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Why You Need to Have a 13-Week Cash Flow Report

Why You Need to Have a 13-Week Cash Flow ReportHave you ever been in a cash flow crisis?

You aren’t able to make payroll.

You can’t pay your vendors.

There is simply not enough cash.

BUT sales are rocketing.

So in theory, there should be enough cash… Wrong.

I say this during every Office Hours I host for our SCFO Lab members… “You need to have a 13-Week Cash Flow Report. If you don’t have one, get one.” As we are quickly coming into the holidays and the new year, let’s look at why you need to have a 13-Week Cash Flow Report.

Or, do you live in a company that is cash rich, and you simply do not see the need to forecast cash because you know you have plenty in the bank?  Well, you still need a cash flow forecast.

Handling a Cash Flow Crisis?

Handling a cash flow crisis is never easy because it puts financial leaders in a difficult place. It may look like asking vendors to extend their payment terms, selling off assets, or laying off employees.

Whether your cash flow crisis resulted from the fluctuating market or mismanagement, there are a couple of tips in handling a cash flow crisis.

(NOTE: Regardless of whether cash is tight or flush, every company should have a 13-Week Cash Flow Report. In the SCFO Lab, members have access to our 13-Week Cash Flow Report template that we use with all our clients. Click here to view.)


Every company needs cash. That’s why you need to have a 13-Week Cash Flow Report! Learn 25 different ways to improve your cash flow with our free whitepaper. 

Click here to Download the 25 Ways to Improve Cash Flow


Update Financials & Reports

Look at your financial statements regularly, and make sure they are updated – especially your…

You cannot make smart and strategic decisions without the most up-to-date facts.  Having an updated cash flow forecast for your business that is updated weekly allows you to have a true pulse on the business. Your accounting records should be based on accrual based accounting. But your cash flow forecast ties in nicely as a great tool.

Communicate Effectively

Communication is key to handling a cash flow crisis. This could look like…

Why You Need to Have a 13-Week Cash Flow Report

The #1 reason why you need to have a 13-Week Cash Flow Report is because it’s active cash management. This report is a big picture tool that tells companies how much cash is required on a forward rolling basis. More specifically, it gives you the freedom to make big decisions.

Cash Rich or Cash Poor – You Need a Cash Flow Forecast

So, we briefly discussed that in a cash flow crisis the cash flow forecast allows you to manage cash and adjust payments to vendors while making payroll and keeping the lights on. What about in a cash rich company?

I recently started on a client, and the company is a cash rich company. The CFO was surprised when I mentioned to him that he should have a cash flow forecast.

Here are a few reasons why a cash rich company would want to know exactly how rich they are:

  1. If you are cash rich, then you may be looking at acquisitions. It would be nice to know who much you pay as cash and how much you finance.
  2. CAPEX acquisitions – you want to know how much actual cash you have to acquire CAPEX.
  3. Distributions/Bonuses, etc. – how much can you pay out?
  4. Plan for the worst –  I do not care what industry what you are in; they all eventually have downturns. Plan ahead and save up for those rainy days.
  5. If you are cash rich, then that means you made a large profit. That also means you have to probably pay taxes, or distribute cash to pay taxes. How much cash for taxes do you need?

How to Create a 13-Week Cash Flow Report

Now, let’s look at how to create a 13-Week Cash Flow Report.

There are several pieces of information that you need to gather as you build this report, including the following:

Why You Need to Have a 13-Week Cash Flow ReportTips on Making Your Cash Flow Report Successful

Here are a couple of tips on making your cash flow report successful.

Get C-Level Support

If your C-level is not supportive of creating the 13-Week Cash Flow Report or using it as they run the business, then it’s just going to be another report that never gets used.

Don’t let it become that!

This tool is so valuable AND every company should be using one.

Not using a 13-Week Cash Flow Forecast is like deciding not to drink water for an extended time. You know you need to water/cash, but you do nothing about it. Eventually, you become so illiquid that you are financially distressed, if not bankrupt.

For example, we once put together a 13-Week Cash Flow Forecast for a company that was making a small percentage of what they used to make when the market was better. We predicted that if they did not take any action, then they would be out of cash within 9 months. Unfortunately, the CEO and senior leadership did not make any changes and had to shut their doors. Our long term cash flow forecast was accurate and we warned the CEO.

Use The Report As A Playbook

The report is useless unless you actually use it as a playbook and use it to make strategic decisions. When you use the report as a playbook, you go from being an accounting/finance professional that knows how to build reports to a financial leader that strategically directs the firm.

How to Use a 13-Week Cash Flow Report

Once you have created the 13-Week Cash Flow Forecast, it’s important to maintain it. We suggest to maintain and update it at least weekly. We also suggest that you use this report in conjunction with the Daily Cash Report.

If you want to increase cash flow, then click here to access our 25 Ways to Improve Cash Flow whitepaper.

Why You Need to Have a 13-Week Cash Flow Report

Strategic CFO Lab Member Extra

Access your Cash Flow Tuneup Execution Plan in SCFO Lab. This tool enables you to quantify the cash unlocked in your company.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

Why You Need to Have a 13-Week Cash Flow Report

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Track Money In and Out of a Company

See Also:
How to Develop a Daily Cash Report
Cash Flow Projections
Discounted Cash Flow Analysis
Cash Flow Statement
Free Cash Flow Analysis

Track Money In and Out of a Company

We have all heard CASH IS KING and HE WHO HAS THE GOLD RULES. I was talking with a business owner of a growing company. He was complaining about the lag between the time he had to pay his suppliers and employees and the time it took him to collect from his customers. He told me that is his biggest problem. Then he asked me how to resolve it. The trick is to track money in and out of a company.

Cash Flow Management

I said the solution is cash flow management. He looked at me and asked “what do you mean cash flow management?” I told him the most basic definition of cash flow management is delaying outlays of cash as long as possible, while encouraging anyone who owes you money to pay it as rapidly as possible.

He looked and me and said if he could do that, then he would not be talking to me. In reality he said his suppliers will not give him the credit he needs and his customers will not pay him when their receivables were due. I told him that his situation was normal and not unusual. He then asked what I would suggest for him to have good cash flow management.

Prepare Cash Flow Projections

I told him first of all, you can not manage anything if you can not measure it. So, you should consider preparing cash flow projections for next year, next quarter and, if you’re on shaky ground, next week. The objective and results of an accurate cash flow projection is they will alert you to negative cash flow situations well before the money is not there.

However, you must understand that cash flow plans are not glimpses into the future. Cash flow plans are only estimates that will take into account such items as your customerspayment histories, your upcoming purchases, and your vendors’ patience.

Additionally, to make an accurate projection you need detailed understanding of amounts and dates of upcoming cash outlays. This means you need to account for every dollar that will be spent, as well as what it will be spent on.


Download The 25 Ways to Improve Cash Flow


Manage Operating Cycle

Secondly, you must manage and work your operating cycle. You know if you were paid for sales the instant you made them, you would never have a cash flow problem. Unfortunately, that doesn’t happen in business to business transactions. You can still improve your cash flow by managing your operating cycle. The basic idea is to speed your operating cycle, which is the time it takes to turn materials and supplies into products, inventory into receivables, and receivables into cash. Some techniques for doing this include, offer discounts to customers who pay their bills rapidly, ask customers to make deposit payments at the time of ordering, issue invoices promptly, and follow up immediately if payments are slow in coming.

Understand Sales Growth

Another area to help your cash flow is to understand that sales growth will conceal problems. Don’t be lulled into complacency by simply expanding sales. You need to watch expenses carefully. Any time and any place you see expenses growing faster than sales, examine costs carefully to find places to cut or control them. You must use your cash wisely. Some ways to achieve this is to take full advantage of creditor payment terms. If a payment is due in 30 days, don’t pay them early, consider using electronic funds transfer or credit cards to make payments on the last day they are due. And, don’t always focus on the lowest price when choosing suppliers. Sometimes more flexible payment terms can improve your cash flow more than a bargain-basement price.

With this information, he told me he is now prepared work on his cash flow management.

For more tips on how to improve cash flow, click here to access our 25 Ways to Improve Cash Flow whitepaper.

Track Money In and Out of a Company, Cash Flow Management
Strategic CFO Lab Member Extra

Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

Track Money In and Out of a Company, Cash Flow Management

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Success Is Your Business

See Also:
Emotional Intelligence in the Workplace
Are You Collecting the Data You Need to Run Your Business?
Five Reasons To Pay Attention To CRM Software
Warning Signs of a Company in Trouble
Working Capital Analysis

Success Is Your Business

I am going away from talking about traditional cash flow analysis this week. I was recently at a meeting with Larry Tyler of Metro Bank here is Houston. Larry was the guest speaker talking about how proper cash flow management can make a business successful. He then discussed how  business owners need to look beyond the financial numbers and look in the mirror to find out how their personal beliefs can affect the cash flow of their companies. Furthermore, Larry pointed out the reason business owners need to look in the mirror is that their personal values are going to make their businesses successful.

Success Philosophies

Larry was kind enough to put together that a business owner understand and believe some of the following points and philosophies that make success is your business a reality.

  1. Everybody in is a salesperson.
  2. Are you a salesperson in business, or are you a business owner making sales?
  3. You will not reach your potential as a sales professional until you answer the question, and answer it correctly! The Law of the Shareholder demands that you do.
  4. The Law of the Shareholder says that the most successful salespeople buy stock in themselves, they adopt a “CEO mindset” where they see themselves as a business owner making sales with a compelling vision to help people and they begin to stop thinking of themselves as an employee.
  5. The life of us lives in the life within the limits of our own thinking.

A Contract in Thinking

                           A Contrast in Thinking

Salesperson ThinkingCEO Thinking

Pays only for what can be reimbursed   Invest money to make money

Calls on anybody   Calls on the right body

Reacts to interruptions    Makes sure interruptions don’t occur

Keeps safe clients   Terminates unprofitable relationships
Is busy and action oriented   Is productive and results focused 
Thinks quantity is more important   Knows quality creates more quantity

Puts profits before people   Puts people before profits 

Puts revenue before reputation             Puts reputation before revenue

Builds business ahead of capacity   Builds capacity ahead of business 

Prioritizes schedules                      Schedules priorities

Is short-term oriented                     Is long-term oriented

Relies on quick turnaround                 Relies on clients’ trust

Succeeds by accident                       Succeeds by design

 

success is your business

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