Philip Campbell's Blog

It’s Accrual World Out There

As accountants and CPAs we know that very few entrepreneurs and CEOs really understand what's going on with their cash flow. And it doesn't matter how many times you prepare and provide the Generally Accepted Accounting Principles, or GAAP, version of the Statement of Cash Flows.

The fact remains. Most people running businesses (large and small) are confused and frustrated when it comes to understanding and managing their cash flow.

Simplification Leads to Understanding

An approach I have found to be incredibly successful during my career in achieving a new level of understanding for business owners is to get laser focused on simplification. We have to simplify the big picture view of understanding and managing cash flow.

Simplification is an exercise in turning information about cash flow (and accrual basis financial statements) into something insightful. Insight that helps everyone make better financial decisions because they can more clearly see the link between the big decisions being made in the company and how they relate back to the impact on cash and cash flow.

Simplification Meets Common Sense

The way we simplify cash flow is to recognize that understanding cash flow can be simplified and boiled down to answering these two questions:

1. What happened to the cash last month?
2. What's about to happen to the cash?

After you have closed the books for the month, you should be able to sit down with the CEO and explain the answers to these two questions in a 2-minute conversation. Same with the Board of directors or anyone else in the leadership team who has an interest or an investment in the business.

And if your CEO was going to meet the company's banker for lunch, they should also be able to answer these two questions in a 2-minute conversation.

Your job is to arm them with the answer. (And handing them a GAAP Statement of Cash Flows isn't going to accomplish that objective.)

The Cash Flow Focus Report is my favorite tool for creating understanding about cash flow with business owners and executives.

Try it and see the positive response you get.

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Laugh Therapy for the CPA in All of Us

I love CPA and accountant humor! I get a kick out of a fun graphic or saying that pokes at what makes us unique in our focus on the accounting and financial side of business.

I ran across a link recently to a Pinterest page from Parker Tax Publishing that put a big smile on my face.

Check it out at their Laugh Therapy page on Pinterest.

Send me an email at pcampbell@pdq.net if you get a good laugh from the images. I'd love to see if it's just me that loves good CPA humor! J

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Understanding Your Cash Flow – In Less Than 10 Minutes a Month

In my new online course I show you how to understand your cash flow in less than 10 minutes a month. And l teach you how to explain what happened to your cash last month to your business partner or CEO (maybe even your spouse) in a 2-minute conversation.

Wouldn’t it be wise to know what happened to your cash last month? Less than 10 minutes a month is all it takes. I provide a 100% money back guarantee to prove it to you. You love my new online course… or I eat the cost.

Learn more here. It comes with my no questions asked, 100% money-back guarantee.

You can also download my FREE Rapid Learning Guide, Cash Flow Made Simple, which teaches you how to use the Cash Flow Focus Report. Your free membership gets you instant access to this and other free goodies.

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Click here to get my blog posts delivered right to your email inbox. I publish one new post each week. Click here now.
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Four Great Reasons to Create Cash Flow Projections

Monthly cash flow projections play an important role in a wise approach to managing your business. Here are four specific ways they can help you get where you are going safely.

Tsunami Warning System

If you are on a beautiful island on the beach and there is an earth quake out in the ocean somewhere, you need a warning system that a huge wave may be headed your way. You don't want to have a huge wave headed your way while you are totally unaware of the potential catastrophe barreling at you.

Cash flow projections can be your early warning system that gives you time to plan when a cash flow problem is on the horizon.

Plan for Growth

Depending on your business model, rapid growth is almost always a net user of cash in the early days of the growth. A lot of executives are caught by surprise when they are successful in growing their company only to grow their way right into a cash crisis.

Then they end up running to the bank begging to create a line of credit or begging to get their bank line increased. That ends up hurting the credibility of the CEO, the CFO and the company as a whole.

With cash flow projections, you can show what's likely to happen if the growth plans are achieved and you can put a line of credit in place well in advance (or take whatever other steps are necessary and prudent long before you actually need the cash).

That's smart planning… and that is what cash flow projections help you accomplish.

Day-to-Day Decisions

A CEO will always have questions like these running around in their head:

Can I add another location?

Can I hire a new Sales VP?

Can I pay our debt back on time?

Will I have enough cash to get through the slow months?

Can I buy the new equipment I need?

When an owner has basic questions like that running around in their head but they are unsure of what the answer is, they are either going to make some bad decisions or have this vague sense of confusion or uncertainty in the back of their mind. We don't want that.

We want clarity and information so questions like that can be considered in the open and reviewed in the context of the likely implications on cash flow.

Foster Transparency and Accountability

This is a very interesting benefit of projections.

Have you ever had an executive or someone in the company that had some grand plans for a new venture or a new project and you were almost certain it was going to lose money? But you don't want to be the one person pouring water all over an idea that others seem excited about.

I have found that having the proponents assist in creating projections, then measuring results against projections, is one of the most effective ways to create some accountability around new projects or ventures.

It gets the proponents of the project or venture involved in the creation of reasonable assumptions and comparisons to actuals as each month goes by. They can't hide when actuals are put next to their own assumptions every month.

The bottom line is you really can't run a business intelligently without cash flow projections.

Do you have cash flow projections for at least the next six months?

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Understanding Your Cash Flow – In Less Than 10 Minutes a Month

In my new online course I show you how to understand your cash flow in less than 10 minutes a month. And l teach you how to explain what happened to your cash last month to your business partner or CEO (maybe even your spouse) in a 2-minute conversation.

Less than 10 minutes a month is all it takes. I provide a 100% money back guarantee to prove it to you. You love my new online course… or I eat the cost.

Learn more here. Or BUY IT NOW for only $49.95 with my 100% money-back guarantee.

___________________________________________________________________

Click here to get my blog posts delivered right to your email inbox. I publish one new post each week. Click here now.
Privacy Policy: I will NEVER rent or sell your email address and you may remove yourself from this list at any time you choose.

Growing Fast Can Create a Drain on Your Cash Flow

Entrepreneurs are surprised when they learn that achieving their growth plans puts a huge strain on their cash. It seems logical to think that if you are growing successfully, and making money, that your cash would be growing not shrinking.

But that's not how it works.

Rapid growth is almost always a net user of cash in the early days of the growth. Especially if you have inventory, sell on terms, or if the business is capital intensive. You have to lay out a lot of cash to get the growth in revenues and to ultimately turn those revenues into cash.

A lot of executives are caught by surprise when they are successful in growing their company only to grow their way right into a cash crisis. Then they end up running to the bank begging to create a line of credit or begging to get the line increased. Which ends up hurting the credibility of the CEO and the company (and the CFO).

The banker is wondering why otherwise smart and experienced business people couldn't see something so predictable coming at them.

Cash Flow Projections Are the Simple Solution

When you hook the vision and growth strategy of your company up to a simple set of cash flow projections, you instantly create visibility into the cash flow implications of growth.

With projections, you can show what's likely to happen if the growth plans are achieved. You can put a line of credit in place well in advance because you can show your banker or lender exactly what your cash needs will be as you achieve your growth plans.

That's smart planning. That's a confidence builder for your banker or investors.

Do you have cash flow projections for at least the next six months?

___________________________________________________________________

Understanding Your Cash Flow – In Less Than 10 Minutes a Month

In my new online course I show you how to understand your cash flow in less than 10 minutes a month. And l teach you how to explain what happened to your cash last month to your business partner or CEO (maybe even your spouse) in a 2-minute conversation.

Less than 10 minutes a month is all it takes. I provide a 100% money back guarantee to prove it to you. You love my new online course… or I eat the cost.

Learn more here. Or BUY IT NOW for only $49.95 with my 100% money-back guarantee.

___________________________________________________________________

Click here to get my blog posts delivered right to your email inbox. I publish one new post each week. Click here now.
Privacy Policy: I will NEVER rent or sell your email address and you may remove yourself from this list at any time you choose.

Is Your Business in the Startup Phase or Well Beyond?

I have shared with you before a fantastic book titled Lean Analytics: Use Data to Build a Better Startup Faster. It is filled with information to help you grow your business no matter what phase of growth you are in. The information is practical and filled with tips and strategies you can implement quickly.

One of the topics I found incredibly helpful talks about determining the phase of startup you are in when building a company. Here is a quote from Chapter 14:

"In a startup, your business model – and proof that your assumptions are reasonably accurate – is far more important that your business plan. Business plans are for bankers; business models are for founders. Deciding on the stage you're at is complicated. This is where founders tend to lie to themselves. They believe they're further along than they really are.

The reality is that every startup goes through stages, beginning with problem discovery, then building something, then finding out if what was built is god enough, then spreading the word and collecting money."

Here is a summary of the different stages they identify.

First, you need Empathy. You need to get inside your target market's head and be sure you're solving a problem people care about in a way someone will pay for.

Second, you need Stickiness, which comes from a good product. You need to find out if you can build a solution to the problem you've discovered.

Third, you need Virality. Once you've got a product or service that's sticky, it's time to use word of mouth. That way, you'll test out your acquisition and onboarding processes on new visitors who are motivated to try you.

Fourth, you need Revenue. You'll want to monetize things at this point. That doesn't mean you haven't already been charging – for many businesses, even the first customer has to pay. It just means that earlier on, you're less focused on revenue than on growth.

Fifth, you need Scale. With revenues coming in, it's time to move from growing your business to growing your market. You need to acquire more customers from new verticals and geographies.

The authors go on to talk about how these stages apply as much to a restaurant as they do technology companies. It is a very enlightening look at evaluating the stage you are in and where your focus should be before moving on to the next phase.

What stage is your company or your new product in? And are you focused on the metrics and the key drivers required in that stage?

___________________________________________________________________

Understanding Your Cash Flow – In Less Than 10 Minutes a Month

In my new online course I show you how to understand your cash flow in less than 10 minutes a month. And l teach you how to explain what happened to your cash last month to your business partner or CEO (maybe even your spouse) in a 2-minute conversation.

Less than 10 minutes a month is all it takes. I provide a 100% money back guarantee to prove it to you. You love my new online course… or I eat the cost.

Learn more here. Or BUY IT NOW for only $49.95 with my 100% money-back guarantee.

___________________________________________________________________

Click here to get my blog posts delivered right to your email inbox. I publish one new post each week. Click here now.
Privacy Policy: I will NEVER rent or sell your email address and you may remove yourself from this list at any time you choose.