by Debra Robinson | Apr 8, 2022 | Blog, Cash Flow Confidence
Beginning the month with promising figures can turn discouraging within thirty days, if funds are back to zero. Dirty Little Secrets of cash flow confidence are ways to control payables to ensure money lasts and even grows through each month rather than disappears. Penny pinching is a thing of the past, there are ways to succeed in every financial situation.
Business owners truly have the opportunity to decide how to spend. Conditioning accounts payable to act more like a bottle neck than a fire hose is the first step to nurturing a business bank account.
With increased production costs, employee wages, and interest rates about to climb; the economic environment is shouldering business owners decision making. Being conscience to fend off emotional spends or splurges to save a dollar is another trade secret in healthy cash flow. Click to read more on Money Habits.
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 can actually save you more money than the fees of its respective members. A cashflow specialist is a key guide to designing the road map to build valuable cash flow forecasts which eliminate the stress of uncertainty.
Savings Lift Off!
Unfortunately, there is no magic number that determines the right amount of cash on hand. This important figure varies from business to business. Essentially, the sweet spot for a particular business can be determined through cash flow forecasting.
From my seat at the table, the correct amount of beginning/ending cash balances will be defined by how easily a business owner can find peace of mind at the end of the day and go to sleep without worrying about cash flow each month.
Don’t let money slip away so easily. The success of your business relies on financial control. Learn how to be proactive by scheduling a complimentary consultation with me at the number below.
Curious to Know the Health of Your Business?
SWOT Cash Flow Forecasting Package: One Time analysis of owners current financials. Debra will create a cash flow forecast giving owners an 8 month view into the future of what their cash on hand balances are likely to be based on their current financial story.
by Debra Robinson | Nov 4, 2021 | Blog, Cash Flow, Cash Flow Confidence
Trick or SWOT? Treating your Finances…. To Outside Eyes!
Don’t be tricked by your numbers. Understanding cash flow in your business should not be frightful! Don’t play it safe going into the end of the year and not know what ghosts and goblins are interfering in maximizing your net profits and optimizing your cash flow.
Do you know the answers to these scary questions?
- Have you figured out if you are spending more money each month than you are bringing in on a cash collection basis?
- Do you know how to read your Balance Sheet that has lots of dirty little secrets?
- Do you know what your monthly breakeven revenue amount needs to be so you don’t run out of money?
- Do you know what your monthly cash reserves amount needs to be so you don’t have to juggle payroll and vendor bills?
Now more than ever, it is important to keep yourself financially educated to have a healthy business in 2021. Achieving cash flow wellbeing takes a team of trusted advisors. If you’re wrapped in wonder of it what would be like to step into November with a full awareness and presence in your financial arena, it is time to treat your business to a cash flow analysis.
SWOT Package Special 25% OFF through November. Become empowered by knowing what your cash on hand will look like for the next 8 months and schedule TODAY! Click to find more information on a SWOT analysis (strengths, weaknesses, opportunities and threats). As an expert of cash, I bring outside eyes to your financial arena. I will do a deep dive into your financials, create a working forecast model, and will deliver it to you in a 2 hour consultation. If you need support with collaborating with your CPA, I welcome the opportunity to help.
Find confidence and comfort in the financial health of your business. For the month of November, we are offering a cash flow package to help educate you on the movement of money in your business. Schedule your complimentary consultation today by calling (303) 835-7992.
by Debra Robinson | Oct 5, 2021 | Blog, Blog, Cash Flow, Cash Flow Confidence
Centennial Revenue Management offers more than consulting on cash flow; it is the GO-TO for all money management advise for the business community.
Debra is passionate about helping business owners and their teams to better understand their numbers and how to use that knowledge to grow and prosper. As such, the team at CRM provides ongoing cash flow and revenue management insights, tips and tools to help you build your financial muscle.
Using her professional background and current experiences mentoring business owners, Debra shares ways she has helped her clients from around the country with quick how-to’s on following the money to improve cash flow.
Are You Ready to Gain Control?
Start the road to financial freedom and cash flow confidence using Debra’s guide to get your business on track. Join the conversation and sign up for newsletters filled with informative tips and ways to achieve the “Dirty Little Secrets of Cash Flow”.
Gain confidence with a 5-Minute Read. Update your cash flow knowledge in a library full of monthly blogs from Debra’s resourcesful 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 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 modeling methodology 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.
We offer a range of cash flow consulting services such as cash flow management and forecasting as well as outsourced CFO services in Denver, CO and virtually across the country. Let us show you how to make more confident, lasting financial decisions for your company and grow a more financially healthy business. Interested in working with Debra? Click to find the right financial package for your business!
SPECIAL EVENT – Light the Night Walk
On September 23, 2021 – The Leukemia & Lymphoma Society’s Light The Night was held in Washington Park, Denver, CO. Debra Robinson has been a part of the walk since the beginning over ten years ago. She supports the memory and legend of her sister who lost her battle to cancer, but also was a pioneer of the Rocky Mountain LLS chapter. See more about LLS and how you can get involved by bringing light to the darkness of cancer. Click to learn more about the many ways to Get Involved or Help Debra’s Light the Night Fundraiser LLS Goal – Please make a Donation.
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Centennial Revenue Management is here to help by creating proactive strategies, identify, and transform money habits to ensure you won’t run out of your money.
Contact Debra today at drobinson@centennialrevenuemanagement.com
or at 303-835-7992.
by Debra Robinson | Jul 22, 2021 | Cash Flow Confidence, Dirty Little Secrets about Cash Flow, DLS
As the masks come off and businesses enter a “new normal”, owners are gearing up for what it will take coming out of the Pandemic. As a small business owner, you are most likely filling the role of a CEO, and CFO (Chief Financial Officer). It’s also not unusual for business owners to rely on their CPA’s for a one stop shop to cover all their financial concerns. Could building a team of subject matter experts help you climb your way to recovery?
Let’s take a moment to pause; What does your financial picture look like coming out of the Pandemic today?
– Do you have more money in your bank accounts than ever before?
– Are you willing to consider adding more disciplines in managing your financial arena?
– Do you know how to forecast your cash reserves to insure you will NOT run out of money by the end of the year?
Moving Into a New Normal Will Take Some Strategies – Check out the steps to keep you on track https://centennialrevenuemanagement.com/whos-managing-your-cash-flow/
- When Should You Hire a CFO / Cash Flow Consultant: In today’s business landscape, outsourcing is a less expensive way to go when wanting to “hire” your subject matter experts!
- Benefits that a CFO Cash Flow Consultant Can Provide: We cannot be “experts” in all aspects of our business. The goal is to look at the good, the bad, and identify what is not working.
- Who is Watching Your Cash Flow? Take Advantage of the SWOT Analysis Package before Investing in a CFO. If you want to know where you stand, take advantage of the SWOT Analysis Package – strengths, weaknesses, opportunities and threats. Click here to learn more about this offering.
Be Proactive with Your CPA as you Enter the 2nd Half of 2021: Now is the time to be collaborating with your CPA and CFO/Cash Flow Consultant to plan for end of year tax liabilities.
A CFO/Cash Flow Expert offers security and an education. Offering a different perspective on your financials, a CFO can take a 360 view: not just a two-dimensional view of profits and taxes.
If you are interested in learning more about how I work with my clients providing leadership in the management of financial activities and collaborating with your CPA, I welcome the opportunity to help.
Read more on how to take charge of your financials.
by Debra Robinson | May 20, 2021 | Blog, Blog, Cash Flow Confidence, DLS
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 can actually save you more money than the fees of its respective members. Adding a CFO and/or Cash Flow Strategist to your financial team, is an investment that owners will reap rewards from long into the future. A business is only as strong as its cash flow. Becoming proactive in creating strategies to help you not run out of your PPP money, is the goal to recover strong out of the pandemic!
From my own experiences, most business owners are spending money as fast as it is coming in and then some. Being accountable and aware of your business spending is the most important step towards finding solutions towards money woes. What were your money habits going into the Pandemic? Did you already have a cash flow problem and were “saved” by the PPP gifts and EIDL Loans? Have you taken the time and put forth the energy in rebuilding a more solid financial foundation?
Spring is upon us! Let May be the month that you plant the seeds to a good financial garden and begin to watch it grow. Centennial Revenue Management wants to help you get off to a good start! Take advantage of the Spring SWOT Analysis Package – strengths, weaknesses, opportunities and threats. This snap shot will help you to plant the financial seeds to build a strong financial foundation. Click here to learn more about that offering:
Now that you are sitting on more money in your bank accounts then ever before, what will you do to ensure and empower yourself that you will not run out of money by the end of this year? The Dirty Little Secret about Cash Flow is that it’s not about the next 30 or even 60 days from now. The sweet spot is 90 to 120 days out to see if you are brewing a cash flow storm or will already be in one!
Top 5 Strategies that I highly recommend paying attention to when creating a plan in the very near future.
- Bring Outside Eyes to your Financial Arena: Take the time and consider investing your money into a cash flow expert that can identify the top money habits that you can change to get a better outcome with managing cash flow. If you went into the Pandemic with a cash flow problem or already struggling with cash flow; it’s more than likely you will come out of the Pandemic with the same cash flow problem. It will just take a longer time to spend the cash reserves that you have stashed from all the loans the government gifted you!
- Identify what your Average Monthly Revenues are each month: To determine this number, I recommend using a 4-month trend taking the total of CASH revenues (not accrual) and divide by 4 months. This will tell you a starting place of what your monthly revenues are likely to be in the months ahead.
- Next up; Identify your Average Monthly CASH Outlay: To determine this number, you need to look at both the Profit and Loss and Balance Sheet. On the P&L, I also recommend looking at the total of 4 months of Expenses on a CASH basis and divide by 4 to get an average monthly amount for each expense line. PLUS, you need to look at the Balance Sheet and determine the monthly amount of debt servicing and Owner Draws/Dividends that are being posted. The total amount will get you close to understanding what your Average OUTLAY of cash is each month.
- Implement an Accounts Receivable Process: This is money that you have earned but have not yet collected. Anything over 45 days outstanding is “low hanging” fruit in the cash flow arena and should be aggressively pursued to collect from your clients. First step in implanting a process is to assign an “owner” on your team to make client relation calls and send monthly statements asking for money owed.
- Implement an Accounts Payable Process: This is money going out that you want to slow down and control how you pay your vendors. I’m not suggesting that you violate payment terms. I am suggesting that you have your bookkeeper enter vendor invoices into your accounting system and then pay on a weekly or bi-monthly process. Big picture, you want to collect as much of your accounts receivable as possible, make payroll, pay vendors and service debt with you being empowered by the timing letting money go out of your bank accounts!
Moving into a new normal will take creating some proactive strategies! Partnering with a cash flow expert can help to empower you to hold onto your cash reserves. What if you could learn to manage the outflow of money against your revenue trends and make a profit and optimize cash flow? Take back financial control and learn how to be proactive by scheduling a complimentary consultation with me at the number below.
The goal is to focus on optimizing cash flow and to educate you on what your minimum cash on hand balances need to be to sustain your business in the months ahead.
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Centennial Revenue Management is here to help by creating proactive strategies, identify, and transform money habits to ensure you won’t run out of your money. Contact Debra today at
drobinson@centennialrevenuemanagement.com or at 303-835-7992.
by Debra Robinson | Apr 1, 2021 | Blog, DLS, Follow the Money
As a CFO, I can tell you that the most vulnerable area in the financial arena is bookkeeping. In my cash flow arena, I refer to the Bookkeeper as the “Keeper of the Cash Flow”! I have learned that one of the most important things you can do to set yourself up for success as a business owner is to surround yourself with people who are great at what they do. My seat at the table in the financial arena is as a CFO/Cash Flow Strategist. Take a moment to identify who your trusted advisors are in the financial arena. Once you have the right “subject matter experts” in your sandbox, you should be able to maximize profitability and optimize cash flow!
Let me ask you:
- What is your relationship with bookkeeping in your business?
- You may think your bookkeeper is doing a great job, and “need” to trust that they are, but what if they are not?
- Are your financials up to date or are you “winging” it with making financial decisions?
Why do you need a bookkeeper?
You and your Bookkeeper: The bookkeeper is the keeper of the cash flow. This person is the “subject matter expert” of your books and records the day-to-day transactions accurately. Please, please do NOT minimize the importance of this subject matter expert.
Bookkeeping Hazards: If you are a business owner that has employees, has credit card debt, has a business loan, and/or has clients that owe you money; you can afford to have a bookkeeper on your team. Top hazards that business owners tend to tolerate:
- Doing your own bookkeeping! I encourage you not to try saving money by doing your own books. Why? This is the highest and best use of your time, and you are not a subject matter expert in “following” your own money.
- Paying Bills and Accounts Payable: A bookkeeper can set up a process for entering vendor bills and producing an Accounts Payable report for you to see what is on deck to be paid in the weeks ahead.Why? It is important to control the outflow of money against money coming in. Paying bills “carelessly” is not a good discipline in the cash flow arena.
- Accounts Receivable: It is a challenge for business owners to ask for money owed. Having a bookkeeper set up a process for collecting from your customers removes the uncomfortable feelings of asking for money.Why? You have a 45-day window to collect money from your customer. Each day after that it is harder and less likely that your customer will pay.
- Who Signs your checks? DO NOT allow your bookkeeper to sign or pay bills through your online banking account(s).Why? This opens a potential area of fraudulent activity (EMBEZZLEMENT) that you can easily avoid by having your bookkeeper set up the checks to be signed and you sign your checks or pay online with a credit card.
One of the “Dirty Little Secrets About Cash Flow” is that most owners are not holding their bookkeepers and other trusted advisors accountable. Having good processes to manage all the bookkeeping activities helps optimize cash flow and maximize profitability. Do not minimize the importance of bookkeeping in your business. You are as good as your team.
Contact Us
If you need support with collaborating with your CPA, I welcome the opportunity to help. Find confidence and comfort in the financial health of your business. Schedule your complimentary consultation today by calling (303) 835-7992.
by Debra Robinson | Jan 24, 2021 | Cash Flow Confidence
What is in store for your business in the coming months as we can see a light at the end of this Pandemic tunnel. I implore you to ask yourself these questions:
- Do you still have cash in the bank to make payroll and continue to navigate these uncharted waters?
- Are you going for another round of funding to help your business survive and/or thrive?
- How much debt are you carrying when your new loan payments kick in?
- Will that funding be enough to get you to 2022?
- Or, will you run out of money in 12 to 18 months because you are still spending more money each month then your Revenues can support?
As a business owner or CEO, your perspective on financials should be different from your CPA’s or bookkeeper’s. It must be based on understanding the full impacts of cash flow so that the integrity of your financials enables you to make sound business decisions. Do not ever make decisions based on your net profit alone. Especially if you are servicing debt!
Cash is King! It is especially important to pay close attention to cash flow now more than ever! I know many business owners that are sitting on a “boat load” of cash from receiving grants and EIDL loans. I also see a storm in the making if business owners do not take the time to educate themselves on cash flow in their businesses. Whatever money habits business owners had going into the Pandemic and losing control of their revenues, it is likely that those same money habits will slowly drain those cash reserves in 2021.
Set yourself up for success and find empowerment and peace of mind in your financial arena. Every business owner needs a three-dimensional view of cash flow. Consider these three components in the cash flow arena:
#1: Look in the rear-view mirror to assess how your business is trending. What is the average monthly outflow of cash compared to your average monthly cash revenues?
#2: Identify your monthly budget to control the outflow of money against the money coming in. (This includes debt servicing, owners draw, equipment purchases.)
#3: Forecast cash requirements in the months ahead for things like taxes owed, additional payroll and past due vendor bills to be paid.
My solution is to replace a cash flow statement with a cash flow forecast! The “Dirty Little Secret About Cash Flow” is looking 90 to 120 days from now to see how much cash you will still have in the bank. Many business owners are in crises and are watching cash flow on a daily or weekly basis. That money is already in play!
The sweet spot for managing cash flow is 90 days from now. That means you must implement a budget, good bookkeeping, and create proactive strategies to bring more money in then is going out. Or in the case of a Pandemic, create proactive strategies to control the money going out against projected revenues coming in.
Cash flow is not about net profit or net loss. It is about the movement of money into and out of your business and on your P&L and Balance Sheet. If you can learn to accurately project cash outlay against projected revenues is a guarantee to give you empowerment and peace of mind at the end of the day.
by Debra Robinson | Jan 19, 2021 | Cash Flow Confidence
As we close on 2020, we all can agree the year has been full of obstacles. Between politics, business and personal struggles; our lives have had to pivot in many ways due to COVID-19. Business owners are one group of many that have been affected the worse over the last year. With shut downs and light foot traffic, owners’ cash flow continues to remain on an ongoing roller coaster due to the stress the pandemic has caused across the world.
However, there have been so many untold blessings. For me, it has been the birth of a new grandson. Although, I haven’t been able to touch him or for that matter been able to see the rest of my children due to long distance; I am thankful they are safe and healthy.
With the right attitude, we all can step over the obstacles and move forward towards the goals we have planned to accomplish. Despite the worry and fear, business owners still can overlook cash flow forecasting, causing them to be more reactive with financial strategies than proactive. This year was the ultimate test to that. As a cash flow specialist, I am no stranger to combatting financial turmoil.
Keep in mind that a CPA or bookkeeper, tracks PAST spending and offers tax preparation. When reviewing cash flow, a cash flow specialist offers a FORWARD – looking solution. In order to survive, owners be conscience of their spending ahead of time. How are your habits? Are you finding funds draining fast? Have you had to shut down?
After the holiday rush and a well-deserved rest, I would love for you to attend my Dirty Little Secrets About Cash Flow webinar on January 20th sponsored by the Denver / Boulder Better Business Bureau. This virtual seminar will offer many strategies for you to focus on to help you not run out of money as you continue to navigate to your new normal of doing business in 2021! It’s time to be PROACTIVE; not reactive in the cash flow arena! Click here to learn more about this seminar.
The community needs you to thrive!
From my family to yours, we wish you a healthy cash flow and happy holidays.
If you need support with collaborating with your CPA, I welcome the opportunity to help. Find confidence and comfort in the financial health of your business. Schedule your complimentary consultation today by calling (303) 835-7992.
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by Debra Robinson | Nov 2, 2020 | Cash Flow, Cash Flow Confidence
Are you ready with your 2021 projected tax liabilities?
Do you know what your projected tax liabilities will be for 2021? Now is the time to be proactive with your CPA and request a tax review for 2021.
As we go into the fourth quarter, it is more important than ever to pay attention to your bottom line and cash flow. Optimizing cash flow takes implementing proactive strategies. Oftentimes, a CPA working independently is not proactive about helping you plan for cash requirements for taxes that will be owed in April of next year.
Concerned about your business as tax season sneaks up on us?
As a Cash Flow Specialist / CFO, I am committed to helping business owners understand their financials from a CEO’s perspective, different from your CPA’s.
Think about it this way; your CPA is focused on reducing your Net Profit to help you pay less in taxes. From a cash flow perspective, you need to focus on increasing your Net Profits that will result in better cash flow. Working together with these two subject matter experts, can help you to maximize Net Profits, optimize cash flow AND get more money into your pockets!
You can now plan for how much cash reserves you need to set aside for April of 2022.
You can also create proactive strategies to offset some of those taxes owed before the opportunity disappears by December 31st.
Now more than ever, it is important to keep yourself financially educated to have a healthy business in 2022. The PPP loan could be considered a great “cash flow” gift. Do not squander it by not looking into the future and understanding what lies ahead as your business continues to find its new normal. Achieving cash flow wellbeing takes a team of trusted advisors.
To help you on this journey, and back by popular demand, I am offering my SWOT (Strengths, Weaknesses, Opportunities, Threats) Cash Flow Forecasting Package discounted to $1,500 to help business owners continue to pivot and navigate during these unprecedented times. This is a one time analysis of your current financials.
I will deliver an eight-month cash flow forecast
I will deliver an eight-month cash flow forecast that is directly tied to your financial story in order to educate you on your minimum cash on hand balance needed to sustain your business in the months ahead. I will do a deep dive into your financials, create a working forecast model, and will deliver it to you in a 2 hour consultation. This process will identify three very important numbers:
- What your sales revenue break even number is.
- What your monthly outlay of cash is including debt servicing, and distributions.
- What your monthly cash on hand balance is and will it sustain you 8 months from now.
If you need support with collaborating with your CPA, I welcome the opportunity to help. Find confidence and comfort in the financial health of your business. Schedule your complimentary consultation today by calling (303) 835-7992.
by Debra Robinson | Aug 20, 2020 | Blog, Blog, Cash Flow, Cash Flow Confidence, Follow the Money, In The News
Understanding how to manage cash flow takes more than just reading a profit and loss.
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? Where did the money go if it is not in the owner’s bank account?
Many business owners now have a lot of money in their bank accounts due to the PPP Loans, EIDL SBA money and / or grant money that has been a lifeline. I will also speculate that most businesses will get their PPP loans forgiven and that will be a great cash flow gift. But will it be enough to sustain your business into next year?
Cash flow is the lifeblood of any company. Just because you may have more money in your bank account than ever before, does not equate to good cash flow. If you have experienced cash flow issues, or you want to make sure they are not lurking around the corner, today is a great day to begin building this financial muscle.
Start with answering these questions:
- What is your cash on hand balance from last month?
- What are your average cash revenues (not accrual revenues), monthly?
- What is your average outlay of cash, not total expenses each month?
- What should my monthly cash reserves amount be to not run out of money?
- Were you having a cash flow problem/challenge before COVID?
Having trouble with answering any or all these questions?
Here is a Hint: It will take more than looking at your Profit and Loss statement to get the answers. You will need to understand your Balance Sheet to help give you the answers. Learn more about following the money to your Balance Sheet.
Let me help break this down for you:
- Your Cash on Hand Balance: This is one of the “key numbers” in the cash flow equation. The ending / beginning cash balance for a month will come from your Balance Sheet (not from your online banking account). This is the starting point for knowing how much money you will have in the current month to work with in your cash flow equation.
Example: Say we are assessing cash flow for August. You will need to look at the Balance Sheet ending July 31st, the month prior to get the total amount of all your bank account balances. This will equal the beginning cash balance for August. Make note, this will include all outstanding checks that are in play but have not hit your bank account.
- Your Average Cash Revenues: This is the second “key number” in the cash flow equation. Sticking with #1 scenario, that we are working on projecting cash flow for August; what are your projected revenues that you are planning for that will clear your bank account by August 31st? This means following the money into your bank account; not what you booked but have not collected. I like to use an average of the last 4 months of revenues to start my projection in helping me to forecast revenues.
Note: This number is going to be tied to your accounting system; what your bookkeeper has closed the previous months on your Profit and Loss and showed as income.
- Your Average Outlay of Cash: This is the third “key number” in the cash flow equation. This is where the Balance Sheet comes into play. Outlay of cash is different than total expenses. Total expenses come from the Profit and Loss. You are looking at Revenues – Expenses = Net Profit. Outlay of cash is more than that. It includes the cash that is posting to your Balance Sheet each month such as debt servicing, asset purchases, shareholder dividends/distributions to name a few. If you have a loan, the principal payment is posted to the Balance Sheet (the interest is posted to the P&L). Do I have your attention?
Example: To calculate total outlay of cash, take your total expenses you are budgeting for August + loan principal amounts + shareholder distributions = Total Cash Outlay.
- Your Monthly Cash Reserves: This “key number” is different for every business. You need to educate yourself on what will work best to help OPTIMIZE cash flow.
Example: Should this number be 3 x your monthly payroll expense? Or it could be 1 x your monthly cash outlay. What is going to help you sleep like a baby at night knowing that you will not run out of money? That is what this amount needs to be on a monthly basis.
- Let us put it all together for our monthly cash flow projection. For this example, I am going to stipulate that the beginning cash balance includes PPP funding of $80,000. (Prior to COVID, the beginning cash balance might have been as low as $45,000):
Beginning Cash Balance: $122,562
Cash Revenues Projected: + $110,000
Subtotal of Cash for August: $232,562
Average Outlay of Cash: – $125,000
Projected Ending Cash: $107,562
This is just for one month, the current month. You can see the importance of adding debt servicing and distributions to the outlay of cash. This number is higher than the revenue number. What if your revenues come in short and your outlay is the same? It is not uncommon for business owners to spend the money as fast as it comes in. How will you handle additional expenses (i.e. quarterly tax estimates, payroll bonuses, etc.) that are in addition to the monthly budget? You will inevitably start to chip away at your cash reserves
Before COVID, were you having a Cash Flow Problem?
If the answer is yes, then it is important to change some of your money habits that contributed to the cash flow shortage. Were you “winging it” with your financials? Did you have an Accounts Payable process in place to control the outflow of money? Did you have a debt strategy? Or if you wanted it, you bought it and accrued credit card debt or maxed out a line of credit?
Now that you have received funding, if you do not change some of those money habits, you are likely to re-create a cash flow shortage. It may not happen for 6 – 12 months as you whittle away your stash of cash. In my experience, it is likely to happen!
Managing cash flow is not about the next 30 or even 60 days. That money is already in play! You have already committed to payroll, vendor bills, and you may or may not have control of your revenues due to the Pandemic. The art of managing cash flow is to look 90 to 120 days into the future. My cash flow modeling methodology forecasts 8 months into the future to predict a likely outcome.
Find confidence and comfort in your business’s cash flow arena. Schedule your complimentary consultation by calling 303-835-7992.
