The CFO'S Perspective

The Cash Flow Statement – The Forgotten Financial Statement

The Perks of Being Royalty

One of the best things about being the sole owner of a privately held company is that you have a great deal of discretion as to how your business is operated.  You get to make the rules.  It’s like being the King or Queen.

This includes deciding on the form and content of the financial information your accounting staff prepares. Particularly if you have no debt or outside investors, you can decide what you want to see and how often you want to see it.

Topics: Cash Flow Financial Reports

A Business Owner’s Perspective on Financial Statements

Don't ever let your business get ahead of the financial side of your business. Accounting, accounting, accounting. Know your numbers.” - Tilman J. Fertitta

When it comes to financial statements, one size definitely doesn't fit all. In fact, as your business grows and evolves, your financial statements should too. Their primary purpose shouldn't change, which is to provide business owners with actionable information. However, as a business matures, and potentially becomes more complex, with an increasing number of opportunities to pursue (or not) the statements need to be able to keep up.

There isn't a hard and fast rule about what you should look at, and at what stage those needs will vary. What should be true, however, is the owner's commitment and rigor around the process of what is reviewed and when. For businesses that lack the full-time need of a CFO, a part-time or project CFO will provide the expertise necessary to produce financial statements that are appropriate and relevant to generate information (not just data) that helps solve real business problems.

I happen to lead an organization made up of those financial executives and can offer that I face the same challenges you do when evaluating what I need to run the firm. Primarily, how do I make sure I have what I need to make good business decisions?

Topics: Cash Flow Financial Reports

How Much Cash Should a Nonprofit Have in Reserves?

An 84-year-old resident of Longview passed away this year, leaving $750,000 of her estate to three local non-profits. Relying on these types of unexpected donations is one way to build up your organization's reserves, but you can't count on these generous gifts.

Case in point is the Anacortes-based conservation nonprofit Pacific Biodiversity Institute, which just closed its doors due to a lack of funding. Whether flush with funds or struggling to keep the lights on, there’s never enough funding for a nonprofit to accomplish every initiative it would like.

Every organization needs to determine how much it requires for Operations, in Operating Reserves, and what can be dedicated to mission-focused initiatives. The answers to these questions are, of course, “It depends.”

The variables that must be considered include seasonality, worst case scenarios, and more. The key to developing a specific answer is knowledge - knowledge of the organization’s current financial state and donation history, as well as the data that is produced from a solid budget and cash forecast.

For those organizations that struggle, a plan must be developed to raise donations and reduce expenses. If you are fortunate enough to have a surplus of reserves additional questions arise. Where do you put those reserves? How should you safely manage them? While the answers vary from nonprofit to nonprofit, there are a solid set of financial best practices to follow and ensure that these questions are answered.

Topics: Non Profit Organizations Planning Cash Flow

5 Keys to Accurate Cash Flow Forecasting

Running out of cash is not only a sign of poor planning, but it's also one of the biggest reasons that businesses fail. Forecasting your company's cash flow can be tricky because of the many variables that determine how much cash you will need for operations versus the amount available.

Topics: Cash Flow Forecasting

Successful Cash Flow Management

The adage says, “cash is King,” and this could not ring any truer for small and mid-sized businesses. Cash is a crucial component of any successful business, especially startups and new ventures.

Cash flow is the lifeblood of organizational success.

Positive cash flow leads to profitability and provides the funds needed to reinvest in the future of the business. However, proper cash flow management is difficult for many companies to undertake successfully.

Some businesses fail to analyze cash flow projections appropriately to identify potential shortcomings, while others suffer from mismanagement of payment terms and an inability to collect outstanding payments. New businesses are prone to spend recklessly and make poor inventory choices because they lack the awareness needed to make cash flow-centric decisions. Companies struggling with cash flow management often err on several of these key elements, fueling the vicious cycle of cash flow issues.

Business executives who have problems with cash flow at their organizations (or want to avoid future issues) will benefit from earmarking these cash flow tips:

Topics: Planning Cash Flow Invoicing Forecasting