The CFO Perspective - How do I optimize my cash? - Scott Geller

Scott Geller – The CFO Perspective

Episode: How do I optimize cash? 

Date: March 8, 2021

IBGR.Network - PROFIT Radio. Everything a business owner needs to start, grow or exit a business. GROW WITH US.

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.

PROBLEM STATEMENT/SHOW OBJECTIVE
Cash is like oxygen. When people don’t have oxygen, they die and so do businesses without cash. You need to store away cash first and put it in reserves to build a 3, 6, 12 month runway protecting the business against a downturn. In order to put cash away, the company needs to be profitable and also know how much is needed for that runway.

​Business owners need to buy into the importance of understanding the business cash flow whether they are within an expansion or retraction period. The knowledge directly leads into the ability to make decisions around the use of excess cash for internal and external investments. The key is to dig beyond the bank cash balance, understand key drivers, and utilize financial tools to make financially educated decisions on the firm's cash future.  

WHAT YOU NEED TO KNOW

1. Buy into understanding the importance and need for your cash flow 
2. Money In / Cash Received
3. Money Out / Cash Paid Out
4. How do I aggregate or find these items
   1. Accounting system
   2. Accountant
   3. Work to do to organize these items
5. Tools
   1. Accounting System tells you what is happening today
   2. Excel or other tools tell you what is going to happen
   3. TODAY vs. TOMORROW .... Accountant vs CFO
6. Start by building  your own spreadsheet
   1. Covers all of the elements of cash in and cash out.
   2. Historical data for variable and constant (fixed) items, project the numbers over the next 3 months or longer
   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).
7. Leverage your accountant
8. Leverage your CFO or fractional
9. Both sides of the business track
   1. Expansion and Growth - Reinvesting in your company
      1. Reinvention Financial Forecast
      2. Buy, Rent, or Lease?
      3. Impact on Working Capital
      4. Appreciating or Depreciating
      5. Generates Revenue
      6. Finance or Lease
   2. Contraction or losses - Retained earnings to reserves
      1. Know your financial projections
      2. What is your covered runway? 4 months ... 9 months ... 18 months
10. The cost of putting together this tracking mechanism will far outweigh the cost of not understanding or knowing your cash needs, sources, and future

WHAT YOU NEED TO DO

1. Strategy for Reinventing the Business
   1. Excellent rate of return compared to bank financial instruments.
   2. Great way of 'hiding' money.
   3. Don't let short term issues destroy long term plan.
2. People
   1. Reward employees
   2. Need for new skills that will also drive value or sales
   3. ESOP
   4. Owner Compensation
3. External
   1. Competitors
   2. Similar companies
   3. New market, capabilities, sales channel, other
   4. Know your reason and what you are getting ... what is the strategic rationale?
   5. Anything else available?
4. Slicing the Pie
   1. Reserves for a 6 to 12 month runway answering the tough questions
   2. Can I afford to fairly compensate myself & reinvent the business?
   3. External opportunities

PREVIOUS : Episode 9 - 2021_03_01 - Do I have options to price my services and/or goods?
NEXT: Episode 11 - 2021_03_15 - How and where do I access funding?


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

​

F3.10.4NA