Ca$h FlowThe Lifeblood

of Your Business

Infrastructure, Cash Flow& Corporate Health

Chris JamesPartnerB2B CFO®972.955.5743

Cash… the Lifeblood

What’s Your Pulse?

Unofficial Organization Chart

• Finders – owners, future thinkers, relationship builders, risk takers

• Minders – historical view, lives in past, desires order, resists change

• Grinders – live for today, non-dreamer, non-delegator, the doer

4 Stages of CashStage 1: Infrastructure Creation

Owner’s Activities• Building relationships with customers• Creating relationships with vendors• Delegating tasks to employees or associates• Causing sales and cash to come into the company

Stage 2: Infrastructure Peak

The result of Infrastructure Creation is Infrastructure Peak• Few customer complaints• High customer service• Low overhead• Company runs “lean and mean”• Short cash collection cycles• Personal sacrifice by the Finder

Stage 3: Outgrowth

Result of running lean is burn-out of owner and employees Attitudes change, owner thinks:

• “I should have a raise”• “We need more people so we can take time off”• “We need a better building”• “I need a new car/house/vacation……”• “We should buy more equipment or inventory”

Needs Change During Outgrowth Phase

Heightened Need For Infrastructure• Cash Flow Forecasting, Budgets, Goals• Expense Control• Policies and Procedures• Employee Training• Management Expertise• Planning – to Avoid “The Danger Zone”

During Outgrowth

Needs of a Finder Change

FOCUS ON THE PAST• Historical reports should

be used to identify• Trends• Baseline (KPI’s)• Areas for

improvement

FOCUS ON THE FUTURE• New Tools are Needed to Ensure Financial Stability & Growth

•Budgets•Cash Flow visibility•Strategic Planning•Experienced Managers•Flash Report

The Finder is a visionary who knows that yesterday cannot be changed, focus is on the future while applying

the knowledge gained in the past

Business Styles

RE-ACTIVE

the business drives you• Poor Visibility• Putting Out Fires• Lack of infrastructure• Long hours• Lack of clear goals

PRO-ACTIVE

you drive the business• Weekly Flash• Cash Flow Visibility• Process Improvement• Creating opportunities• Setting goals

What’s Your Pulse?

Re-Active Organizations

•Lack of appropriate infrastructure

•Cash problems

•Fire fighting mentality

•Long Hours

•Customer Service problems

•Lack of goals

•Frustration sets in

Due to these issues and staff limitations…the Finder shifts towards being a Minder,

Working IN the business rather than ON the business

The Result ?The Danger Zone

The Danger Zone is created when the cash needs of your company far exceed the cash available to meet those needs

Danger ZonePotential Outcome

• Loss of current and future customers & vendors• Damaged business relationships• Lost enthusiasm or energy of the Finder• Damaged relationships with family members• Death of the dream of the founder• Death of the company

• Leave Minding activities to other capable persons

• Weekly Status reporting(keep your finger on the pulse)

• Timely and Accurate financials

• Sales or cash? – let others find the cash, Finders need to generate sales with good margins & set goals

Avoiding the Danger Zone

Rescuing the Finderfrom The Danger Zone

• Stop trying to solve all the problems• Rely on others for Minding

– Find someone who is good at it– Bring in someone the Finder can trust

• Return the focus to finding new customers• Refocus on product and market factors• Create a reporting system that measures the Pulse

of the business– Meaningful financial and performance reports– not Quickbooks/Peachtree standard formats

Forward looking

Sales per Employee

2,000

3,000

4,000

5,000

6,000

1 2 3 4

Period

Plan per EE Actual per EE

Reports for Finders

Sales by Month

0

50000

100000

150000

200000

250000

300000

1 2 3 4

Period

Sa

les Plan

Actual

Analytics

Dashboard

Ca$h Flow Model

Reports for Finders

Cash Flow ForecastWhy Companies Fail

Cash Out exceeds Cash In

Finder is drawn into Minder duties

The plan was to grow but lack of planning results in:

Poor ManagementOverspending

Surprises Firefighting slow vendor payments & time spent seeking new vendors

poor morale turnoverpoor collections

poor customer serviceloss of customers

FORECASTING alerts you to possible future problems and allows time to:

•investigate alternatives & take action

•find additional funding

•improve performance

•Survive & Grow

Danger Signs• Prompt payers begin to slow• Orders decrease• Bad Debt will increase• Surprise order from new customer (prior vendor shut them off due to non-payment)• Employee Fraud increases

Planning• take advantage of the 2008 Economic Stimulus

Package to reduce tax liability• run Lean, cut costs now• surround yourself with experienced advisors• know your cash balance and projected cash balance• "In a true crisis you are managing cash, not managing the

numbers… In a turnaround situation, there is no cost that is fixed." - Bettina Whyte, Advisory Board Chairman, Bridge Associates

The Economy

Survival & Growth• Surround Yourself With Talent and Information

• CEO & Business Roundtables• Flash Reports• Budget vs. Actual reporting• Seasoned professionals you can trust• Forward looking (realistic) projections

• Identify & Take Action• Company Strengths and Weaknesses

SWOT Analysis• Employee Strengths and Weaknesses

let competitors hire your weak employees• Customer Strengths and Weaknesses

will they weather the storm• Vendor Strengths and Weaknesses

establish 2nd sources

• Be a Finder• Build an infrastructure that allows you to be a Finder• Find the right Minders • Visit customers, maintain excellent relations• Impart your vision to the staff• celebrate successes

and keep your finger on the PULSE

Chris JamesPartner

972.955.5743cjames@b2bcfo.com

www.b2bcfo.com