FINANCE TRACK - CREATE TRACKING REPORT ON CASH FLOW MANAGEMENT - Scott Geller

Scott Geller - "The CFO Perspective"

​Show Objectives
As a Business Owner I need to buy into understanding the importance and need for your cash flow within the business. What are the starting points and what do you need to know first? Today's show will determine whether the business survives the rapid growth of Stage IV. This is a real skill set to be mastered and the following is what we have done and consulted others to do.
​
Key Issues - ​Owner/Manager perspective:

1. Identify all the sources of cash (what is coming in),
2. Identify all of the demands on cash (what is going out),
3. Build a spreadsheet that indicates periods of negative velocity.

What You Need to Know

1. Money In / Cash Received
   1. - Paid Cash Sales
   2. - Paid Accounts Receivable
   3. - Bank Interest
   4. - Refunds & Rebates
   5. - Dividends
   6. - Loans
   7. - Inventory Sales
   8. - Other Income
2. Money Out / Cash Paid Out
   1. - Materials
   2. - Labor
   3. - Servicing Debt
   4. - New Financing
   5. - Leases
   6. - Mortgages
   7. - Travel & Per Diem
   8. - Other Expenses
3. How do I aggregate or find these items
   1. Accounting system
   2. Accountant
   3. Work to do to organize these items
4. How do I aggregate them?
   1. Accounting system - download to excel
   2. Manually - input them into a file database style: Item, corresponding party, type of item, standard or typical or known amount, date due Pay or Receipt side - month or week or day if needed

What You Need to Do​

1. Tools
   1. Accounting System tells you what is happening today
   2. Excel or other tools tell you what is going to happen
2. Even though your accounting software can provide this information, I recommend you build your own spreadsheet at first. Create your own formulas and relationships, play your own version of "what if". You will understand the concept of Velocity of Cash IN and OUT at a level not possible from reading a report. Once you understand it at this level getting the software to give you a report is fine.
   1. Create a spreadsheet that covers all of the elements of cash in and cash out.
   2. Using historical data for variable and constant (fixed) items, project the numbers over the next 3 months or longer - we match the sales cycle at a minimum.
   3. Place close attention to those months when cash out exceeds cash in and especially when it cleans out all of your cash used for operations (Cash on Hand or COH).
   4. If you didn't understand why a Line of Credit was essential - now you will.
   5. Shift your Executive behavior at either delaying cash out to a better period or increasing the cash in to balance the equation.
3. Tool that provides what happens, but you really need to understand what will happen
4. Needed by both sides of the business track
   1. Expansion or Growth
   2. Contraction or losses
5. The cost of putting together this tracking mechanism will far outweigh the cost of not understanding or knowing your cash needs, sources, and future 

Since we are at Stage IV there is a good chance you have a CFO working with you and use their counsel on how to make this work.

F4.04.3NA