Posts Tagged ‘13-week cash flow’

Pay more attention to your company’s cash flow for a prosperous 2016

Tuesday, January 5th, 2016

A 13-week rolling cash flow budget lets you harness the past, present and future of your company to arrive at a comprehensive analysis of its overall financial well-being – making you a more effective leader and decision-maker.

An effective cash flow is rooted in your company’s historical trends and considers 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. In order to dig a little further to gain a little more insight into your company, I recommend:

  • Analyzing your accounts receivable to determine ways to quickly turn them in to cash.
  • Reviewing your current inventory levels to determine what is old or obsolete and what can be used to generate more revenue.
  • Going over your accounts payable to optimize your own financial obligations.
  • Looking at your non-core assets to determine how much money is being spent and whether or not a more lucrative avenue is available.

Finally, don’t forget to update your cash flow regularly. Setting up a cash flow dashboard will take a little extra effort at first, but maintaining it is simple. Then, if done correctly, you will have the ability to accurately estimate your business’s variable costs and expected sales at a moment’s notice – and that is a very powerful tool to have.

To learn more, visit www.reacpa.com/cashflow and listen to my podcast about why $1 million doesn’t matter or, if you have questions, send me an email.

This article was published in the January 2016 issue of Columbus Business First – Ask The Expert.

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5 Financial Secrets Of Successful Business Owners

Tuesday, September 29th, 2015
Financial Secrets Of Successful Business Owners - Rea & Associates - Ohio CPA Firm

After following through with a 13-week cash flow for almost a year, you will have better insight into how to spend your profits to help your business generate additional cash and sales. Visit www.reacpa.com/podcast to learn more and listen to Rea’s podcast — Unsuitable on Rea Radio.

Many business owners find difficulty coming to terms with their financial obligations. They will dedicate long hours combing through their company’s expenses, invoices and payroll to arrive at an annual budget, only to let the report sit until it’s time to repeat the exercise again a year later. A 13-week rolling cash flow helps take the stress off business owners when it comes time to make important strategic decisions throughout the year. But in order to get your company back on the right track, you must be ready to change the way you look at your company’s finances. These five financial secrets of successful business owners will get you on the right track.

Listen To Unsuitable On Rea Radio – Why $1 Million Doesn’t Matter

1)     Know how much cash you have on hand.

We’re talking about tangible cash here; and to know how much you actually have on hand you will have to look beyond the ending balance on your business’s bank statement while not letting yourself get caught up in a sea of technical information, graphs and presentations. The three most important questions you should be asking every week are:

  • How much money do we have in the bank?
  • What is our accounts receivable balance?
  • Who do we owe and how much we owe them?

The other information and reports are still important, they just aren’t as critical when you have to make big decisions without a lot of time to ponder your company’s short- and long-term financial state.

2)     Understand your billing practices.

To get an accurate picture of your company’s cash flow, you will need to take a closer look at your current billing practices to find out if you are getting your bills out on a timely basis. Don’t be tempted to gloss over this step. It may surprise you to learn that a lot of decision-makers and business owners think they are on top of their billing activity, only to learn that they’re not. A 13-week cash flow budget will expose this weakness and will get you back on track.

3)     Delegate ownership of your cash flow. 

We are all busy and it’s easy to be enthusiastic about implementing a 13-week cash flow strategy — in theory. But when it’s time to actually put your strategy into action it’s easy to blame “lack of time” for why you put it off. The good news is that you can delegate the work to someone who has the time. You really can’t afford to ignore your cash flow. When you understand where your money is coming in from and where it’s going, you will begin to see positive results.

4)     Review your cash flow projection often.

While it’s great to write out an annual budget or a three-year-projection, most owners will push the document to the side … where it will begin to gather dust. Then, when the day comes when you need to know the financial state of your company for decision-making purposes, you are left with inaccurate, outdated information. When this happens, your effectiveness and accuracy as a leader is challenged. It doesn’t have to be though. When you review your cash flow regularly, you arm yourself with the tools need to make financially strategic decisions. For example, after following through with a 13-week cash flow for nearly a year, you will gain greater insight into how to spend your business profits to help generate the additional cash and sales needed to facilitate sustained growth.

5)     Put your accrual basis profit in its place.

While you may still need to have an accrual statement or generally accepted accounting principle statement to appease regulatory agencies, you would do well to remember that when it comes to the lifeblood of your business, cash flow is king. In all likelihood, businesses of all sizes should consider keeping two sets of records — an accrual and a cash basis statement — to maintain your company’s compliance among all stakeholders.

You can’t spend accrual basis profit. You can, however, spend cash basis profit. Which is why, at the end of the day, you’ll find that your banker, your lender, your shareholders, etc. … will take more interest in your cash flow strategy and your cash flow budget than your other reports.

Want to learn more? Click here to listen to Unsuitable on Rea Radio and find out “Why $1 Million Doesn’t Matter.”

By Dave Cain, CPA (Dublin office)

Visit www.reacpa.com/podcast for more episodes of Unsuitable on Rea Radio or click here to subscribe to the podcast on iTunes or click here to listen to the show on SoundCloud.

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