How do I plan for 2021? - Scott Geller

Scott Geller – The CFO Perspective

Episode: How do I plan for 2021?
Date: January 18, 2020

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INTRODUCTION
I have 20 years of experience in the finance realm that started with the Federal Reserve Bank as a bank examiner, moved on to 7 years at a Fortune 300 insurance company, and then a 50-70 person spin-off technology firm under the Allianz umbrella of companies. I was with the spin-off from day zero all the way until the unfortunate end and I had to close down the business.

I am now a financial consultant serving primarily as a fractional or part time CFO for companies that range from start ups to young and scaling to established with stable growth. I take over from the accountant as a lean cost effective option for Profits Engineering, Cash Optimization, Strategic Acceleration and Executive Partnering committed to your success. Please contact me at scott.geller@capitisadvisors.com.

Show Objectives - The Why
Today I wanted to initiate your thinking for 2021 if you haven't already. 2020 was a black swan and everyone's ready to move on to the new year; however, you need to prepare yourself for this new year.  By the end of our time together you will understand the framework for businesses to prepare for another year of unknown variables .

What You Need to Know - The What

1. As a Business Owner I need to buy into understanding the importance and need for your cash flow within the business.
2. What are the starting points and what do you need to know first ...
3. 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
4. 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
5. How do I aggregate or find these items
   1. Accounting system
   2. Accountant
   3. Work to do to organize these items
6. 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
7. Tools
   1. Accounting System tells you what is happening today
   2. Excel or other tools tell you what is going to happen
8. 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.
9. Tool that provides what happens, but you really need to understand what will happen
10. Needed by both sides of the business track
    1. Expansion or Growth
    2. Contraction or losses
11. The cost of putting together this tracking mechanism will far outweigh the cost of not understanding or knowing your cash needs, sources, and future

 

1. 2020 was a Black Swan event
2. Future ain't what it used to be ... Yogi Berra
3. What is going to impact your business in 2021? Why do you need to perform scenario planning?
4. Moving from 2020 to 2021
   1. Supply chain is back to work
   2. Monetary policy
   3. Bank Failures are back
      1. 4 failures last year
      2. Diversify and pay attention to your relationships
   4. Kastle Systems Report- indicator of economy and workers going back to work
   5. Lockdown on Small Businesses
      1. Small business revenue was down 32% YOY
      2. 29% of all Small Businesses closed in 2020 ... doesn't include "silent failures"
      3. Lockdown creates vacant space = lost tax revenue = fiscal deficits
      4. 70% of CEO's expect to downsize offices
5. 2021 Unknowns
   1. Biden Plan
   2. Unemployment
   3. Bank Failures
   4. ESG & Impact investing
   5. Oil prices
   6. State Fiscal Health & Property Taxes
   7. Office CRE: Urban vs Suburban
   8. Retail e-Volution
   9. Political walls
   10. "You've got to very careful if you don't know where you are going because you might not get there" Yogi Berra
6. Economist KC Conway of Red Shoe Economist ... Build out Plans B, C, D and so on

What You Need to Do - The How

1. Agile isn't just IT
2. The Mindset
   1. Working in sprints
   2. Projects with frequent updates, reviews vs. long multi-step project
   3. Moving from work ... review ... work ... review ... work ... present rather than work ... work ... work ... present
3. How to apply?
   1. Work in sprints for finance
   2. Layman's description is operating with a "work ... review ... work ... review ... work ... present" approach rather than the traditional "work ... work ... work ... present."
   3. Build a Model as an iterative project
   4. Forecasting
      1. Regular updates vs. annual budgeting
      2. Started at previous company and apply with clients
      3. Cash, revenue, full financials, sales pipeline
4. Making decisions in real time and more agile spirit
5. Iterative budgeting process throughout the year
6. Looking ahead with an agile focus
   1. Model/forecast
   2. Scenarios for your company
   3. Proactive Solutions
7. Take the next step by looking ahead with the Agile focus through forecasting, scenario planning, and creating those proactive solutions that are so important for success or survival 

Shows 

• PREVIOUS: Episode 2 - 2021_01_11 - When do I hire a CFO and what is a Fractional CFO?
• NEXT: Episode 4 - 2021_01_18_ Do I really need a financial model?

Resources (optional):
You can connect with Scott via his website or LinkedIn
Connect on LinkedIn
See Scott’s Website

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