining minimum cash balances, a comprehensive analysis of your current situation, and a personalized one-on-one consultation to understand your cash flow forecast.
Experience the power of optimizing your cash flow with our newly renamed package, designed to help you make smart short-term decisions and secure a prosperous future for your business.
“It takes 21 days to break a habit.” That’s how the old adage goes. Unfortunately, experts have agreed that this simply isn’t true – but don’t be discouraged. In my two-plus decades of working with business owners from various industries, I’ve encountered quite a few bad money habits. And fortunately, with some diligence from the business owner alongside education and support from myself and the rest of their team of financial experts, I’ve seen those bad habits broken with big payoffs. What follows is a selection of some of the most common bad habits I’ve encountered during my tie as a cash flow specialist, as well as how to address them.
1.Being complacent with the financials. I strongly encourage you to take “ownership” of your financials by educating yourself on how to read your Profit and Loss, Balance Sheet, Accounts Receivable Report and Accounts Payable Report.
2. Commingling money between business and personal finances. It’s important for business owners to remember that the company is not their personal cash bank account. Keep business and home separate! One of the easiest ways to break this habit is by opening a business credit card account that you use exclusively for business needs and expenses. This will help you avoid intermingling expenditures and simplify matters related to budgeting.
3. Racking up loans or credit card debt to buy what you “want”. While it can be tempting to use your line of credit to invest in things like new software or technology, this kind of spending can quickly get out of hand and leave your business in a cash flow crunch. If you cannot pay off your credit card each month, it is a red flag that you are spending more than your monthly budget can support. Create a proactive debt servicing strategy to eliminate credit card debt before buying things when you want them, at least until you can afford them.
4. Trying to do it yourself. Many business owners try and tackle their financial situation alone with the notion that they’re saving money. The truth is, hiring a team of financial experts (bookkeeper, CFO, CPA), can save you more money than the fees of its respective members. Doing your own bookkeeping is not the highest and best use of your time.
5. Relying only on your CPA. A CPA is focused on taxes, therefore relying solely on one will not help you with understanding your financial story. A CFO should be focused on increasing your bottom line to optimize your cash flow. This takes proactive thinking (CFO); not reactive thinking (CPA).
Don’t let these bad money habits stifle the success of your business. Take back financial control and learn how to be proactive by scheduling a complimentary consultation by clicking the button below.