READY TO FINISH STRONG?
Better Management in 13 Weeks
At the beginning of 2017 you were probably motivated to make huge financial strides in the months ahead. But as the weeks began to pass, the struggle of managing the day-to-day operations of your business began to demand more time than you expected. Now it’ s summer. The year is more than halfway over and you are left wondering what happened. Perhaps the answer lies in the effectiveness of your cash management strategy.
More often than not, a business’ s leadership team will put forth a lot of time and effort into mapping out the company’ s budget for the year ahead. Then one thing leads to another and the budget they worked so hard to put together becomes stale, outdated and forgettable. Worse yet, any financial objectives outlined within those pages essentially go down with the ship. If this scenario sounds familiar, a 13-week cash flow projection just might be the solution you’ ve been looking for.
A 13-week cash flow projection provides you and your stakeholders with a detailed representation of your business’ s well-being and empowers your management team to become more accountable in your business’ s success. Once you have a better idea as to how much money is going out and coming in( and why), you will be positioned to make better decisions and develop timely and attainable goals. Here’ s what you do:
• Generate a strong projection of your financial resources. Be sure to put in the effort to research and include data from a variety of sources.
• Analyze your accounts receivable to determine ways to quickly turn them in to cash or to better manage your sales and improve profitability.
• Review your current inventory levels. Excess inventory is cash that has already been spent and is not being used effectively. Therefore, take the time to review and segregate inventory that is old or obsolete and then consider whether it can still be used to generate cash.
• Review and organize your accounts payable, which will help you manage when payments are made.
• Take a look at your non-core assets and determine how much money you are spending to offer them. Do they cost too much to hold on to? Ask yourself if they are viable and whether they align with your current client base. If not, maybe you should discontinue the offering in favor of an offering or initiative that produces greater revenue for your business.
Remain Realistic
A proper cash flow projection is based on facts – not on what you expect( or hope) will happen. Your first step should be to look at your company’ s historical trends, current initiatives and any internal and external factors that may impact the financial security of your business, including past, present and future billing and payment patterns. Also make sure that the cash your business needs is based on fixed and recurring costs. From there, you can then estimate variable costs and expected sales.
Once you have compiled your historical data and have put your cash flow projection in to action, update your data with current figures and information weekly, which is important if you intend on using your cash flow projection as a management tool. With regular maintenance, your projection will become an accurate representation of your business’ s financial wellness while providing you with a framework for generating short- and long-term success.
Would you like to have an accurate cash flow projection readily available to help you make critical business decisions but need help setting getting started? I am available to take your call.
by: Tom Jeffries
CPA, Principal 212 North Washington St.
Millersburg, OH 44654-1122( 330) 521-4533 tom. jeffries @ reacpa. com