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.
See how far an expert can take you!
Did you take on more debt by signing up for an EIDL loan? Have you been funded with 1, 2 or even 3 loans in the last 2 years? If so, please continue to read this very important message that I want to convey that you might not realize what you signed up for when you took on more debt from the SBA.I worked with one of my clients last week to learn about how the payback schedules are going to be kicking in. Most of my clients started receiving EIDL funds in 2020 and then some have taken 1 or 2 more loans. Each time, the government is deferring when your FIRST payment will be due.
SBA Loan – Gift or Burden?
How nice of the SBA to let you know that your loan(s) payments are being deferred for 12 or 24 months from your initial funding. Here’s the kicker…… your loans have been accruing interest from day 1 of receiving those funds. I learned that my client has accrued $14,500+ of interest on approximately $650K loan payoff. I also learned that until the accrued interest is paid off, we won’t touch the principal balance of the loan. Client’s interest is charged at $65.47/day until she is current. Oh, by the way, her first payment is not due until May of 2023 because the govt will defer another 12 months from her last funding. How nice of the SBA, or not???? Who is making money off your debt? Is it a gift or is it a burden?Steps to Find Your Accrued Interest
Think about that for a minute……If you have not looked into your EIDL loan and are just sitting back waiting for that deferred payment schedule to kick in; I would like to strongly encourage you to find out what the accrued interest amount is sitting on your account. Here are a few steps you can follow:
- Find the last email/letter from the SBA that is for the loan. This will be your original loan document or the last AMENDED notice for the loan.
- You can call the 800 number on that letter for help. What I learned walking through this process with my client is we went to this website: Capital Access Financial System (sba.gov).
- You will need to ENROLL by clicking the NOT ENROLLED link.
- You can create your login information. (This is a different site than where you originally signed up for the loan.)
- It’s very easy. But, again, if you need help, call the 800 number on the loan document that you have received.
- Once you get logged in, it will tell you what the total balance is including the accrued interest amount. This is what needs to be paid before you will start hitting the principal amount.
- You will also see when your first payment will be due.
Dirty Little SecretFrom my seat in the sandbox as a CASH FLOW expert, it’s important to create debt servicing strategies in line with how your cash flow can support them. Understanding how to manage cash flow takes more than just reading your Profit and Loss. You MUST understand the Balance Sheet that is tracking all your debt. How much you are posting to the principal portion of the loans are posting here. This money going out has NOTHING to do with your Net Profit/Loss.Proposed Solution
I would welcome the opportunity to help you create those debt servicing strategies from a proactive perspective; not reactive. We are continuing to offer our SWOT Package to help you know where you are currently with your cash flow. The good, the bad and the ugly. Here is a snapshot of what this package can offer: SWOT Packages | Get Total Cash Clarity | Centennial Revenue Mgmt (centennialrevenuemanagement.com).
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.
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 firstname.lastname@example.org
or at 303-835-7992.
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.
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
email@example.com or at 303-835-7992.
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.
The COVID-19 stimulus bill, signed this March, sent much needed relief payments to tens of millions of Americans. Now that the money has arrived, the biggest question is how to manage it, pay bills, and ensure it carries through longer than six months. Some news outlets are reporting that we still haven’t seen the worst of the pandemic. What’s it going to look like for your business in the month’s ahead? Will your PPP Loan and EIDL Grant monies keep you afloat into next year? Or will you run out of money because your business was already struggling with cash flow going into the Pandemic?
Last month I wrote a blog: The Bad Money Habits You Need to Break: I highlighted the importance of changing the bad money habits that can stifle the success of your business:
– Using your business to fund your personal home budget. What about having a business budget that funds your owner compensation proactively instead of “robbing Peter to pay Paul”?
–Taking on too much debt with loans and credit card debt. Now you took on more debt; what’s your debt servicing strategy?
– Not having an Accounts Payable process. You lost control of your revenues due to the shutdown. Now you as you begin to open; how do you learn to control the outflow of money if you don’t have a good process in place?
Has government money arrived? Now, you may have more money in the bank than you have ever before. Getting the PPP loan will be a gift from the government when you can apply for the loan forgiveness. Do not squander this gift. Use the money to gain control and begin investing in building a better financial foundation for your business.
Here are my top key financial indicators that I recommend you learn from your current financial story. Let’s agree; you may have lost control of your revenues in the past few months and are working on ramping that financial indicator back up. However, you DO have control of the outflow of money. Remember that CASH IS KING. Review your business financials asking your bookkeeper these questions:
1. What is your monthly average outlay of cash? This is not just your total expenses each month. This number includes your average monthly expenses that you track on the Profit and Loss. PLUS it includes what is on your Balance Sheet that has nothing to do with profitability and everything to do with cash flow. This will include (but not limited to):
- Debt servicing for your loan principal payments.
- Credit card payments.
- Shareholder/dividends paid out.
2. What is your average monthly CASH revenue coming in against the outlay of cash going out each month? I will tell you from my experience, most businesses are spending money as fast as it is coming in. If you are a $1M business, you may be averaging $83K/month in revenues. You have to look at the monthly spend on your Profit and Loss + the money that is posting to your Balance Sheet. Then add that sum to the monthly outlay of spend each month. If you don’t know this number, you will most definitely run through your PPP loan in no time.
3. What does your monthly CASH RESERVES need to be maintained to help you sleep at night without worrying about running out of money? Do you even know where to find this number in your financial reports? Here is a Dirty Little Secret: It’s on the Balance Sheet and it will be the total of all your bank accounts when you close your financials the month before. Let’s use the example that you’re a $1M business that is averaging a monthly outlay of cash of $85K/month. Your monthly payroll is probably the biggest expense and it averages $48K/month. Should your cash reserves be maintained at 3 x your monthly payroll expense? Should it be 1 x your monthly outlay of cash? What happens when you have expenses that are above your monthly spend such as, quarterly tax estimates, bonuses, and/or a 3rd monthly payroll that occurs twice a year? Will you have enough in your cash reserves? Or will you have to “rob Peter to pay Paul”?
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 can actually save you more money than the fees of its respective members. Adding a CFO to your financial team could be an investment into building a more improved financial foundation that allows you to become proactive in creating strategies to help you not run out of your money!
Take back financial control and learn how to be proactive in managing your cash flow. Schedule a complimentary consultation, and let me introduce you to my cash flow forecast processes.
Centennial Revenue Management has tools to help, including templates and spreadsheets to help organize your PPP usage and monthly forecasts. Contact me today at
or at 303-901-4823.