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.