Cash Flow Forecasting

Matrix Key:  Financial Viability - Profitability - Projections and Plans

“Cash Is King.”

Few components of the WholeLife Matrix carry as much weight as profitability.  For many people, profit has negative connotations.  But without profit, you don't have a business. Cash flow forecasting is essential to the success of every business, and should include the following:

1. A schedule of receipts and disbursements
2. Liquidity measurements
3. “What if” scenarios
4. Accounts Receivable to Cash projections

Here’s the bottom line…if your business runs out of cash, you are out of business.  You need cash to pay vendors.  If you don’t pay them, they will stop selling to you.  You need cash to pay employees.  Few employees are willing to volunteer their time.  You need cash to pay off debt.  Banks are picky about being re-paid.  Cash is King.

You must monitor your cash flow at all times.  How quickly will your Accounts Receivable convert to cash?  What if your customers pay you three months late?  What is your percentage of cash to inventory?  A close look into all of these questions is worth your time and effort.  A little planning now will keep the wolf from the door later and will keep you on a winning path.

Join us for an ongoing conversation about my blogs every other Tuesday at 11am Pacific Time.    Send me an email (Ralph@Consulting2Win.com) with "Deeper Dive" in the subject line, and I will send you the login information.  

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Projections and Plans

Matrix Key:  Financial Viability - Profitability - Projections and Plans

"Failure to plan is planning to fail." - Unknown

We've devoted a major quadrant of the WholeLife Matrix to the practice of Projections and Plans.  Most good entrepreneurs know that planning is essential to success.  It's easy to let planning drop down the priority list though, when the day to day responsibilities of a growing business become more time consuming.  Here's the thing...without consistent, good projections and plans, your business is being run by the circumstances.  That's like the tail wagging the dog.

The four principles of good Projections and Plans are:

1.      A reliable Cash Flow Forecast

2.      A reliable Sales Forecast

3.      A projection for your Sales/Expenses/Profit

4.      A System to Review and Adjust all of these projections and forecasts

Don't let the market determine where your business will end up.  There are too many easy and efficient tools you can use to stay out in front of your company's performance.  Use your own ideas as your guide and head down your chosen path.

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Keys to Profitability

“Success demands a singleness of purpose.” - Vince Lombardi, Former Coach, Green Bay Packers

Most of the entrepreneurs we work with need to strengthen their relationship with profit. We all know we need profitable businesses. But what does that really mean? In nutshell, income less expenses equals profit. Profit earns you the right to do business. If you don’t earn a profit you will eventually lose the right to do business.

So what are the keys to making a profit?

A good accounting system. Every business must have the systems in place to track the numbers and generate reports. Managers should have access to income and expense information on a daily, weekly, monthly and annual basis.

An estimating/pricing system. You must be able to estimate the amount and cost of material and labor that it will take to produce your product. With an accurate cost accounting system, you can determine your gross profit margin, deduct your expenses, and calculate your net profit. Without an accurate system in place you are just guessing as to your bottom line.

Projections and plans. The plans for sales and expenses provide a road map of where the business is going. Without the projection you are being run by the circumstances. That is a condition for uncertainty. You don’t want the market to determine where your business will wind up. You want to be guided by your own ideas and knowing that you are heading down your chosen path.

Measure for profitability. You have to stay on top of the progress of every department in your company. When things start slipping in production, you need to step in quickly to find a solution. Conduct weekly meetings with your accounting, production, sales, and estimating departments. Develop reports that show each department’s impact on the bottom line. If you are a sole proprietor, you still need to schedule time to measure for profit and make adjustments for things that aren’t working.

Remember, profit is the key to a winning business. To learn more, listen to our radio show on the Keys to Profitability.

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