Category Archives: Cash Flow

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Keep the Bathtub Full: Understand Your Numbers

Most business owners went into business to do what they love and do what they are good at –  and they hoped to make a living and improve the business’s value while doing it.  Most started their careers as employees, so they tend to carry an employee mindset vs. that of an owner, entrepreneur, or CEO.  As a result, some business owners have created a high-stress job for themselves, not a business.

Successful business owners create a vision of the business and think like a CEO.  Smaller business owners may wear several hats, but in order to become a better CEO, they must strive to delegate responsibility and create sustainable processes to deliver customer value consistently. Employee vs. CEO.  There is a big difference.  The successful business owner also understands their numbers – the balance sheet, the cash flow drivers, and the income statement as well as their overall performance scorecard. 

I’ve had many business owners tell me over the years tell me “I am not an accountant.”  True, but you ARE a business owner and you need to understand your numbers!  That means learning how to read and understand financial reports such as balance sheets and income statements and understand how they relate.  You need to understand your working capital needs and cash flow drivers.  Most business owners know how to read a P&L, yet have no idea where their cash is going. They wonder, “How can we be tight on cash when business is booming and sales numbers are growing?”

It is a common perception that reading and understanding financial statements is difficult.  Some of the problem is that many of the system-generated reports of many ERP systems are too detailed and difficult to read.  But also, business owners haven’t invested the time to learn how to read financial statements and interpret what the numbers mean.  I find it generally makes sense to simplify.

It reminds me of the bathtub illustration I learned from a banking CFO back in my KPMG days, used to explain the bank’s cash flow statement.  He said, “Cash is like a bathtub of water.  Cash comes in through the faucet and goes out through the drain.  The trick is to understand the flows in and out and keep the tub full of water.”

One way to gain confidence is to review your financial reports regularly.  Develop a weekly scorecard and review your financial statements with your controller or accounting team monthly.  Notice trends in key areas like new customers, sales, average transaction value, gross margin, cash flow turnover, and operational efficiencies. What are the financials telling you?  Are you increasing your company’s valuation or are you just sustaining a high-stress job? 

Spending time on this will help you avoid “reaction” mode (daily firefighting) and allow you to work more in “ready” mode. Ready mode is working on needle-moving activities, the kind that will truly grow your business in all the right ways.

If you spend time with your numbers, you will get better at understanding them. In addition to studying your reports, take a course. Read blog posts like these.  Prepare or update your business valuation.  Get people on your team that know financial stuff well and can help YOU understand it.  Trust me, everything you apply time to, you get better at.

Contact me for additional help!

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Three Ways to Grow Your Business

Grow Your Business

When it comes to ways to grow your business, it may not be that you lack time but that you need to do some prioritizing. It’s important to constantly evaluate your growth and progress. With the year already well underway, it’s time to take a closer look at how your business is doing. Is it multiplying? Are revenues increasing? If not, here are three ways to grow your business.

Let’s dive into each of these and see how you can measure and improve your progress, using a fictional example of a mid-size coffee roaster, employing 40 people, and supplying over 50 coffee shops with custom-roasted blends.

Add More Customers

This is the most obvious way to grow your business. The more customers you have, the more potential sales you can make. Look at your metrics for new customer acquisition. How many new customers have you gained since this year began? If you aren’t seeing the numbers you’d like to see, do you need to adjust your marketing strategy or invest in new acquisition channels?

Example: ABCoffee expands their strategic social media campaign to target not just their base city and suburbs, but counties 100-200 miles away. Their sales reps do “coffee shop tours” of shops in this expanded area, sharing photos their marketing specialist then posts to encourage people to visit the shops, and leaving a packet of information and sample roasts to the owners of the shops, so they will consider carrying ABCoffee.

Increase How Much You Sell to Each Customer

Another way to grow your business is to increase the amount that each customer spends with you. Look at your average order size. Has it increased compared to previous years? Consider offering bundle deals, or upsell items during the checkout process. I’m sure you’ve seen stores that have multiple low-price items in the checkout area or have been asked online if you want to add “these regular items” to your cart. Always try to add another line item to an invoice and offer premium/higher-priced products to encourage customers to spend more.

Example: ABCoffee offers specials that allow regular customers to add free bags to orders over a certain size. They occasionally slip in samples of new roast, hoping to whet the customer’s appetite to carry more varieties. They host “cuppings” for coffee shop owners to do tastings of their coffee blends, and offer special pricing for orders placed at these events.

Increase the Number of Times a Customer Buys from You

You can also grow your business by increasing customer loyalty and encouraging repeat purchases. To measure this, look at your purchase frequency metrics. Have customers been buying from you more frequently this year? If not, consider implementing a loyalty program or offering discounts to encourage repeat purchases. Make it a desirable thing to be a regular customer.

Example: ABCoffee implements a wholesale customer subscription program that provides a 10% discount to customers that sign up for their automatic monthly delivery service, thereby increasing the frequency of orders (with the bonus of providing reliable and predictable orders to their fulfillment center, increasing efficiency.

By evaluating your metrics for each of these areas of potential growth, you can identify where your business is thriving and where there’s room for improvement. (There’s always room for improvement.) Maybe you’ve been focusing on customer acquisition when your efforts would be better applied to increasing customer spend or loyalty.

Remember, there’s no one-size-fits-all approach to growing a business. Find out what works for your specific business and customer base. By concentrating on these three key areas and monitoring your metrics, you can make data-driven decisions to drive growth and achieve your business goals.

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How to Increase Your Cash Flow

cash flow

Business owners face many challenges today – cash flow being one of the most challenging. Attracting and retaining top talent, marketing strategy and establishing a strong brand, business growth, time management and delegation, and communication are also on owners’ minds. But from a financial perspective, cash flow is often the biggest problem owners face today. This is a result of the timing of performing services, invoicing the customer, receiving payment from the customer, paying vendors and employees, and managing operating expenses. Most businesses need to be more profitable and need to improve cash flow to do all these things well. That goal gets especially complicated if certain seasons are slower than most – like summer.

Monthly revenue fluctuations can cause havoc in forecasting your results and cash flow. But since a steady cash flow is a vital part of a healthy business, there are steps you can take to increase it no matter what the season.

How to Increase Your Cash Flow

  • Work your accounts receivable. The squeaky wheel gets the grease. Make some phone calls to speed up collections. Consider reducing credit terms offered. If accounts receivable are a significant portion of your balance sheet, measure and graph days sales outstanding (DSO) monthly. DSO is calculated as follows: accounts receivable ÷ (credit sales ÷ days in the period). I generally like to use 3 months of sales ÷ 90 days to calculate average daily sales divided into accounts receivable.
  • Reduce your inventory levels. The number of days on hand is the number of days it takes from inventory purchase to sales (i.e. how long product sits in the warehouse.) The lower the days, the more frequent the turnover and better cash flow. Measure monthly and look to reduce the days on hand. Lower inventory balances do increase stockout risk so you do need to be careful reducing inventory too much.
  • Push accounts payable. Can you negotiate longer terms or quick pay discounts? Remember the value of a quick pay discount is very substantial if you have adequate working capital.
  • Increase profitability. This isn’t always easy, but look at low-margin products and focus on operational efficiency. Sometimes tasks and projects take your team’s time because you give them time. If I give you 30 days to clean your house, it will take 30 days. If I give you six hours, you’ll be amazed at how much you’ll get done in six hours.
  • Put a line of credit in place. This helps provide a safety net when needed, especially during slow periods.
  • Consider creating a cash flow contingency fund. The next time you are in a more profitable season, set aside funds that can help with cash flow in the slower seasons.
  • Stay on top of records! I create a rolling 13-Week Cash Flow worksheet for all my clients, update it weekly, and develop strategies for asset velocity (accounts receivable, inventory, accounts payable) and profit enhancement.
  • Practice good budgeting and planning. A realistic budget, and plans that take slower seasons into consideration, is a huge help in leveling out cash flow concerns.

Which of these steps do you need to focus on most? If you don’t have the time to do these things yourself, it may be time for a fractional CFO. Contact me today for a free initial consultation.

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Cash Flow: Examine to Advance

I did a cash flow exercise the other day with a new client, and they were blown away by the simplicity of some cash flow enhancement techniques.

The company was a $6,000,000 manufacturer with approximately $600,000 in accounts receivable, $1,000,000 in inventory, and $300,000 in accounts payable. We calculated simple annual cash flow velocity (amount of time to turn a sale into cash and pay the respective vendor).

Right off the bat, we noticed that inventory seemed much too high, accounts receivable collections hadn’t been a priority based on the aging, and vendor terms could possibly be adjusted to improve cash flow.

Inventory

We looked at the inventory valuation and noted excess and slow-moving inventory. When touring the facility, I noticed that raw stock seemed high. Some of the excess inventory was pre-planned due to current supply chain issues. This made sense, but there were some inventory levels that could be reduced immediately. After our evaluation, the leadership made some decisions regarding purchasing reductions and are going to look at selling some of the excess inventory. If they can increase inventory turns and decrease days of on-hand inventory, they are expected to increase cash by $400,000.

Accounts Receivable

The next step we took was to look at their accounts receivable. With a little more attention to collections, they believed they improve the aging and could easily reduce DSO by 5+ days increasing cash by $80,000!

Vendor Terms on Accounts Payable

We looked at their accounts payable and determined we could push two of their main vendors’ payments out without any negative vendor impacts. We also noted a few of their vendors were offering 2% 10, net 30 terms. Our calculations showed that pushing two vendors out would increase cash by approximately $100,000 and by taking advantage of the discount terms offered by other vendors, the company would add approximately $36,000 of purchase discounts to their bottom line. See my previous discussion of purchase discounts here.

They were shocked by the impacts of these simple cash flow techniques, and how small gains can make a huge difference.

Your turn. Here’s how to increase your cash flow:

*         Ask your vendors for five more days to pay. See if they offer quick pay discounts.

*         Study your inventory levels and determine if it makes sense to reduce them and still be able to meet production and customer needs. Most companies have too much safety stock on hand.

*         Review your accounts receivable. Make calls to the slower paying customers not only for collections but to reframe your expectations. If they can’t comply, consider increasing pricing to cover the extra carrying cost or if the case is an ongoing challenge, it might be time to suggest they transition to another supplier.

You’ll be pleasantly surprised how much these few steps can help your bottom line. Contact me for a free chat about your current situation!

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How to Add $722,000 to Your Balance Sheet

balance sheet

I work with many bankers and lawyers who call me when they have a customer or client whose company is in trouble or needs help improving their business. The initial assessment takes about a week. We review the companies’ internal controls and backroom systems. Then we look at the historical financial statements, the current forecast, relative cash flow drivers, and their profitability matrix. In the process, we discover the core areas of needed improvement – generally, the situations are related to inaccurate forecasting and inaccurate financial statements. 70% of business owners don’t have an accurate view of their numbers! Sometimes immediate triage is necessary.

Generally:

  • The company is not consistently profitable.
  • The books are in bad shape.
  • The business owner needs to get a better viability on cash flow.
  • The owner doesnt know what their company is really worth or how to improve valuation.
  • Leadership is concerned with the company’s financial performance.
  • Certain financial covenants were tripped.
  • Internal processes are ineffective and needed improvement.

I remember one company specifically. Sometimes you can tell how a business is managed as soon as you walk in the door. I should have realized right away what I would be facing! The controller worked at a long table. Papers and invoices were in piles all over the table. You could feel (and see) the stress immediately.

During my initial conversation with the controller, it quickly became clear that the financial system (Peachtree at the time) wasn’t accurate. He was way behind getting invoices into the system and accounts reconciled. He was making decisions based on the bank balance vs. the book balance. He was manually tracking outstanding checks (with a stack of un-mailed checks) and was barely making payroll every week. On the day of my visit, he had just received his annual worker’s compensation audit invoice and had not planned at all for that $15,000 expense.

This is the way he ran the business. The odd thing was that he thought things were going okay! The phone was ringing, they were very busy and they were making payroll. But he was stressed out every week to make it. And when new inventory was needed, he had to scrape up enough money to get it – usually robbing Peter to pay Paul – which would catch up with him later. He left old accounts payable open with an “I’ll deal with that later” mentality.

This is not okay. To gauge a business’s performance you need timely and accurate financial information.  Also, there’s a huge difference between accrual accounting and running the business on a cash basis.  It’s important to understand the difference and know that many times, using cash-based thinking may be necessary – certainly, in dire situations, cash-based thinking is the only way to have a successful turnaround. See my previous discussions on the 13-Week Cash Flow forecast process. Before I go back to the story, let’s look at the business cycle.

The process starts with sales.  If we follow the cash, sales turn into accounts receivable.  Accounts Receivable turns into cash.  Cash is used to purchase inventory, pay employees, pay operating expenses and taxes with the leftover being cash profit.  Profit is necessary for viability. 

The flow meters and gauges relate to accounts receivable, inventory, and accounts payable. Debt can be used as necessary but comes with a cost. ALL of these things need accurate tracking.

We had to establish some simple systems. Geno Wickman, the creator of the EOS, Entrepreneur Operating System, is an example of how this is done, and some of my clients are successfully using his system. His recommendations include:

  • Review your financials every month.
  • Manage a monthly expense budget.
  • Track the five to 15 most critical numbers for your business every week (e.g. visitors, followers, leads, appointments, proposals, sales, revenue, errors, customer satisfaction, cash balance, accounts payable, accounts receivable.)

I would add to also review your cash flow and sales numbers weekly.

Back to the client’s story.  We implemented several basics.  First, we got the financial process in shape.   It’s arduous at first getting messy books up to date and a solid closing process in place.  But like the utility room flooding  – you need to turn the hose off before you clean up the water.  Once the financial system was up to date and accurate it was easier to run the business with the book cash balance vs. the bank balance.  

We developed a 13-Week cash forecast, implementing a weekly update and review process. 

We re-evaluated the inventory process, measuring the current state, developing plans to improve, and graphing progress.

We developed strategies to improve cash flow.  We looked at customer terms and payment history, we examined and reduced inventory stocking levels, we looked at vendor terms and accounts payable terms.  We developed tracking for these drivers and expense reductions. 

It’s amazing the effect on cash these cash flow drivers can have.  Let’s look at the accounts receivable gauge and the effect of proper strategy.  In another client case, I worked with a medium-sized distributor.  At the time they were doing $20,000,000 in revenue with $2,500,000 in accounts receivable.  The aging was a mix of approximately 100 customers with various balances in the various aging buckets.  Based on the math, the day’s sales outstanding (DSO) was 46 days.  We worked with the credit manager and the sales team to improve the turnover.  We measured and graphed DSO weekly.  After two months we were able to reduce DSO to 38 days and in six months we were at 32 days. 

Based on these actions, we added $722,000 of cash to the balance sheet – and in this case, reduced interest expense by $45,000.

Back to the original story: we saw a major turnaround in the company with more accurate and timely records helping the owner have a better handle on his cash flow and make better, informed decisions. And, as you can imagine, he experienced far less daily stress.

Does any of this sound familiar? Let me help you and YOUR company. We may not be able to add $722,000 to your balance sheet, but we can reduce your stress, forecast results better, and help you become more consistently profitable. Contact me today.

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Fourth and Final – Finish Strong and Be Ready

fourth quarter

The fourth quarter has started – the final quarter of the year.  In this fourth-and-final quarter, there are four things you should do in your business to stay strong and successful.

Get Your Team Energized to Finish the Year Strong and Be Ready for 2022

With most of my clients, I am focusing on helping them have a solid Q3 close and a strong finish to 2021.  In the quarterly review meetings, we are looking at the numbers and ensuring that everyone understands the business’s vision and long-term strategy.  I find that, generally, everyone is 70% aligned. We use the opportunity to increase that percentage by having an in-depth discussion of the historical quarter’s results, and then looking at the rest of the year and going into 2022 to align the teams’ vision and long-term strategies. Knowing where you stand can give you motivation and energy for what needs to happen next.

Ensure a Solid Q3 Close

If you’ve established effective processes and routines, your accounting staff should be keeping up with the necessary tasks to ensure you have accurate numbers and information for future decisions. If not, focus on getting these procedures polished (checklists are a great help to this) and getting your staff on board with doing them well EVERY month.

Get Your Short-term Targets in Focus

What are you hoping to see happen in your business during the fourth quarter? Write these goals down, narrowing them to be realistic, measurable, and fitting for your team.

Start the Budget Process

2022 will be here soon so you’ll need to have your budget in place to ensure an effective transition. It may be a simple matter of copying and tweaking this year’s budget. Or, you may have to revamp if, for example, some areas of income didn’t match your expectations. Get input from your staff. Consider cost-cutting measures or redirection of funds to more effective endeavors such as product development or marketing for next year.

Bonus Task

I find it interesting the statistic that 98% of business owners don’t know how much their business is worth.  Their business is their most valuable asset, yet most have no idea of its value until they decide it’s time to sell. I know several owners currently looking to transition out and “retire,” but the offers they are receiving are substantially less than they anticipated.   

In addition, not knowing the current value of your business makes it harder to intentionally increase it over time with well-informed decisions.

I suggest all business owners do a business valuation every few years. If you haven’t done this, let’s arrange to do one now. Our valuation process is inexpensive and efficient and you’ll be pleasantly surprised at how the information helps you as you head into 2022.

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Halftime: Preparing to Finish Well Using a Mid-Year Review

financial

Halftime. I’ve written about this before, but, the year is half over, and it’s a great time to schedule a mid-year review to look at your business’s first-half performance, take what you’ve learned, and re-forecast for a strong second half of your year.

I know a lot of people are going on vacations, but for me, while it’s wise to take a short break, mid-year is a time to contemplate my client’s performances and develop a plan to come out strong for the rest of the year. In fact, for some, an offsite half or full-day session is a perfect means for this exercise.

I have had a couple of full-day, offsite sessions with my clients already this year, and while it’s not absolutely necessary to carve out a full day, whatever time you can set aside is valuable for reviewing information, and re-forecasting the business plan.  Plus, it helps you distill Q3 action plans into several big quarterly goals and get the entire team on the same page.

A quick and thorough financial close process is essential in order to have the information you need.  We’ve talked a lot about that in the past, but a strong quick close paves the way for better decision-making. It gives you more confidence in the numbers and is more efficient. Regularly gather your performance statistics: sales by segment, gross margin, expense comparisons to budget and to prior years, and any capital /investment needs for the rest of the year.

At your halftime meeting or offsite, evaluate your team and have candid conversations to maximize performance.  Look at your sales department’s performance and marketing successes/failures.  Take a close look at the current data and strengthen your plan for the rest of the year.  Gather the facts, reevaluate your assumptions, and get your team all focused and rowing in the same direction. 

Whether you decide to have an offsite, or just take some time in the office, here is a Second Half Checklist to help you prepare for a proper halftime business review:

  • Gather overall 5 Performance Stats actual versus plan: Sales, Gross margin, Operating expenses, Net income, Asset velocity
  • Update the Org Chart
  • Obtain your Income statement by month – 2021
  • Download your Balance sheet by month – 2021
  • Print out your 2021 Budget by Month (original)
  • Collect an invoice register download or sales by segment data
  • Prepare documents for an Income statement comparisons: month to date versus budget versus last year: quarter to date versus budget versus last year, year to date versus budget versus last year.

Don’t miss the halftime opportunity to take stock, reevaluate, and develop action plans to improve performance, net income and cash flow.

I’d love to see if I can help! Contact me!

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Improving Your Backroom

accounting

The “Backroom” (your finance and accounting department) has always been a vital piece of a company’s framework.  I’ve been pushing backroom efficiency since I was with KPMG 30 years ago.

Back then, most internal control and accounting processes were manual and spreadsheets were just coming on the scene.  Manual methods were often inefficient, inaccurate, and boring. The larger the company, the larger the accounting department needed to be. We needed enough people just to bill customers and post cash to accounts receivable.  Things have changed significantly now; we have automated solutions where we scale differently and efficiently.

Most businesses consider that their value comes from sales and marketing. They are always thinking about how to create customer value. The finance department exists to support the business’s value creation, and we need to operate it as effectively and efficiently as possible.

In my years of work in the turnaround and profit improvement space, I’ve encountered many bloated finance departments that have grown over the years, some because of company growth, but some because of using outdated and inefficient processes.

Companies should regularly evaluate the needed functions in the company’s admin support and backroom.  Take the employee’s names out of it, and create lists of what needs to be done and what positions should be accountable for it.  You can talk with the employee(s) who currently own the process … they may have ideas about streamlining or automating processes – or even let you know if they’d rather be doing something else!

Evaluation often leads to change, and some people handle change better than others. I’ve worked with several companies where the employee is unwilling to change – they aren’t interested in learning new ways to do things, like their routine, or lack confidence.  If an employee just won’t change or isn’t willing to grow, the best way to improve the process may be to change the person who does it.

I’m currently working with a company to create a start-to-finish process manual from the ground up. We are documenting every process.  We just finished tweaking the billing process to improve efficiency.  Implementing this improved process led to an immediate improvement in cash flow ($200,000!), a reduction in one full-time equivalent, and a much better forward-facing process for the customer.

Change like this is both rewarding and difficult. It’s not an easy decision to streamline staff, yet a healthy company cannot hang onto employees just for the sake of having people around that they like or that they don’t want to upset.  Are there other positions that person is a better fit for? Or have they contributed all they can and are unwilling to grow and change with the company? In the long run, it may be healthier for them, too, to find a better fit.

Evaluating, polishing, and documenting your backroom processes can also do the following:

  • Improve leadership skills – it makes owners and the leadership team step up and pay attention to what is taking time and money
  • Mitigate distractions – a step-by-step process helps employees stay focused, and if they happen to get distracted, be more quickly able to pick up where they left off
  • Provide a planning calendar – accounting processes are often tied to a calendar, so you’ll be building a planning tool that will  help you in the future
  • Create weekly checklists – having these written out will help if the current process owner suddenly isn’t available. It’s a tool for cross-training and prepping new employees to take on this task.
  • Encourage discipline – repeated routines help create needed “muscle memory” and could free up mental space for employees to problem-solve
  • Build efficiency – who doesn’t want a more efficient company? Comprehensive and documented processes streamline tasks for everyone involved and helps you avoid individuals adding their own, possibly unneeded, steps. (i.e. do you really need to make photocopies of everything if there is a computerized record – and backup – available?)

Does the idea of streamlining your backroom intrigue you? Let’s chat. My experience can help!

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Gear-up For Q2

Well, happy spring!  I hope you had a successful first quarter.

Now that Q1 is over – how did you make out with your first quarter goals?  For me, the year-end CPA audits are done, my “big rock” goals were completed, and my teams are ready to jump into the second quarter.  It feels good to finish strong, and I hope you did too.

If you didn’t finish as strong as you hoped, I urge you to get your first-quarter financial results wrapped up early and do a solid comparison to your projections.  Take another look at your 1-year plan to ensure that you are on target.

Also, set up a meeting with your banker to ensure they are up-to-date with your financials.  A strong relationship with your bank can be so important in good and bad times.  Banks don’t like surprises and will appreciate you being proactive. Review your year-end financials, first-quarter numbers, and forecast for the future so they can have a clear view and be confident that you know what you’re doing.

As the second quarter kicks off, it is a great time to evaluate your team. How did they perform over the quarter? Are the right people on the bus and in the right seats?  I’m currently going through an exercise with one of my clients to evaluate the finance team.  We are reviewing the org chart based only on accountabilities, not names.  We will be making some adjustments. We are starting with what needs to be done, then ensuring we have the right people in the right spots.

As I look back, Verbeck Associates and my clients had some huge goals for Q1 that seemed unreachable at the time … and yet … we nailed them.  We held each other accountable, reviewing the ‘Weekly Big 3’ weekly, and if someone is behind, we help them with resources and reprioritize priorities so we hit the targets.  That process was the key to our reaching those ambitious Q1 goals.

Let’s check on your progress:

Compare your Q1 financial results to your Q1 budget and to Q1 last year. Look at sales and gross margin by segment, overhead and payroll expenses, and cash flow. How did the quarter stack up compared to your plan and to last year?

If you’re behind on your goals – be honest – face it head-on and up your discipline. Don’t use the excuse you didn’t have enough time. There’s never enough time. You need to make time and keep your focus on the important things.

Now, set up your next 90 days. Set your “big rock” goals in place and get to it!

 

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Q1 Review Time: Goals, Closing, Tasks

It’s almost the end of the first quarter of 2021. Hard to believe. That was quick!

Let’s take a look at a few things you should be reviewing as the quarter comes to a close.

Goals and Targets

Business leaders who want to have strong and profitable businesses tend to set big goals for the year, and often, per quarter.  How did you do with your goals?  I’m slightly behind on a couple of the “Rocks” (high priorities) that I intended to get done by the end of this quarter.  I still have a couple of weeks to turn up the heat and get them done, and so do you!

How are your financial results so far? Are you close to where you thought you’d be? There’s still time!

Q1 is tough for us accounting types. There’s a lot of activity, including closing the prior year, meetings with your CPA, preparing for taxes, finalizing your budget and goals, and communicating with your team.  It’s not unusual to miss some targets in Q1, even significantly.

There are three options if you are missing your targets already:

  • Realign
  • Refocus
  • Give up

Option three is already off the table for an intentional business leader. But realign if you discover that your sights were set too high, and refocus if you came close but didn’t quite make it. Perhaps there are a few details you can narrow in on for the next couple of weeks to hit the target.

Financials and Recordkeeping

I’m amazed at how few companies and organizations have a solid financial close process and still don’t use a simple closing checklist – every month.  I know it’s easy to try to wing it, but from experience, things will slip – not all balance sheet accounts will get reconciled, dates will pass without action, and the overall accuracy will degrade.  I’ve experienced this myself.  We need to maintain the monthly discipline of following a checklist – every month.

A monthly close should take no more than 10 days, and should actually take less time than that. Huge companies can do it – GE, a 95 BILLION dollar company with 250,000 employees, can close in three days.

I have one client that has a complex billing process.  When I began working with them, their month-end close took 30 days.  Not only did the slow billing process affect the close, but it also caused delays in customer payments and cash flow. By focusing on changing the process, we were not only able to improve the close timing, but accounts receivable turnover also increased significantly.

If you are having closing in 10 days or less, investigate what’s slowing the process down.  A recent survey indicated the month-end close (close to disclose) process has slowed due to internal levels of review, growing need to identify and consolidate more detail for financial statements and more time to check for errors.  While these all sound good, the problem seems to be that the close is run by memory rather than clear and specific protocols and checklists

With the quarter ending – plan now to get back to basics.  Get your financials closed quickly (download the closing checklist), compare to your forecasted results, determine what is necessary to get back on track, and plan out an action plan to get back on course.

Tasks and To-Dos

All work isn’t created equal, despite it all feeling urgent.  Step back and ask yourself

What is of highest value right now?

Sometimes, I will look for the path of least resistance.  I can still feel productive checking my email or knocking a small task or two off my list. But deep down, I know I’m avoiding the significant project or important initiative I should be working on.  I have found the following three actions helpful when this occurs, and suggest the following for you:

  1. Delegate routine tasks. An administrative assistant (in person or virtual) can help with recurring tasks so you can focus on what only YOU can do.
  2. Batch tasks. Try to do your “lower value” tasks in batches. Schedule time to process email, read professional development articles, clean up files, etc. as one appointment block so you can knock off a lot of administrative tasks at one time.
  3. Automate.  When possible, utilize apps and other systems to take care of routine details. Automatic payments help you avoid late charges. Weekly reminders through tools like Outlook or Google Assistant help you stop the “try not to forget to …” thoughts swirling in your head. Using tools that snooze email to a more appropriate time can keep you from feeling distracted by a full email inbox.

A quarterly review is invaluable in helping you, and your company, succeed.  I love to help clients grow stronger in their review/closing process. Is it time for some extra help? Schedule a free strategy call today!