Only 4 ways to improve profit - May 1, 2012
Posted by: Randal Suttles in Articles
As I was reviewing the monthly financial results with one of my clients, we spent a great deal of time analyzing the gross margin. She asked me to do a training session with her and her key managers so they could better understand how to improve it. What follows is a brief, and hopefully simple, summary of our discussions.
You can improve profit only 4 ways (there are really 5, but I will get to that at the end).
You can raise the prices of the items you sell. Number 1. And this has a 100% improvement to profit. For every extra dollar you charge, you make another dollar. Simple.
I once missed a financial exam question that asked which has the quicker and greater impact on profit: higher prices or more volume? I picked volume. My logic was you cannot raise prices without volume, because a price increase on no volume is still zero. I got the answer wrong, but you know, I was partly right. You can increase volumes to raise profits, even without a price increase. That is Number 2. But, therein lies the tension that owners and managers face: how much volume do I lose if I raise prices? But the math is the math. Raise the volume at the same price levels, and you will make more profits.
Number 3 is to reduce the cost to make or manufacture. That means reduce manufacturing labor costs, material costs, and overhead costs. These are all topics for other discussion. But again, the math says if you can reduce the costs of what you make, you make more profit.
Number 4 is also cost control: reduce general and administrative costs. Administrative salaries, rent, office costs, computers, benefits, and so on.
Those are the only 4: Increase sales prices (number 1). Increase sales volumes (number 2). Reduce costs to make (number 3). Reduce administrative costs (number 4).
About the 5th way? That is balance sheet management. Control the accounts receivable levels, reduce inventory balances, manage accounts payable, tighten capital expenditures, limit debt levels and lower interest costs, etc. All of these are asset and liability management that impact profits. But for strictly managing operations, there are only 4 things to work on. Simple to describe. Hard to do.
Julie OTT - Feb 15, 2012
Posted by: Randal Suttles in Testimonials
Work-Comp Management Services, Inc.
WCMS
817 Woodmere Drive
Lafayette, IN 47905
Phone: (877) 449-7473
Fax: (765) 449-8504
I am an occupational health nurse, and I started Work-Comp Management Services (WCMS) 16 years ago. We provide occupational health staffing to our manufacturing based clients, and we also have a full service drug screening clinic in Lafayette, Indiana. Until 2008, WCMS did all of the payroll, bookkeeping, taxes and general back office duties ourselves; I believed it saved money. One WCMS employee handled the books, while I managed the off site clients, marketing and handled HR matters. I didn’t want to have anything to do with the financial management of the business; I didn’t understand it and didn’t want to; it was much easier just to ask for periodic reports on how the business was doing.
In 2007 the business really started to grow, and we began staffing nurses in 10 states. Our payroll shot up to $77k every two weeks. We kept using more of our bank Line of Credit, and increased it twice to handle the cost of our growth. In 2008, I noticed that we were not paying the Line down very much, and we had large balances on our charge cards. I couldn’t understand why our debt was growing; surely we were making a large profit from the new business, and yet the debt kept growing.
In 2008, a friend of mine suggested I meet with Randy Suttles of B2BCFO. She stated Randy specialized in helping small companies streamline functions, develop a solid growth plan and maximize profit. I was hesitant; I wasn’t sure an extra monthly expense would be a good idea, but I went ahead and met with Randy near the end of 2008, about 6 months before the economy really started to nose dive. I was pleasantly surprised that B2BCFO doesn’t require a service contract; they really do business on a handshake. The cost seemed reasonable. Randy started working with WCMS the next week.
Randy reviewed every aspect of the business with me; staffing, roles and responsibilities, duties, and most importantly, our financial records. Randy found that the business was not making the profit we thought it was; in fact, our expenses had overrun the profit we made from our growth. I was spending a lot of my time handling HR and back office duties rather than working with our clients, and it was a real eye opener to get that clear, concise picture of WCMS.
At Randy’s direction, WCMS outsourced bookkeeping and payroll. We were able to cut staffing costs due to the outsourcing, and back office processes were streamlined. Randy understood that I hated looking at financial reports; he walked me thru my aversion/fear of those documents by having the accountant give me simple monthly reports….what money was going out, what money was coming in, and what we actually made or lost for that month and why. I became comfortable over time asking for additional reports, getting a good grasp on how my business was running. WCMS weathered the great recession well because of the changes Randy had us implement.
I have been with B2BCFO since 2008, and last year we saw sales go up 25%. WCMS is strong and profitable; more so then we’ve ever been. Randy’s services have been invaluable; I can honestly say that if I hadn’t met Randy when I did, I don’t know where the business would be right now. WCMS will be a B2BCFO client until the cows come home….it was the smartest business decision I ever made.
Julie Ott, RN, BSN, COHN-S/CM
WCMS Owner/Nurse Manager
The GamePlan™ - Feb 4, 2012
Posted by: Randal Suttles in Articles
In my newsletters, I typically write relevant stories of actual events that have happened to me. Stories that give lessons that my clients can use. Stories about what has happened on audits, and with working with my clients to solve their financial problems, dealings with banks, regulators, botched accounting systems...And I get positive feedback from scores of people. They love the stories.
This letter is a bit different but tells a story too. I think it very important to periodically explain and remind my contacts how I work with my clients. Below is just part of the story of:
In the beginning:
With the owner and relevant staff, I conduct a free, no obligation review of the company’s financial information and systems. I attempt to learn what are the problems and potential ways to solve them. I prepare benchmarks against industry relevant financial averages. And I create a confidential report of the findings. Then:
I meet with the owner to discuss the results of the “Discovery Analysis” TM. We review the key findings. Most of the time the owner is well aware of what I identify, sometimes not. We then discuss the areas in which I might be of assistance, the time line, and we agree on proposed costs. Often times, this report, the “Strategy Gameplan” TM, is all that the owner needs right then. Most of the time though, after we have agreed on the scope, timing and cost of the anticipated work for the near term, we shake hands (because there is no signed contract) and then comes:
The “Strategy Implementation” TM phase of the work. Here I work on the agreed tasks. I work with company staff (I have none of my own) in order to keep the costs down and get the work done as quickly and efficiently as possible. This ”Strategy Implementation” TM phase can last as little as a few weeks, to more typically a few months. As one of my clients said: “You clean things up”. There are generally tangible results: refinancing complete, cash flow improved, financial reporting sped up and more accurate, but most importantly there is relief to the owner. That is when:
I review the results with the owner. We discuss the financial impact of the work so far. But more important, we review the impact on the owner, the staff, and the company generally from the improved cash flow, financial position, better reporting. But, the results are not all tangible. Owners talk about “relief from the pressure”, more time to focus on growing the business, more time to strategize, better relaxed. All see different positives, but “relief” is the common theme.
Following these initial phases of work with the owners, we discuss my ongoing involvement. I tend to serve on a long term basis with my clients as their long-term trusted business advisor. As one of my clients said: “I want you involved. Now that it is fixed, we need to keep it that way.” And we move on together to grow the Company with financial and goal clarity and much relief.
I do the purchasing - Dec 1, 2011
Posted by: Randal Suttles in Articles
That is a quote from one of my clients. He and a partner own a very successful manufacturer. As you might imagine, there are many issues: sales and marketing, finance, employee relations, engineering, OSHA and EPA compliance, etc. All are important, and if not done right, can cause immense problems in any business. But he said “I do the purchasing”. That is the critical core function that if not done right causes more than just problems, it causes failure. He had picked out and is personally in charge of the mission critical piece of his business.
The owner of another client, also a manufacturer, approves all capital expenditures. Not just the big ones, all of them. That is the cash flow critical piece of his business. Large or small capital expenses for unneeded or overpriced equipment could break him. So, he personally handles that.
Another client handles all employee recruiting. Personally. Her business is to provide professional nursing services on long term contracts to manufacturers throughout the US. Her mission critical work is to make sure the nurses meet her standards. So she hires all of them. Personally.
One more. A long time friend of mine who manages fixed income securities for clients all over the world said to me he does 2 things (ok so it is more than one, but you get the point): “I work with my clients and I decide what we buy and sell.” All of the rest: compliance, data processing, employee relations, reporting, etc., is managed by others.
Indeed, non core functions need to be well handled. But the successful entrepreneurs know their critical core functions, and that is where they focus their energies. It works.
Suttles Law - Oct 1, 2011
Posted by: Randal Suttles in Articles
A bit of background first:
In my early career, fresh out of the University of Notre Dame, I worked in public accounting for 7 years. The first 3 years with Peat, Marwick, Mitchell (one of the “Big 8” at the time) and 4 years with my father in his accounting firm. We were the largest local CPA practice in Indianapolis at the time. The Firm’s name was Fowler, Suttles & Co., named for my father and his partner, Hugh Fowler. Not only were they business partners, they were close friends.
I was at one of my current B2BCFO® clients this morning. This client of mine is owned by the second generation in their family. The first generation was a client of my Father’s, and of mine, some 30+ years ago. The lady who processes accounts payable is still at this client, as she was back then. I noticed this morning that there was a very old poster tacked to her cubicle, that she had obviously received from my father, and had treasured all these years. A bit tattered to reproduce, so I type the words here (capitalization and format are same as original).
Fowler’s Laws
In Any Field of Our Endeavor,
Anything That Can Go Wrong,
Will Go Wrong.
Left To Themselves, Things Always
Go From Bad To Worse.
If There is A Possibility of Several
Things Going Wrong, the One That
Will Go Wrong Is the One That
Will Do the Most Damage.
Nature Always Sides With
The Hidden Flaw.
&nbs....
Posted by: Randal Suttles in Articles
Years ago one acquisitive entrepreneur I worked for (he purchased many, many companies and is now on the Forbes 500 list) refused to consolidate the operations once acquired. That is generally opposite of what most buyers do. Usually they try to combine and consolidate computer systems, staff functions (think personnel, legal, accounting, etc) and generally seek to reduce the overall costs. He did not consolidate. He said, indeed, he wanted to make each acquired company more efficient, but it had to stand on its own, so that if he ever needed to throw it overboard (generally by selling it, but sometimes liquidating it) he could. No anchors to weigh down the rest of the companies. One of my clients purchased an expanded manufacturing plant, with lots of borrowed money, a few years ago. Business fell off and the company is now facing oversized debt payments for the building, which is now too large for the company. Given the layout, some of the space can be sublet, but not all. The building and its debt have become an anchor. Another of my clients has several long time, well paid, employees who are no longer fully needed. Their expense has become an anchor to the business as well. Another owns a number of specialty vehicles and trucks that he does not wish to sell. After all, when business picks up, we’ll need most of those trucks. Anchors. To be successful, or reverse losses, some of the solutions are not pleasant, but the anchors must be tossed overboard. Sell the building and take the losses, terminate the excess staff, part with the excess equipment, etc. Most of the time it is more emotional for the owner than it should be. But, the anchors must be thrown overboard, with no rope.
Anchors - May 31, 2011
I Cant Figure Out How To Do That - May 2, 2011
Posted by: Randal Suttles in Articles
3 true stories.
Story one. Many years ago, when savings and loans still existed, I audited several. One of my clients was a small rural savings and loan that only lent money for residential homes in their and surrounding counties. One year I began the audit as I always did, and asked to see the new loan register for the year. I was told by Lloyd, the president, that they made no home loans that year. Zero. I said you have got to be kidding. That’s all you are in business to do. He told me that he could not understand how the S & Ls locally and indeed all over the country were making loans at 8% by borrowing large amounts from money brokers. Even though the borrowing rate was lower than the 8% he could lend at, if he could not borrow at passbook rates of 5.25% and lend at 7.25%, as he always had, he would not do it at all. I paraphrase Lloyd: “I can’t figure out how they are doing it and expect to continue it. So we [his savings loan. He viewed it as his, although it was a mutual company, to him it was his.] are not going to do it.” We all know what happened to the entire industry. Gone. The hot brokered money ran, and the real estate market collapsed in the early 80’s. Turns out Lloyd was spot on. He merged with a successful local bank, the officers, directors, and the depositors came out fine. Lloyd didn’t understand it, so he didn’t do it.
Story two. For many years I worked with a classic hard charging entrepenuer. He never met a market he did not wish to enter and conquer. We were presented with the opportunity to invest in, or buy 100% of, a multi state radio station that was trying to build a national niche as a multi-market provider of local news. Lots of issues involving sales, market size, advertising revenues etc. But a unique concept. Bear in mind this entrepenuer never met a market he did not wish to enter. I already said that, didn’t I? We hired a radio station “consultant” and went and did our due diligence. Historic financials, market studies, cash flow projections. Typical due diligence drill. This man really wanted to buy these stations. Finally, after much angst, he said to me (again I paraphrase, but this is really pretty close): “When I lie down for a nap and think about the radio stations, I really want to get in that market. Then I wake up, the feeling passes, and I think I don’t understand how we can do that. The market [local news delivered nationally] doesn’t make sense to me.” So we took a pass. Saved our mone....
Posted by: Randal Suttles in Articles Most of these writings of mine have some kind of theme or particular point. This one does not. It is just two stories about one of my long ago clients. The client was a trucking company. They were a very large long haul trucker. Given their size, they were self insured for property damage claims to their own trucks and for the products they hauled for their customers. I was at the office that handled the claims for my client one day in December. In Indiana. It was cold, icy and snowy. The manager of the unit picked up the phone and took a call from one of their drivers. The driver was fine but had been in a major wreck. He had been hauling a load of new cars from Detroit to a dealer in Ohio. He was passing through Fort Wayne, Indiana going downhill (probably too fast) hit the ice and flipped the truck upside down. No injury to him but literally smashed the cars, all 8 of them. The manager asked the driver what kind of cars he was hauling. As you can probably guess, not small cars, not small pickups, not even mid size cars. He was of course hauling brand new Cadillacs. Total loss. Always the worst possible outcome. Same client. Same winter. Two months later. Now February. Lots of snow and ice. I was at the corporate office in Kokomo, Indiana. Their office was in an old flat roof converted warehouse. Three stories tall. There was so much ice on the roof (several inches frozen solid) that the roof had begun to creak pretty badly. Given the age of the building, everyone was concerned about a collapse. So they sent two maintenance workers to the roof to clear off the ice. No instructions though, just get the ice off the roof. They did. Roof stopped creaking. …..Two months later, spring in Indiana and it is raining buckets. I am at the same office and water is pouring through what must have been 100 small holes in the roof. Care to guess how they cleared the ice? Pick axes of course. Right through the ice and holes in the roof. Always the worst possible outcome. Posted by: Randal Suttles in Articles One of my clients is a job order manufacturer for the auto industry. A few months ago they were having difficulty meeting delivery deadlines. As they tried to meet deadlines quality began to slip, more deadlines missed… You know how it goes. They needed a way to fix the shop scheduling problem, to meet ever tighter deadlines, while holding to their quality standards. Or the customers were leaving. I was asked about computer software to help fix the problem. I balked. I told my client that if you cannot figure out what is causing the problem and solve that, then if you automate it, you will just get the same problems, only faster. Years ago when I was CFO of a health insurance company, we targeted to pay 90% of the claims in 5 days, 98% in ten. We were failing. We had grown too fast and could not keep up. Our solution: colored folders. Every day of the week was a color. From my memory: red for Monday, yellow for Tuesday, blue for Wednesday and so forth. You get the idea. Every claim received was put in the appropriate color of the day. So on Friday, every claim file in a yellow folder was on day 4 and needed to be done by Monday. End of day Friday, anything still in a yellow folder was transferred to a black folder and they got priority. It took some time, but daily monitoring of the colored folders by the adjusters and their supervisors caught us up. In a few months we met our time service standard. Note this was 25+ years ago and predated most automated computer systems. It was a manual solution. So we tried something similar at my client. We have about 200 jobs in shop at any point in time. Each job will have an engineering/machining spec drawing on it. The deadlines are generally five days for each job. We assigned every week of the month (not day, but week) a color. So, the machine operators know by color in the folder (we used different color sticky notes, and wrote the exact due date on the sticky note and stuck it in the job folder) which jobs to work on first. And, since many of the jobs can be handled by different machine operators, they know by color which operators they can help complete the jobs. The machinists and supervisors solved the slipped deadlines themselves, just by focusing on the colors. We went from almost 50 out of 200 late deliveries to only 2 within 2 months. All we did was use colored folders. Months after implementation, we are still current, still using colored folders and have not yet automated it. Some years ago, while I served as CFO of a mid sized health insurer, we spent several thousand dollars to air ship in a computer from Texas. Why would anybody do such a thing? Here is the context: We had grown so fast that our data processing systems could not keep up. Not the software, nor the hardware. We were unable to timely process health insurance claims, by a lot. Everyone was working extremely hard to try and keep up, but the hardware (printers in particular) could not keep up with the volume. The Chairman was angry, to say the least. He wanted to know what management was doing about it. I clearly remember the meeting with the manager of the payment department. He had lots of excuses, including lack of staff, lack of computer tech support, lack of this, lack of that. “Not my fault!” It was clear though, that the manager was making excuses. Although there were indeed difficulties, there just was no sense of urgency. The Chairman asked what it would take to fix the hardware problem. The department manager indicated he needed a new printer (10X faster than the current printer) that was compatible with the software. It was a rather unique printer, available in the aftermarket, and he had located one in Texas. He said they would purchase it and we would receive it at our Indianapolis offices in 3 weeks. Shipment via truck. The Chairman was incensed. He ordered the printer air shipped in, two days. We spent thousands to deliver a message. There was to be no excuse for failing to solve the processing problems. It wasn’t so much the cost to fix the problem, it was the lack of urgency. We got current with the claims payments pretty quick. Not because much different was done, but there was clearly now a sense of urgency. Much of the time, the most important message is the example you show the staff. The Chairman gave a clear example. That department manager left the company soon thereafter. Two different approaches. Excuses or urgency? Posted by: Randal Suttles in Articles I just hung up the phone with a client. I had told her to print the cash flow statement for the prior month. (She uses PeachTree. Quickbooks has an embedded cash flow statement as well. So do most financial software packages). She printed it, faxed it to me and we began discussing it. Her first words were: “I don’t even know what this is.” I told her it is probably the most important financial statement she has (she is a relatively new client so there will be much training and analysis for us to do). I walked her through the report. It showed cash payments for equipment. She did not know the operations manager had purchased those particular pieces of equipment. It showed a “use of cash” for the increase in accounts receivable. She did not understand how increasing accounts receivable is a use of cash. We discussed it quite a bit and she began to understand why the company was reporting so much income, but “we have no cash”, because it is being absorbed in increasing receivable balances. The cash flow statement showed substantial owner draws. The Company is subchapter S, so after regular W-2 wages, the owners take distributions. She was not aware of the amounts they had been withdrawing. Time to review the personal spending situation. The cash flow statement showed uses of cash caused by a drop in accounts payable. That she understood. No explanation necessary. When we pay bills, that’s a cash use, and cash goes down. The cash flow statement showed payments on lines of credit and installment loans. Again, a use of cash and well understood by the owner. This particular client is a service company, so inventory is not an issue. But, for wholesalers, retailers, and especially manufacturers, it is usually the changes in the inventory balances that require the most discussion with and monitoring by the owners. The important point to the owner was not the theory behind sources and uses of cash, but that the cash flow statement is the place to look, and investigate, to find out what is going on with the cash in the business. This monthly article is dedicated to my friends in banking who deal with struggling small businesses that have misused short term debt. It is about debt. Short term debt. It can be a business killer. It is not that short term debt is bad. It is necessary and when used properly, a critical building block in the financial structure for most businesses. The problem is time. Short term debt, typically lines of credit in mid-market companies like my clients ($2 million to $20 million in revenue) as opposed to commercial paper or standby back up lines, is properly used when it funds working capital, and working capital only. Some rules of thumb: use short term lines to fund 70-80% of current accounts receivable and 50% of inventory. In growing companies the available line needs to match forecast sales growth and the resulting receivable and inventory balances. The time problem occurs when the short term debt is mismatched and used to purchase or invest in longer term assets like land, buildings, and most frequently equipment. Or, when it is used to fund losses. For growing companies with room in their line of credit to draw more funds, the temptation to use the line can be seductive. After all, the interest rate is lower than other debt sources and there is no amortizing principal, so payments are lower. But it is a slippery slope. The money is drawn, the new machine or computer(s) is acquired, losses are funded. The line comes due in a year. But the equipment is longer lived than one year, or profits do not recover. It takes time for those investments to pay back (returns on investment, present value of cash flows, internal rates of return, etc, are all topics for another day). It takes time to recover from debt funded losses. That’s the time problem. When the owner uses the line to buy longer lived assets or pay for losses, the time to maturity is mismatched. The line comes due long before the business can throw off enough cash to pay off the line. The bank may be cooperative, but terms can be tightened, fees raised and worse case, the bank says no to the renewal. And now the short term debt can kill the company, because it has to be repaid. Now. Liquidation of collateral occurs. The business is gone.
We called them “surprise” counts because the tellers and branch managers were not supposed to know when we were coming or in theory they would be extra careful with their closings that day. But, they generally had a pretty good idea around the time of the year we would show up. One client bank, in a small rural town in southern Indiana, was scheduled by us for the surprise cash count in early fall. We had a staff of 8 people to cover the branches and the home office. We loaded up in our cars to drive to the town the evening before, so that we could show up early the following morning, do our surprise cash count audits, and head home. As we pulled in to the parking lot at one of the two motels in town, imagine our surprise when, there on the neon sign, just below the motel name, it blazed out “Welcome Peat Marwick”. You see, the secretary had confirmed the motel reservations in the Firm’s name, not in the name of an individual, and given that we were taking 8 rooms, in a small town, with only two motels, we were big customers. So, we were loudly welcomed and announced to the town. When we showed up at the branches the next morning, the managers had a pretty good laugh at our expense. Everyone knew we were coming. The cash counts were perfect (they usually were). The point is that if you are going to surprise examine books and accounting records, it must be a surprise, or there is no purpose. It does not always have to involve the outside auditors. Good internal auditors, controllers, CFOs, and the like are continually “auditing” the numbers they get from the business departments in their companies. They always have a skeptical approach, they investigate different areas and departments, and they begin their work unannounced. In my CFO role for my clients, I examine different sets of numbers “unannounced” periodically. One month it might be a review of the inventory systems, another the receivable collection efforts, another the purchasing departments. Most clients have very good internal accounting systems and each com....
Posted by: Randal Suttles in Articles I have many years experience in the health insurance industry. Now that we have Obamacare, I thought I should share what I recommend to my clients: GET OUT OF THE HEALTH INSURANCE BUSINESS! The new health insurance reform bill mandates that employers offer coverage to all employees beginning in 3 years, if they employ more than 50 employees. That’s a straw man. Most employers over 50 employees already offer health insurance. Health insurance reforms passed in 1996 mandated that insurers guarantee issuance coverage to any employee of groups with less than 50 employees, no matter the employee’s or dependent’s health conditions. That is what has caused the massive increase in premiums for small employers. It is technically called a “death spiral” by the actuaries. But, the practical impact is that 15 years ago, group health insurance cost 30% less than individual health insurance. Today, small group health insurance costs 30% to 50% more than individual policies, for the same coverage, because the insurance carriers must cover prior medical conditions. Obamacare mandates that individuals purchase health insurance beginning in 2014. The same death spiral will occur in individual policies. But, between now and then, individual coverage will remain substantially cheaper than group. Example: I have one client that is planning to drop its health insurance coverage for their 13 employees and provide an agent to assist the employees in buying individual policies from any insurance company they choose. My client will contribute $100 per month for single employees, and $300 per month for employees with family coverage. The employees will need to pay the rest. In this case, and not atypical, the employee contribution for individual coverage will be lower than their current 30% share of their group premium. And my client will save between $40,000 and $50,000 per year on their cost of the insurance. The employees will turn in their health insurance premium invoice, and my client will reimburse up to $300 per month. The reimbursements are tax exempt to the employee, just like the group coverage, and they are deductible by my client, just like the group coverage. The only caveat is that the employee does not have the option of taking cash, they must show an insurance bill. By the way, reimbursements done in this fashion are FICA exempt as well, just like group health. The one problem is employees or dependents with medical conditions might not qualify for individual health insurance coverage, since pre existing conditions will still be excluded, at least until Obamacare takes full effect. Most states already have high risk pools for the purpose of providing coverage to those who do not qualify in the private mark....
Posted by: Randal Suttles in Articles Many years ago, when I was CFO of a mid size but fast growing insurance company, we broke the payment system. It didn’t really break, it just quit. We were growing so fast that the number of payments needed to move through the system could not be physically input and spit out with a check, just because the hardware and software were no longer sized right. The processors would just lock up. It was horrible. Solution: we visited an insurer that was processing volumes higher than ours who had purchased a standard industry software package, and then customized it. They were very pleased with it. The package cost $50,000. That was a lot back then for this kind of software. The problem was it had taken the company over 18 months to customize and install. But, once done, they were very pleased. It did all of the unique and company specific tasks on the payables, the checks, and the accounting that they wanted. But, I didn’t have 18 months. I had none. We could not get checks processed, right now, let alone 18 months from now. We bought the package in November and told the vendor we wanted it live by January 1. The vendor said that was impossible and would not warranty it. No matter. We bought it. We were out of time and out of alternatives. We installed it ourselves, with a lot of help from our in house data processing folks. I put in two rules: we will use the software package from the vendor with standard settings and standard forms, standard input and output. No customizing until after we were operational. Second rule: no changes in the input forms or interfaces from any company department requesting payments and no change in output formats (accounting coding, output reports, timing, etc). This new accounting software would be a black box to the user departments. They would send in what they always did, and the accounting department would send back the same data it always did. All of the burden to make the software work would be borne by the accounting staff. I told them once it was operational, we would customize it all anybody wanted. We were operational January 1. Six weeks. Unheard of. One thing happened that I thought might, but was not counting on. I thought that once the staff began using the software with standard settings, when it came time to customize, they might not want to. I was right. Once they learned the standard package, they were content. Posted by: Randal Suttles in Articles
Physical inventory taking can be expensive, time consuming, and if not done right, unpleasant. See above. For mid market companies like my clients ($2 million to $20 million in revenue) it often seems like a waste. Even if the banks don’t require it, you should routinely take physical inventories and compare with the accounting records. First, it is a good check on the plant or store personnel. If never checked, people tend to get sloppy, if not fall in to outright theft. If they know you will check, behaviors change. Second, it is critical to find out if the accounting system, which tracks quantity and price, is accurate. Much of the time it is not, and it is the accounting system that is in error. One of my clients bought several hundred thousand dollars worth of precious metal that was used in its manufacturing process. Three weeks later they took a physical inventory. We compared the result with the newly designed accounting system (I had designed it). We were off more than $30,000 (10% of the entire inventory we had purchased), in less than a three week period, during what was generally a low volume cycle. Either my accounting system was horrible, we did not acquire as much metal as we thought, somebody stole, or the counts were poorly done. The owner personally did a recount and reweigh of the metal. Indeed, the physical inventory was not counted right. Good news for my client because there weren’t $30,000 in losses, real good news for me because the accounting system worked, bad news for the guys in the plant. Third, when you take physical inventories, it credentials your management and stewardship. That’s critical to the bank. One of my clients and I personally conducted a physical inventory on January 1, New Years Day, in below zero weather. We counted hogs and newborn pigs outdoors and in their crates. The livestock secured the farm loan.Read more... Posted by: Randal Suttles in Articles Since it is tax preparation time for most of my clients, I thought a little tax story might lighten things up. True Story: Some years ago one of my clients was undergoing a routine IRS exam. There were issues involving LIFO inventory, manufacturing costs, allowable deductions and the like. Routine stuff. Now picture a long narrow conference room, with a large picture window running the length of the room. You have seen these hundreds of time. I am at one end of the table. The IRS agent is at the other end. There were four of my staff accountants, two on each side of the table, between me and the IRS man. Papers and folders strewn all over the table. My client’s controller walks by the conference room, looks in, sees me standing up, pointing at some papers and yelling, literally yelling across the room, at the IRS agent. My client, looking in and hearing clear loud yelling, seeing me gesturing at papers and pointing at the IRS man, was panicked. My client interrupted, fear on his face, and pulled me out of the room. He was very, very worried. Why was I yelling at the IRS agent? I told him not to worry. We had just settled the last issue, with no changes to the tax returns. He could not understand. How could yelling at the IRS agent get us a no-change exam result? I would not advise yelling at the IRS man. Cool, calm interchanges are best. But not this time. We received a no-change exam result because we had done the accounting and filed the tax returns properly. The yelling? The agent had asked me to speak as loudly as I could. You see, he had hearing trouble in both ears. He wore dual hearing aids and had a device to amplify sound in addition to the aids. He was a very capable agent, just could not hear well. Needless to say, my client was relieved.
FOR IMMEDIATE RELEASE MEDIA CONTACT Ania Kubicki ANGLES Public Relations 480-656-8388 E: b2bcfo@anglespr.com ADVICE FROM B2B CFO FEATURED IN WALL STREET JOURNAL’S COMPLETE SMALL BUSINESS GUIDEBOOK B2B CFO, the only CFO services firm featured in the book, quoted in Chapter 9 “Handling Your Company’s Finances” Phoenix, Ariz. (BUSINESS WIRE) DATE—The Wall Street Journal’s Complete Small Business Guidebook, published on Dec. 29th 2009 by Random House is quickly climbing the charts of most popular reads. B2B CFO, the nation’s largest CFO firm that exclusively services the needs of small and mid-size businesses, was featured along with other leading national resources in the 258-page book. Author Colleen DeBaise, who currently serves as small business editor at The Wall Street Journal, turned to B2B CFO for insight on cash flow strategy for her chapter on “Handling Your Company’s Finances.” In this chapter, DeBaise discussed cash flow projections and operational finances and included a sample chart frequently used by B2B CFO Partners that outlines how to prepare and what to do to survive budget deficits. DeBaise pulled from key experts in the nation to bring together best practices when starting a small business. “From writing business plans to creating exit strategies, we pulled advice from key experts to bring our readers a comprehensive resource,” said DeB....
Posted by: Randal Suttles in Articles It wasn’t mine either. “This is not my first rodeo” is a quote from one of my clients. It is a quote worth remembering. Here is the context: My client is a 50+ year old manufacturer of metal components. They supply components for large turbines, locomotives, and diesel engines. You get the picture. They are highly influenced by the economy. As the economy tanked in late 2008 and well in to 2009, their volumes collapsed. The good news about that was that my client, having been through every recession since the ‘60s, is very financially conservative. They carried virtually no debt. So, for us the problem to solve was cash flow deficits as far as the eye could see. But we were not being pressed by lenders. We began taking all of the routine steps. We scaled back the factory hours to 4 days, with 8 hours scheduled work each day. We laid off plant employees. We cut office hours. We laid off staff. We reduced expenses: supplies, computer equipment, travel, advertising, insurance costs. You name it, we tried to reduce it. We went from a monthly cash flow deficit in the mid 5 figures, to essentially cash flow break even. And here is when we got the quote: We were in an executive meeting, in a rather self congratulatory mood, discussing our successes. The owner, who was sitting back calmly listening and nodding in agreement, took his feet off his desk, leaned forward and said: “Very good, but this is not my first rodeo. We are not done reducing the expenses. I want bottom line profitability.” Everyone had become somewhat satisfied with the efforts we had made in getting back to cash flow break even. And of course that is critical. But the owner had been through these economic cycles before. It was not his first rodeo.
My first audit, fresh out of Notre Dame, was Steak n Shake. At that time Steak n Shake was a 120 store restaurant chain in the Midwest. This was 33 years ago, just for context. I was selected by the senior auditor on the job to assist her with the audit. She chose me and one other (he is now CFO of a very profitable publicly held software communications company) to go with her from Indianapolis to the corporate accounting offices in Bloomington, Illinois. Why me? My father was a CPA and had me keeping books for a couple of his clients at age 11. Back then, that meant manual sales journals, manual cash disbursements journals, and manual ledgers. No excel worksheets. No computers. Mostly an adding machine. I could, and still can, run a 10 key adding machine better than anyone, with either left or right hand. And that’s why she chose me to work on the audit. Let me set the scene for a moment, and I will get to my point. Steak n Shake had 120 stores. All of the accounting was manual, as it was for all companies back then. IBM had not yet invented the PC, and Bill Gates was still in grade school. The Steak n Shake corporate accounting office consisted of 30 ladies, yes, all ladies, and one controller. The controller had his own office. The bookkeepers all worked in one large room, upstairs, above the warehouse and supply kitchen for the Illinois restaurants. No cubicles. Rows and rows of desks. Just a metal desk, an adding machine, and one lady for every 4 stores. 30 bookkeepers all seated in rows, 2 desks wide, 15 rows deep. For each store, she kept a sales journal, a cash receipts and disbursements journal, a fixed asset register and a general ledger. And there was lots of accounting paper, the stuff with the columns and the little squares where you hand wrote the numbers. You have seen old pictures of company offices, just like this. Rows of clerks and bookkeepers, with an adding machine (or a comptometer), hand writing letters or hand posting the books, thick black ledgers and journals. Usually a lamp on the desk, sometimes a black rotary dial phone. My job was to use my 10 key adding machine skills to add and re-add all of the worksheets that the ladies prepared every month, that they gav....
Posted by: Randal Suttles in Articles Lenders have a number of ratios and formulas they use to evaluate credit applications, to set ongoing debt covenants, and to review renewals. I find two of them are most critical. They are intertwined, and if you can meet them, the rest of the covenants and ratios tend to take care of themselves. First ratio: Debt to Earnings. More specifically this formula would be total debt divided by earnings before interest taxes, depreciation and amortization (EBITDA). There are refinements to it. For example, if the company routinely carries high cash balances, they can be used to offset the debt in the formula. But, that’s not usually an adjustment made for small and mid size companies, because cash balances are usually pretty thin. Most mid market companies are either subchapter S or LLC companies under the tax code. So, the company does not pay taxes. But, the bankers will want some acknowledgment of the distributions necessary to the owners to pay their personal share of the taxes. And, the earnings number in the denominator needs to be reduced for capital expenses (CAPX). An easy assumption is that depreciation will equal CAPX, so no adjustment for either in the formula. But, if CAPX is much different than historical depreciation, it needs to be recognized. Posted by: Randal Suttles in Articles How do you fix accounts that don’t balance? Where do you begin with a checking account that hasn’t been reconciled accurately in years, literally? What do you do with a system spitting out rejected checks from customer authorized direct payments and the staff can’t keep up? How do you deal with an inventory costing system that shows an inventory shortage every time you take a physical inventory? Fix it backwards. Example with the checking account: Reconcile the bank, best you can today. Don’t try to re-audit the prior transactions. Start now and work backwards. Balance per the bank today, plus deposits in transit that we know about today, minus outstanding checks that we are confident about (meaning we know they have not cleared and they are less than 90 days old). What is the calculated balance that the books should show? What do they show? What is the difference? Do the same task next day. Find out what cleared that we had no idea was still outstanding. Find what checks or automatic bank draws occurred today that we did not know about. Post today’s transactions. When the difference between the reconciled balance and the book balance is the same number for 5 straight days, you are done. Book the adjustment. What you did was work current data, current transactions, current bank activity only. Any old stuff is irrelevant. But, doing it this way, if old stuff shows up (like old outstanding checks you didn’t know about) now you can catch them. My favorite: the company I served as CFO was drawing pre-authorized bank drafts from customer accounts every month to pay their monthly bill. The data system was rejecting hundreds of the drafts every day, because the bank would not accept them. And the number was growing. We literally had a room full of rejected bank drafts. We had two staff people available to fix this. And we had hundreds of unhappy customers. How to fix? Backwards. We had already lost any goodwill with the prior customers. And we could not keep up with the ever growing number of rejected drafts. Why not? We would draw the payment, but if the customer had changed banks, or the amount of the pay....
Posted by: Randal Suttles in Articles Character, Collateral, Capacity, Conditions, Cash Flow I recently had a discussion with a commercial loan officer about the 5 Cs of Credit. Some of them are obvious, all are important. Character refers to the integrity of the borrower. For mid size companies ($2 million to $20 million in revenue) it means the operational and credit history of the company. But most important, it refers to the reputation and integrity of the company owner(s). The owner’s credit history is important, his or her credibility is critical. Collateral is easy. What will be the secondary source of repayment, if the cash flow does not pan out? What is the liquidity and excess value of any collateral that the lender could look to, before having to pursue collecting on any personal guarantees? Collateral is the asset the banker or investor refers to when saying: “Don’t tell me about the return on my money, tell me about the return of my money.” Capacity generally refers to the excess net worth of the company and the owner beyond any current debt balances. The lender will consider business net worth, and personal net worth. How highly leveraged is the borrower already? Can this loan be successfully repaid under agreed original terms, considering current leverage and debt repayment obligations? Conditions means general market and industry economic circumstances. Is the economy in recession or expanding? What about the particular niche in which the company operates? I also use this “C” to remind clients that there will be borrowing conditions: debt covenants, fixed charge coverage ratios, limits on future borrowings, etc. Conditions in the economy and particular industry are very important, but don’t forget the conditions that will be placed on the borrower. Constraints would be a good reminder as a 6th C of credit. Cash Flow. This is most important. All other Cs notwithstanding, the lender wants to know how the cash flow will repay the loan. And how reliable are the cash flow projections? Will the loan still cash flow if the projected increased sales, or reduced costs, or investment returns don’t turn out to be as strong as projected? How aggressive are the assumptions driving the cash flow model? Lenders want the loan to pay back with conservative assumptions.<....
Posted by: Randal Suttles in Articles This is a true story. Several years ago the audit firm finished the exam of a mid size food wholesaler and issued a clean audit opinion. There was one comment in the internal control letter to the owners: the same employee receives cash payments, prepares and posts billings and accounts receivable, and sends out past due notices. She had been doing it for years. The owners ignored the comment, concluding separating those duties would be too costly in additional payroll expense. Besides, they trusted her. The auditors contacted the company about 10 months later to schedule the interim field work for the next year’s exam. The compromised employee left. Subsequent police investigation concluded she probably left the country. Forensic audit work by a different audit firm, which was hired by the insurance company at risk on the errors, omissions and theft insurance policy, showed that she had begun taking cash and underposting the sales receipts within a couple of weeks from the conclusion of the prior year audit. The forensic audit ended once $50,000 in losses were proven, although informed estimates placed the loss likely in the hundreds of thousands of dollars. The company was extraordinarily profitable, so the owners never missed the money. It only showed up when the audit firm asked to schedule the next exam. That’s when the employee disappeared. Subsequently, the company hired an additional bookkeeper to separate the transaction and posting duties. Eventually, upon the long standing recommendation of the original audit firm, the company hired a full time controller. The point is not to be so profitable that you don’t miss the dollars stolen. The point is that following some simple accounting control rules is critical. Separate duties. Have checks and balances. Have someone supervising and reviewing the activity. That can be a full time controller, or a part time CFO. But there must be oversight. Even small companies, where the owner is hands on, need to at least address the internal control issue. Unless the owner is truly processing all of the transactions, doing all of the postings and financial statement preparation, personally reconciling the accounts and signing the checks, separation of duties is critical. If there is just one other person involved, besides the sole owner (that includes partners, married couples, long time friends, and family) prudence requires that proper internal accounting con....
Posted by: Randal Suttles in Articles The controller, who is only 3 months in to the position, tells me that for the past two years there weren't really any financial statements and now the owners want the numbers accurate, and right away. Nearly impossible to get done, right away. What to do? I told the controller to set aside history for right now. I suggested she put together two forecasts: One showing where the business and its cash are headed under the current volume and cost structure, and a second forecast under a structure that at least starts from cash flow break even. I told the controller to set aside worries today about the delinquent vendor payables, the property taxes now coming due, and the bank lines that may not be renewed. None of those can be fixed until the business is cash flow break even to start, and then cash flow positive going forward. The controller believed the bank would provide additional funds to tide them over, as they had for the past two years. I thought not. The forecast of the current circumstance is easy: project from current revenues, subtract the current expenses and minimum vendor and bank payments and the result is the net cash deficit. Calculate a time to exhaustion of the remaining cash resources and show the owners how much they will have to contribute to the capital and when. Their pain threshold will be sorely tested. Then show the results after the tough decisions. What decisions? What amount of payroll dollars must be cut, and who? Which ongoing monthly costs must be eliminated? Travel, meals, advertising, excess space and rents, equipment, repairs... Review every line of expense and lay out what it takes in cost cutting to get to cash break even. From there forecast forward the cash flow and match to the delinquent vendor payables, back taxes, bank loans, etc. You cannot fix delinquent accounts, past due bills, late installment loans, line of credit advances, past due mortgages, etc. until you triage the cash flow. Once you stop the bleeding, only then do you have a chance to make the patient well. I repeat: the critical step is to detail what it will take to triage the patient and get to cash flow break even. That is what the owners need to hear and understand from their financial experts. Only then is there any future. Posted by: Randal Suttles in Articles What is ONE JND? Is that some kind of military code? A GPS coordinate? A password? A typo? None of the above. ONE stands for ONE, as in the number 1. JND stands for "JUST NOTICEABLY DIFFERENT". As in the saying: "I need at least one thing that is just noticeably different." One of the most successful entrepenuers (in the B2B CFO® firm we call you "finders") that I worked with over the last 25 years used to say, in reference to products and marketing, that to be successful, you need at least one feature, one benefit, one trait that is just noticeably different. More JNDs are better. But one JND is required. He marketed health insurance. What was the JND? "We pay 90% of our claims in 5 days or less, 98% in 10 days or less." Worked pretty well, sold millions in premiums, the customers all knew what was unique. It became the claims time payment standard in the industry. I have a current client whose JND is his web site. His competitors have no such presence. He markets and installs stone kitchen tops, stone floors, stone bathrooms, granite counters. All of the marketing is done via the web. The site is clean, simple, emaculate, powerful. It shows pictures of new kitchens. He has video of how the stone is cut and installed. People do a search for stone or granite and where they live, and they end up on my client's site. As soon as my wife saw the site, she pointed at the monitor and said: "I want one of those [kitchens]". ONE JND. But the JND idea does not just apply to products and marketing. I prepared a loan syndication package for a major refinancing. It included all of the standard information about products, markets, competition, management, historic financials, etc. and of course, projections. Other than providing data unique to the company and our particular financing, it was pretty standard fare. But, we had ONE JND: the projections included a forecast with two down years - lower projected revenues and profits. The senior officer with the lead bank told me, after they had approved the transaction and funded us, that what he remembered in particular, and what they appreciated, was that our loan application package was different. Nobody projects a down year! ONE JND. ONE JND is the minimum. More is better. Our firm B2B CFO® has lots of JNDs. One in particular stands out to clients. We have no contracts. When a partner begins work with a client, it is done on a handshake. No contract. We lay out the amount of time we expect to spend, and the initial and ongoing tasks to be done, plus a guideline of the expected cost and time commitment (two days per month, or 1 day per week, or ½ day per month). But no contract, no financial strait jacket for the client. That is just not done in the consulting industry, nor by other firms in our particular niche as CFOs. It is just not done. Clients notice our willingness to commit without a contract. They appreciate it and understand the vote of confidence we have in what we do. ONE JND. Posted by: Randal Suttles in Articles A senior lending officer at a large commercial bank said to me some years ago that when he reviewed loan application packages, he wanted the answer to three questions: 1 - What is my primary source of repayment? 2 - What is my collateral or other security? 3 - What is my third source of repayment? By primary source of repayment he meant the cash flows to cover the borrowed money. That could be profits from new equipment purchased with the borrowed funds, higher volumes for which a credit line would finance accounts receivable and inventory, additional sales and margins from new or expanded plant capacity, current profit levels, and the like. The cash flow projections were most important here. The second question as to collateral is easy to answer. The collateral or other security is the asset financed, like the inventory, receivables, equipment, land and buildings, maybe sinking fund payments, and so forth. And the banks use some simple rules of thumb that my clients can easily incorporate in our loan applications. Rules like: borrowings will be limited to 80% of the current accounts receivable, 50% of the inventory, debt coverage and fixed charge ratios higher than 4 to one, and so on. But, it is the third question that is most important. Even after showing good primary repayment and solid collateral, which were simply minimum requirements to fund any borrowing, the issue became what is the added source of protection? If the primary source of repayment does not work, meaning that the cash flow projections are not met; if the collateral proves inadequate: if real estate declines in value, if inventory is damaged or won't sell, if receivables are slow being collected; what is the added source of protection for the bank? That third source of repayment, in privately owned mid-market companies (like my clients: $2 million to $50 million in revenue) can be overcollateralization, liens granted on other assets, and the like. But, as a practical matter, what it really means is the bank wants the personal guarantee and assets of the owner as that third source of repayment. Over the years the bank had done a number of studies on its mid-market clients, and had learned that the single most important statistic, as to whether the business loan would be paid back under its original agreed terms, was the personal credit history of the owner. When granting or renewing a credit was a marginal decision, the owner's personal credit was the deciding factor in the bank's decision to make or deny the loan. I repeat: at the margin, assuming the primary source of repayment was credible, and the collateral and covenants met the bank's standards, the credit committee decision was swayed by the personal credit history of the owner. The bank would require the guarantee simply as a matter of policy, but it was the personal credit that caused a favorable or unfavorable decision at the margin, even for very large (multi-million dollar) loans. As my banker friend said long ago (I paraphrase here because it has been a while): "If he has trouble paying his personal bills, he will have trouble with our loan to his company. If his personal financial house is in order and has been over time, we are comfortable that we will be paid back and we are willing to take the risk". Still true today. Sometimes, when I am working on new loan packages or refinancings for clients, the first place we focus is the personal credit, because at the margin, it makes the difference. Posted by: Randal Suttles in Articles As everyone knows, the economy is, and has been, horrible. I thought I would describe how one of my clients has begun to respond. My client is in the commercial and residential heating and cooling business. In our region, I am informed that 8 similar businesses have failed in the last 12 months. By the time I became involved (referred in by the client bank) my client is on COD (cash on delivery) with all of its major suppliers. Although they continue to receive product, the suppliers have required additional weekly funding with each COD delivery. The bank loans are current, but straining the company. Weekly and monthly cash flow was negative. Our first step was to match the monthly and weekly expenses with the available cash flow from the service business and the margin after equipment costs from installations and repairs. Fortunately, most of the expenses are variable and rise and fall with the sales. So, labor, payroll taxes, fuel, installation costs of equipment, and the like, move up or down with volume. The fixed expenses were the hardest to reduce: salaries, office, warehouse, health insurance and in particular monthly installment loan payments, plant mortgage, and the additional vendor payments. Further, there is no supplier credit available. We downsized the fixed expenses to match current, and much reduced volumes, assuming no fast recovery. If it happens, great, but we are planning for the worst. So, we budgeted to cash flow break even. With a little bit of additional owner capital, we are approaching the suppliers. The suppliers would like to continue working with my client. After all, there are only a few still operating in our region, and the suppliers need customers too. So, we are offering some up front cash with two requirements: 1 - the gross supplier balance will be permanently reduced 50% and 2 - the additional weekly and monthly payments, above the COD payments, will be cut by 50%. In the event my client does not make the now reduced additional weekly payments to fully pay off the reduced balance we negotiate, the full balance will be restored. And, important to the suppliers: they are all treated equally, so that none get in front of another. These adjustments free up weekly and monthly cash flow to 10% of sales. That extra cash will be used to reduce bank and installment loan balances. But, once the economy turns (it will) we will have freed up resources by having reduced the payables balances, and we will recover faster. It is not easy, but in this economy, the suppliers are willing to help, my client is taking the drastic but necessary cost reduction steps, and they will survive this economic crisis. The point is to be proactive. Start with the cash available from sales, and match the expenses to that level. Work with the banks and the suppliers, and the business can pull through. Posted by: Randal Suttles in Testimonials Randy Suttles has been a business advisor to me personally and professionally for over 20 years. His financial and general business knowledge combined with his hands-on understanding of practical operations uniquely positions him as a strategic financial and business advisor for mid-market and emerging companies and organizations. Having worked in an accounting and business advisory services firm early in his career and then having served as one of the youngest CFOs in the country of a major financial institution, he cut his teeth early as both an internal and external key financial consultant and in multiple industries. His experience leading a nationally recognized fast-growth start-up company to maturity as President has also added to his comprehensive understanding of a company's lifecycle. At CHORUS®, we have appreciated Randy's counsel and value the impact he has and continues to have on our business. Michael A. Evans President & CEO CHORUS, Inc. Posted by: Randal Suttles in Testimonials Randy Suttles stands out as the best CFO with whom I have worked during the 35 years that I have provided investment banking services to mid-sized companies. I have found Randy to be extremely knowledgeable about financial matters, to have excellent judgment in assessing financial issues, and to be decisive in taking the appropriate course of action. I highly recommend Randy to any company seeking effective financial counsel. Peter W. Mattingly Posted by: Randal Suttles in Testimonials In 1983 Randal E. Suttles joined Golden Rule Financial Corporation and Golden Rule Insurance Company as its Chief Financial Officer. When Randy joined Golden Rule he was new to the insurance industry. Within a very sort period of time he mastered the insurance accounting and tax idiosyncrasies and became a very effective financial executive and member of senior management for Golden Rule leading our financial affairs including accounting, tax, financial reporting, banking, treasury, and rating agencies. Randy also served on the company's investment committee and retirement committee. Randy made a difference for Golden Rule. Jack Whelan Posted by: Randal Suttles in Articles Small Business Finance I & II An extract from Lesson One: To summarize the key points of cash management: 1 - Short-term solvency (liquidity) can only be maintained through a good cash flow tracking system. You can borrow for the short term if a liquidity crisis arises. But to know how much you need, you must keep good records. 2 -Long-term solvency is only possible if net cash flow from operations, excluding borrowings or money invested by the owners, exceeds loan payments. To avoid bankruptcy, the owner must survive in the short term to reach the long term. An extract from Lesson Three: Cash Flow eventually equals income or loss. As I said in Lessons 1 and 2, although profits and losses are not equal to actual cash flow right away, they do eventually generate cash (profit) or require cash (loss). But, from a financial management standpoint, you need to know both. September 14, 2008 note from Randal E Suttles, CPA: I wrote this course for Indiana University more than 25 years ago. I put what I wrote then in bold typeface now. The principles of financial management don't change. Posted by: Randal Suttles in Articles From the Indianapolis Business Journal Starting Your Own Business ...One of the common complaints that I receive from businessmen who are successful is "if I'm making so much money, why don't I have any cash?" September 14, 2008 note from Randal E Suttles, CPA, Partner: "Even after my writing more than 25 years ago, the principles remain the same. To be successful, the company must generate adequate cash."
Always The Worst Possible Outcome - Apr 1, 2011
Colored Folders - Feb 1, 2011
Statement Of Cash Flows - Oct 1, 2010
Get Out Of The Health Insurance Business - Jun 1, 2010
How Do You Fix A Broken Accounting System - May 1, 2010
Physical Inventory - Apr 1, 2010
You Can Yell At The Irs Man - Mar 1, 2010
This Is Not My First Rodeo - Jan 1, 2010
Two Credit Ratios - Nov 2, 2009
Fix It Backwards - Oct 1, 2009
The 5 Cs Of Credit - Sep 1, 2009
50000 Stolen And They Didn't Even Miss It - Aug 1, 2009
Cash Flow Triage - Jul 2, 2009
One Jnd - May 29, 2009
The Banker Will Have 3 Questions - May 4, 2009
Cash Management In Tough Times - Apr 6, 2009
President And CEO Michael A. Evans Chorus Inc. - Nov 7, 2008
Investment Banker Peter Mattingly - Sep 16, 2008
Managing Director
P. W. Mattingly & Co. Inc.
CEO John M Whelan - Sep 16, 2008
President & CEO 1979 - 2004
Golden Rule Insurance
Indiana University School Of Continuing Studies - Sep 14, 2008
Indiana University
Division of Extended Studies 1982
Course by Randal E Suttles, CPA
Indianapolis Business Journal Series - Sep 14, 2008
First in a Six Part Series published August 24, 1981
by: Randal E Suttles, CPA
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