Show Me The Money
For those of a certain age who had parents of the WWII-generation, “if you can’t see it, don’t spend it,” governed how you spent your money. In the Great Depression era, a turned-out pants pocket indicated that one was broke. For those who remember the name Jerry Maguire, a larger number behind the dollar sign was desirable. In today’s digital world, it is not even possible to see the money. Yet, for business owners, seeing how much money they have on hand each day has never been more critical.
In a recent survey of local Bucks County business owners, the lack of visibility surrounding their cash flow was a common complaint. Even those business owners who had some type of a daily cash flash report stated that the numbers didn’t necessarily reflect the true cash status of the business. Thanks to the globalization of our economy, the chance for “garbage in and garbage out” has never been greater. Currency exchange, international letters of credit and daily currency fluctuations have serious ramifications on daily reporting. Just a simple understanding of your bank account status is affected by 12:01.01AM re-adjustments to your balance.
We could devote an entire newsletter on what your cash flow really should reveal versus what it actually shows you. But for today, we will just provide a few suggestions on how to gain visibility and creditability on the numbers.
One local business leader says he has gone back to “old math” as he calls it, with the logical application of “this plus this divided by this”. Using a small white board in his office, he states, “When I leave at the end of the day, I write down five key numbers that I want to see when I get the report in the morning. If I met or exceed the numbers, I’m good. If not, it’s the first item on my ‘to do’ list.”
Another suggestion is to track those metrics that you can put on the bulletin board for the employees to see in the morning. In the words of another business executive, “Don’t keep your employees focused on month-to-month profitability. Keep them focused on the cash you have available to spend”.
Many organizations use the challenge of keeping the organization “on budget” to reflect a cash availability measurement. In the sage advice of business owners, budgets tend to reflect a static situation – months of preparation and even more months of transactions. Cash availability is a “real time” requirement. In today’s business world real time cash availability can fluctuate dramatically in a matter of minutes. “Our customer never advised us that they weren’t going to continue paying in 30 days. They went to 40, then to 55 and finally to 70 day’s pay before they confessed.” Placing an emphasis on measuring cash availability is usually the best way to raise the alarm quicker.
The Manufacturer’s Alliance of Bucks and Montgomery Counties will be holding an event in July to share cash flow strategies and stories with other manufacturers. The meeting will specifically address the cash reporting and awareness issue. Experts in the field will be available to discuss services that have been successfully used and endorsed by other companies. Even some of the old fashioned remedies will be on display for those who believe “old school” still holds a lot of value. Watch BCEDC website event’s section for specifics regarding the date and time of this event.
To learn more about SEWN, please visit www.steelvalley.org or contact Greg Olson, SE Regional Director, 215-458-7580, sewnse@steelvalley.org.