The CFO'S Perspective

Accounts Receivables: Getting Paid

Accounts receivables are a hot topic for business owners because they are the primary driver of cash flowing into the company. Unfortunately, in the US 39% of invoices are paid late and 52% of businesses have been asked by clients to extend their payment terms. This creates a difficult situation for business owners because late payments not only hurt cash flow management but may also serve as an early warning sign that payment is not coming.

Typically, the longer invoices remain outstanding the less likely they are to be paid. When invoices cannot be collected on, they become bad debt and are written off, erasing the revenue they would have generated for the hardworking businesses that earned them. Bad debt hurts short-term cash flow and long-term profitability. In fact, every year an average of 4% of accounts receivable are written off as bad debt, which equates to $400,000 in lost revenue for a company with $10M in sales annually.

So, what can you do to reduce your accounts receivables problems?

Topics: Accounting Planning Cash Flow Accounts Receivable

Vendor Management – Pay Now or Pay Later?

Effective cash flow management requires careful control of both money coming in and going out. While practices like shortening payment terms, offering variable pricing, and pursuing collections can increase the timeliness and amount of money coming in, delaying payments to vendors can slow cash outflows, providing the float needed to sustain operations during difficult times.

In an article about re-opening your business, Jeff Dunn explains succinctly, “Determine which vendors are critical to your day-to-day operations and pay them as timely as possible; which are important but can be paid slowly; and which are not important going forward that will be paid when able.”

How do you decide who to pay now and who to pay later, and how do you abide by vendor management best practices while doing both? This quick guide will help you answer those questions to improve your cash flow position right away.

Topics: Planning Cash Flow Expenses Strategy COVID-19

Cash Flow Management: 6 Best Practices for Small & Medium Businesses

Never take your eyes off of the cash flow because it’s the life blood of the business.
- Richard Branson

Staying on top of your cash flow is vital to running a small business smoothly. According to a U.S. Bank study, poor cash management is the cause of 82% of business failures. Cash flow is critical to the survival and success of your business. Without it, you cannot hire or pay employees, buy inventory, expand your operations, or secure a line of credit or financing. 

Building good cash flow management habits will help your small business weather rough terrain and double-down when opportunity strikes. To help your business avoid becoming just another statistic, here are six best practices to manage your cash flow and help you grow your business at the same time.

Topics: Cash Flow

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