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True North

What do you think of when you hear the term true north?  The technical definition refers to the line up the earth that takes you directly to the North Pole.  A compass on the other hand points you to magnetic north.  So which is correct?  How do you know where you are going?  I would like you to consider another definition of True North, one that applies to how you live your life.  Diving a little deeper, to use this definition to define your leadership.

True North, as it applies to your life, incorporates the values, passions and motivations that are most important to you and help you find satisfaction and fulfillment in your life.  I submit further, that these same values translate into how you can lead authentically.  Brenda Barnes, CEO of Sara Lee says “The most important thing about leadership is your character and the values that guide your life.”  So I ask you, are you guided by an internal compass that represents your true values?  Do you live out these values in every decision you make?

Bill George in his book entitled True North explores this topic in great depth.  Bill tells us all to discover our authentic leadership in order to lead in our passion, but to do so while remaining true to our innermost values.  Every one of us has an arena where we can lead. But it is up to us to discover for ourselves what our authentic leadership is and then to put it to work.

What are the traits of an authentic leader?  According to Bill George there are 5 of them:

·         Pursue purpose with a passion

·         Practice solid values

·         Lead with your heart

·         Establish enduring relationships

·         Demonstrate self discipline

Without a real purpose, leaders are at the mercy of their egos and are vulnerable to the purpose of others.  Do you think the leaders of Enron started out to break the law?  I submit that somewhere along the line they forgot their real purpose.

Values are personal and must be established by each one of us, but one value is necessary for every leader to be successful.  That value is INTEGRITY.  As a leader do you allow integrity to be a part of every decision?  More importantly do your actions follow what you say?  Do they and you, hold up under pressure?

Authentic leaders will lead both with the head as well as the heart.  Do you have passion both for your work, as well as the people you serve?  How about empathy for the people who work for you?  Do you have the courage to make the tough decisions?

All good leaders develop enduring relationships.  Many people today will only follow a leader where can have a personal relationship.  Are you available for your employees?  Your customers?  Your family?

Self Discipline, without it an authentic leader will never produce the results of which they are capable.  Self discipline means among other things, the ability to admit your mistakes and take immediate corrective actions.

So how does one become an effective leader?  Like everything else in this world you start with the hardest person in your life to lead…YOU.  You must take responsibility for your own growth and development.  Begin your journey by devoting yourself to a lifetime of development and learning.  Talent will get you only so far, like every great athlete or musician, they and you, still need to practice and grow every day. 

Many small and mid-sized companies have basic accounting systems. They have a book-keeper, maybe a Controller. They have an accounting system - probably QuickBooks, or possibly a more advanced product. What they usually don’t have  - and what for many is a major weakness - is a coordinated Financial Process.  Jim Collins, entrepreneurial author and guru, says there are plenty of great mousetraps but not very many great processes and that's where entrepreneurs should focus. The better process will enable others to build better mousetraps.

A B2B CFO can help you build such a process for financial excellence.  Here are the ten key steps to taking financial control of your company.

• Key Metrics - Select some key performance indicators and report daily, weekly and monthly
• Cash Flow Forecast - A weekly forecast of cash will create a strong control discipline and enable you to look forward at least a month.
•  Timely Financial Statements - Accurate and timely financial statements are essential for managing results
•  Financial Analysis - Carry out a monthly comparative review of financial and other indicators
•  Commentary - Prepare a monthly operations overview with suggestion for improvement and strategic development
•  Monthly Ops Meeting - Chair a monthly meeting on the financial performance, impact on strategy and implications for change
•  Financial Planning - Develop budgets, plans and rolling forecast to manage desired activities
•  Cash Management - Build relationships with banks and investors to ensure company cash flow plan materializes Financial Control - Implement process and procedures to deter fraud, improve efficiency and maintain confidence in results
• Financial Systems - Implement and tune best current systems and staff to improve and maintain information flow

To get started on Financial Excellence, call David Kirkup, Partner at B2B CFO on 404 348 0326 or dkirkup@b2bcfo.com.

(This was originally a presentation I gave to a group of company owners. It was an offer they could not refuse.  This article was first published in 2008 and is back because I'm a believer in re-cycling.)

My wife and I were watching the Sopranos final season on CD and I started thinking about why we like the show. Of course there's the underlying dark comedic theme, and the realistic inside dealings of the family, as well as many New Jersey scenes familiar to me from my time there. My wife, who is in the psychology profession, pays professional attention when Tony Soprano visits his therapist. But as I watched the final episode I also realized that one thing that frustrates me about Tony.... His organization suffers from a lack of financial discipline, effective controls, crisp procedures and timely financials. He really needs a part-time CFO!

In Season Six - the final episode, the New York mob is making an aggressive takeover bid for the New Jersey family - which involves the forcible and permanent retirement of Tony Soprano, his consiliare - Silvio Dante, and heir apparent - Bobbie Baccala. As the senior executive team makes a break for the off-site location, it becomes increasingly clear that the financial side of the organization is terribly weak. Consider:

• Shortly before being shot by NY wiseguys, Sil is seen stuffing the Bada Bing payroll into his bag. So.. who will be making sure the staff get paid? And how does Tony ensure that this enterprise continues, and that he does not lose key staff. Are there effective procedures to cope with this kind of risk?
• While Tony's main W2 occupation is as a "waste management consultant", the family enterprise is a mostly cash business. Revenue in the form of thick envelopes arrives regularly, but I don't believe they are using QuickBooks or another reputable financial system.
• When earners deliver the monthly revenue, envelopes are described as "heavier or lighter than usual", but no serious effort at budgeting and variance tracking is evident.
• The family's business interests are widespread with many divisions, products and revenue streams. Competent analysis of profit margins is essential to maintain focus on the most profitable earners.  Often considerable resources can be wasted on losing ventures such as the declining "security and protection" business.
• There is little evidence of tax planning, and retirement investment mostly seems to consist of football spreads and the ponys. While Tony may disdain tax returns, it's a fact that the IRS has put more mob members away than the FBI.
• As a mob boss, Tony's role is that of a Finder . He guides and develops the business. But because of the lack of a strong supporting CFO he constantly finds himself immersed in detail, and has to act as a Minder. Inevitably this leads to longer hours, more stress and less time with the (real) family.

By any measure, Tony is a born leader. He has confidence and charisma, brains and empathy, inspires loyalty and reverence, and his power is rarely questioned. Tony's not afraid of confrontation... "I got some news you're not gonna like." And in the end, like most Business Owners, he's also something of a philosopher:

"All due respect, you got no idea what it's like to be Number One. Every decision you make affects every facet of every other thing. It's too much to deal with almost. And in the end you're completely alone with it all. "

So I thought it would be interesting to talk about what Tony Soprano, like any business owner with revenue up to about $50 million, should look for in a part-time CFO .

Your CFO should be a:

Technician: A professional accounting designation (ACMA, CPA or MBA),  and/ or many years of experience is the foundation. Your CFO has to have the accounting, process and tax knowledge needed to steer a company's finances. The ability to match wits with the government can also be helpful.

Financier: A good CFO not only runs the process for fundraising, but should also bring financing into the company. He will have a track record of originating and closing deals and should have a list of potential financing sources that are eager to take a call. As the Soprano enterprise grows it will become increasingly important to fund growth with legitimate backing.

Closer: Your CFO can be a key member of your sales team, available to help negotiate and close sales. The CFO can be actively involved in managing and optimizing your sales pipeline and should be capable of being deeply engaged in sales. This might involve convincing larger customers that you are indeed a serious and viable business.

Operator: The CFO should take a leading role in bringing operational quality into your company. This doesn't mean bringing in ISO 14001 or whatever the latest flavor is. That means installing just the right amount of process, reporting and structure. Not so much that it slows you down, but enough so that you smoothly run and grow the machine.

Lawyer: It will be a long time before you have in-house counsel and you don't want to go to your outside law firm every time you get an NDA to sign, or sign up another customer for the protection business. So, choose a CFO who's comfortable reviewing legal documents.

IT: No, you don't want your CFO troubleshooting Windows Outlook on your desktop, but you do want someone who's savvy enough in information technology to take the lead in driving your information systems.

Cheapskate: This isn't usually a problem with CFOs but you want someone who can stretch your dollars by knowing where to cut expenses without harming your business.

Consiliere: Your CFO should be a trusted advisor. As Tony Soprano found - running a company can be lonely. Your CFO can be a key, objective source of advice and counsel as you make the big and the small decisions.

As you probably noticed, only one of these points (the 1st one) actually deals with accounting. Despite their accounting beginnings, the best CFOs go far beyond this foundation. They are capable of adding value to every aspect of the business. Judge yours accordingly and make sure you have a high impact B2B CFO.

Contact David Kirkup, Partner with B2B CFO on 404 348 0326 or dkirkup@b2bcfo.com.

Why should you budget?  Because “it’s something we do every year,”or is it a “big stick we use to cane those who don’t perform.”  Is this really the intended purpose of budgeting? How about “we budget in order to achieve our strategic goals”?

Budgeting is part of a larger process called “performance management.”  Performance management is a logical approach to the way organizations direct and manage resources to achieve objectives. Thus, budgeting’s central role is to allocate resources to the activities that drive value.  Organizations must therefore concentrate on two questions: 

• How can we beat last year’s performance?
• What is our competition doing, and how can we beat them?

The answers to these key questions typically appear in a strategic or operational plan, against which budgets can be set and monitored for effectiveness. But if that plan is vague or incomplete, the resulting budget will not help the organization implement its strategy.

Most organizations have plans. There is, however, a huge difference between a good plan and a bad plan. A bad plan, for example, is one that focuses only on costs and revenues. This plan provides no guidance for the organization regarding how it is to achieve the revenue targets. There is no linkage between the high level goals and the day-to-day activities necessary to achieve them.

Performance management is all about managing the activities that generate results. Those activities should directly support the organization’s strategic objectives. Therefore, a good plan acts as a road map, showing the organization how it should move from its current level of performance to the desired level of performance, based on the perceived economic environment.

According to Answerthink, a management consultant firm there are eight planning best practices of high-performance organizations:

1. Good plans answer directional questions. Some are, “Where are we going?,” “How are we going to get there?,” and “What happens if things do not turn out as planned?” High-performing organizations do not assume that Plan A will always work. Instead, they prepare alternatives in case they are needed.
2. Good plans typically address three activities. They are (1) how will we maintain current operations, (2) how will we improve the efficiency of current operations, and (3) which new ventures or initiatives the organization will we implement. In this way, any change in performance can be assessed in terms of the type of activity.
3. Good plans— and organizations—are focused. High-performing organizations do not plan in detail. More detail does not equal more accuracy. More detail does, however, negatively affect the time available for good analysis.
4. Good plans include all aspects of the business. In addition to detailing how goals will be achieved, good plans also describe how the organization can continue to be effective for the future.  Thus many of the measures within a plan will not be financial. Employee knowledge, customer relationships, and the culture of innovation may create the bulk of value for any organization.
5. Good plans link strategies to activities. Activities are linked because the achievement of an objective is the result of doing the right things well. Activities as well as their impact on achieving strategic goals are monitored. By understanding these relationships, organizations begin to understand—and can build on—the true drivers of success.
6. Good plans are measurable. Objectives and strategies have measures of success, while activities have measures of implementation. In this way, the completeness of an activity can be correlated with the success of an objective.
7. Good plans include assignments for accountability. In high-performing organizations, specific people are made responsible for individual activities. They are empowered, rewarded, and have control of the resources to ensure the delivery of the activity.
8. Good plans include the recording and monitoring of assumptions. High-performing organizations monitor a range of business assumptions that are tied to the targets set for corporate objectives. If the organization discovers that their business assumptions are incorrect, they reconsider the associated plan targets and adapt accordingly.
   
   

Doing budgets well is not for the faint of heart, but failing to budget is almost a guarantee of business failure.

David Kirkup, Partner, B2B CFO - 404 348 0326 - dkirkup@b2bcfo.com

When working with new clients and/or prospects that sell or carry inventory, I always ask the owner(s) how quickly their inventory turns.  Without hesitation, most reply 6 to 8 times per year.  Then I ask them how they calculated or arrived at that number.  The universal answer is "I just know".  Maybe correct or more likely, probably not.  I believe most of them are simply calculating their annual sales and simply dividing by their average inventory.  For example, if they sell $6 million a year and their inventory balance is $1 million, they will say their inventory turns 6 times a year.  Okay, that would be correct if inventory was carried at sales price, but inventory is carried at cost on the balance sheet, which assuming a 50% gross profit margin in this example, inventory would only be turning 3 times per year.  (Please see actual formula for calculating Days Sales in Inventory below).  Therefore, instead of having 60 days worth of sales in inventory on hand (360 days/6), they actually have 120 days worth of inventory on hand.  No wonder most small to medium size companies are strapped for cash.   I believe most of them don't realize the tremendous cash flow repercussions of having too much inventory on hand.

Granted, most of us have been taught from day one in our accounting and finance classes that inventory is an asset.  After all, it is classified on the balance sheet as a current asset, unless of course it doesn't turn within a traditional annual business cycle, which then would require it to be classified as long term. In accouting humor, we refer to long-term inventory as FISH (First-In, Still-Here).

Let me challenge the status quo and current way of thinking and suggest that we start viewing inventory like a liability. Why? Well, were all too familiar now with terms like "Toxic Assets", "Troubled Assets", "Impaired Assets" and inventory often falls into this category.  Why, because inventory can become obsolete, it can lose its value and it is highly susceptible to shrinkage (i.e. theft).  Doesn't it seem odd to hear terms like Toxic Assets, boy that's an oxymoron if I ever heard one, right on par with "Jumbo Shrimp".   Inventory can become a Toxic Asset or Troubled Asset very quickly. There is nothing worse for your working capital position than having a large asset go bad.  Inventory can be downright toxic if it isn't planned and managed properly.  Ever wonder why banks hesitate to lend against inventory.  They simply don't think they can recover enough cash value in the case of liquidation.

Days Sales in Inventory Formula = {Inventory/Cost of Goods Sold} x 365 

I think the underlying moral of this story is, don't fall in love with your inventory and think that you have a great asset on your books.  Remember this sage piece of advice when managing cash and working capital "it isn't what you sell, rather it's what you buy, particularly how much and how often".

As a B2B CFO®, I am experienced and skilled in helping companies analyze their optimum inventory and working capital components in order to maximize cash flow.  If you are concerned with your current ratio, quick ratio, inventory turns and/or lack of cash flow, take a look at your inventory levels.  Better yet, contact me and I can assist you in your analysis.

At B2B CFO® we genuinely care about our client's success and we want each and every one of our clients to realize their dreams.

Cash. We Help You Get It.

The more uncomfortable process, but the one that yields the most value, is to single out the times where things did not go your way.  Did you have a difficult time with a presentation?  Did a meeting not go your way?  Did a customer or your boss chew you out?  Did you lose a valued customer?  The cause does not matter; the cure does. 

Think seriously about what you did to cause this result.  As I said earlier, it is uncomfortable to look in the mirror when you are not on your game.  Understanding why this happened increases your success rate going forward.  Did you underestimate the task at hand?  Did you not prepare adequately?  Did you hesitate when you should have stepped up?  Analyzing each situation as to what happened and how you could have turned that into a success is the first step to make sure history repeats itself less.  I say that because you are never going to be perfect, but turning a mistake into a success will set you apart as the person people want to do business with.

Once you have identified what you need to work on and avoid, keep a list handy.  Prepare for each day by reminding yourself of what you need to work on, as well as what you do well, until it is second nature, and celebrate your successes in 2010.

As a business begins its fiscal/calendar year of operations, there is always a sense of renewal.  Whether the previous year was a success or not, there is always excitement about starting out a new operating year with new goals and a belief that the next year will be better than the last.  Many of us set resolutions at the beginning of each year.  In business, the resolutions should be incorporated into the business plan.  If your company has a business, strategic, marketing and/or financial plan, the odds of achieving success are better than not having one.

In my October 2009 newsletter, I wrote an article entitled “Do You Have a Vision for Your Company?”  Regardless of how you plan your business, it starts with your vision.  Included in your business vision are the company’s mission statement and values.   That article can be viewed at http://www.b2bcfo.com/partners/kcattoor/.

In the companies that I’ve worked with over my 30+ year career, I’ve seen different companies use different terminology for business planning.  Those described in Wikipedia are-

·        Business plan- a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals. 

·        Marketing plan- a business plan having changes in perception and branding as its primary goals is called a marketing plan. 

·        Strategic plan-  is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. Various business analysis techniques can be used in strategic planning, including SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats).

·        Management by Objectives (MBO)- is a process of agreeing upon objectives within an organization so that management and employees agree to the objectives and understand what they are in the organization.

A well run business should incorporate all of the above into their long and short term planning.   I’ve always combined the above plans into one document.  They are all important, but I believe that the most important approach is Management by Objective (MOB).  This approach engages your management team and your employees to achieve common goals.  If goals are achieved, the business is likely to succeed.

When your plan is established, it should be revisited on quarterly basis.  Inherent in the planning process is a detailed financial plan with statements of projected income, cash flow and often times balance sheet projections.  Each of these statements should be supported by detailed assumptions and financial analyses supporting your projections.  These projections should be updated monthly and any needed adjustments to the plan and projections should be made.  

I’ve been fortunate to work with some quality organizations in my career.  CBS, Inc. and the Pohlad Companies- Minnesota Twins to name two.  Business planning was integral to running our businesses successfully.  Once your plan is set, it becomes a living and breathing document. 

I met recently with my financial advisor. We were talking about how so many businesses begin the planning process but do not have the discipline to stay with it.  He stated that in advising clients you sometimes feel like a personal trainer who has a client at the first of the year who wants to lose 20 pounds.  But after 30 days, they no longer show up at the fitness facility.  And so they don’t lose 20 pounds.           

So set your plan and stick to it!  Work your plan and your chances of having a successful 2010 are great!

In 1998 a company web site was considered slightly cutting edge and cool.  But, not important enough to hire a professional, especially when Uncle Billy's high school son Dexter could build one for you.  Almost imperceptibly, web sites went from "nice to have" to compulsory over the next few years.

You may have heard much talk about social marketing: Linked In, Twitter, Facebook, Blogs etc, and decided it's nice to have.  Today I read an interesting article that makes the case that we're back to the future again.

In the Four Cs of Social Media , Sean Nelson of Sonar Media develops the case for paying attention to the development of this new type of communication.  I have followed Sean's growth from Insurance Broker to national Social Media guru, and now pay close attention to his blog.  The Four Cs are:

Communities
Traditional advertising and marketing is about interrupting. Social media is about sharing and interacting. You have to have someone listening in order for interactions to happen.

The interesting thing is that people want to interact. The following statistics make that clear.

• 78% of social media users interact with companies or brands via new media sites and tools, an increase of 32% from 2008.
• 95% of new media users also believe companies or brands should have a social media presence
• 89% believe that they should interact with their consumers using social media

Its important that you build communities on Facebook, LinkedIn, and Twitter that are made up of your prospects and clients.

Content
Content is King. Its been that way since cavemen began writing on walls. Since then only the means of delivery has changed.

One of the mistakes I see is companies jump into using social media and immediately begin communicating sales messages. A sales message here and there is likely fine but when its all you do…Houston we have a problem.

Regardless of what you sell someone out there is looking for information about it. They want to be informed, educated, and even entertained. If they like your content they will like you. If you share good content consistently over time they will likely begin to trust you.

Social media provides great vehicles to share video, photo’s, written, and audio content.

Conversations
The difference between traditional advertising and marketing and social media is the difference between talking at someone and talking with them. If you’ve built the right communities and are sharing the right content conversations should naturally happen.

There are different levels of conversations. A comment on a blog post, a retweet, a comment on your LinkedIn or Facebook status are all forms of conversations. Tou just need to be sure you are tracking these responses and reply back.

Even something that seems as trivial as a “Thumbs Up” on a Facebook wall post is a positive. The important thing is you put out a message or content and someone chose to respond.

These conversations and those among others will have an impact. These two statistics support this.

• 51% of respondents saying that social media has influenced their online transactions.
• 78% of consumers trust peer recommendations

Conversion
The final piece of the puzzle is for the preceding steps to lead to conversion. If you’ve taken the time to develop a strategy than all of the pieces should work together to lead to this point.

One of the mistakes that I see is that companies indiscriminately send people to their home page. While that may help you build site traffic it may not necessarily help you with conversion.

If you’re communicating about a product or service why not funnel any responses into a Landing page. Seth Godin has been talking about landing pages since 1991 and lists five actions that the page can generate:

• Get a visitor to click (to go to another page, on your site or someone else’s)
• Get a visitor to buy
• Get a visitor to give permission for you to follow up (by email, phone, etc.). This includes registration of course.
• Get a visitor to tell a friend
• (and the more subtle) Get a visitor to learn something, which could even include posting a comment or giving you some sort of feedback

Your home page can generate these five same actions but its not designed to focus on one of these five actions specifically. Sending them here is like sending them to a neighborhood rather than a specific location.

Wrap Up
The 4 C’s are important if you want social media to work for you. There are different ways to build communities on Facebook, LinkedIn, and Twitter. There are different ways to communicate messages on each. The conversations are even different.

Focus on applying the first three to each of the networks and begin to see the Fourth C happening a little (maybe a lot more) frequently.

David Kirkup

404 348 0326

dkirkup@b2bcfo.com

ARE YOU MANAGING YOUR CASH OR IS IT MANAGING YOU?

By Johnny Gates

I recently saw a survey concerning the degree to which business owners are managing their cash flow. The results might be surprising to many in that only 20% of business owners felt they were in control of their cash flow. This means that over 80% of owners manage their business without having the necessary control over cash. Unfortunately the lack of financial control of your business can lead to devastating consequences. Compare this situation to driving down the road at night and your headlights go out. You can’t see any cars or obstructions on the road. The only hope is that you reach your destination before you are involved in a serious accident.

Anyone running a business needs a clear vision of how their business decisions affect the finances of the company to achieve the success they desire. “Cash is King” and every business owner should have a clear understanding of the financial implications of their business decisions to increase the chances of success. If you don’t take control of your cash, it will most certainly take control of you.

As a business owner you probably wear many hats: Administration, HR, Marketing/Sales, Finance, Operations and anything else necessary to ensure the success of the business. I have seen this situation many times in working with small to mid-size businesses. At some point the work that needs to be done is put off; the accounting and finance segment is usually the area that receives little attention. Over time an owner will notice he is not sure about the financial condition of the company or where the cash is going. Have you ever asked yourself the question “I am making a profit but I don’t know where the cash if going?” To find an answer to this question you spend more and more time dealing with cash flow issues rather than driving the business and increasing sales.

So what is the solution to this problem? Let’s take a look at a few areas that can help improve your control over cash.

Accounts Receivable – You need sales to replenish cash for future expenditures, but sales are not sales until they are collected. Do you have customers who are continually late in paying their invoices? If so, you have become a banker for your customer. In today’s economy, companies cannot afford to allow customers to stretch credit terms. Have new customers fill out a credit application. Information obtained in this process will alert you to possible bad pay habits and potential bad debts. Ask for credit references and check them out. Make sure your customers understand your credit terms and have them stated clearly on your invoice. Call the customers within one week of the due date of the invoice to see where it is in the customer’s payment process. A monthly statement can help with customers who have delinquent invoices, but frequent follow-up phone calls will achieve greater success for payment.

Managing from your Bank Balance – Sometimes when I ask owners if they know their cash balance they tell me certainly and state they check the balance online at the bank daily. This is an activity that will ultimately result in failure, mistakes and frustration. Remember, you reconcile your bank account and don’t manage from it. You must obtain your cash balance from your accounting system and not the bank. Your bank will not show checks that have been written and not cleared the bank nor will they show receipts that are deposits in transit to the bank. When a check is written, it is deducted from your cash balance on the books (computer or manual)….this transaction has not cleared the bank. Reconcile your accounting system with the bank account monthly to ensure that all transactions have been properly recorded in the accounting system and bank. If you follow the process as outlined, you will avoid serious and expensive mistakes.

 Limitation of Financial Statements – Monthly financial statements are very important to a business as they provide a historical view of what has transpired in the company and gives the business owner a better perspective of what has contributed to a profit or loss. In fact financial statements are a must for any company. Banks and investors require you to provide them and you cannot succeed without them. However, accounting rules for creating financial statements focus on measuring profit and loss….not cash flow. The financial statements may show a loss, but have a positive cash flow and the opposite is true for a profit. As an example, certain expenses that require amortization and depreciation to be written-off are non-cash expenditures that can be added back to the net income or loss to determine cash flow.

The solution to this problem is to prepare a schedule of your actual and forecasted revenues and expenses with the beginning and ending cash balances. A schedule of this type can be prepared on a spreadsheet with columns next to each other for a comparison of revenues and expenses each month. Preparing a schedule on this basis will give you a clear picture of where your money is going.

Cash Flow Forecast – If you run your business without cash flow projections, you are flirting with disaster. Establishing cash flow projections does not have to be difficult; it is simply using a few basic principles with your intuition and knowledge of the business. Here are a few pointers you should use to create a cash flow projection that will give you the confidence to avoid problems.

• Start with at least six months of actual expenses and revenues. What has happened in the past is likely to happen in the future.
• Are there any significant changes happening now that are different from the past? If so, be sure to include them in your projection.
• Be conservative in projecting your revenues and expenses. Actual results will always vary from projections. Always be conservative here to avoid dramatic unexpected results. Never project revenues that you cannot be fairly certain will occur as this will create a false sense of security. If you can be 90% certain that cash balances will come in at or better than forecasted, the forecast is conservative.
• Once you are finished with your forecast, review it again checking cash balances. Are they in line with the actual cash balances over the last six months? If you can answer “yes” to this question then you can feel comfortable with the forecast. Following this step will allow you to uncover any unusual or unexpected results in the numbers.
• If you have never prepared a six-month forecast, start with a 13-week forecast until you feel comfortable that the numbers are starting to make sense.

 Understanding your cash flow will give you peace of mind and help you start to take control of the financial side of your business. B2B CFO is experienced in working with business owners to assist in developing cash forecasts that will lay the groundwork to avoid those unexpected demands on cash. If your company does not have a CFO, isn’t now the time to hire one? B2B CFO believes that every company should have a CFO, but most cannot afford one full time. We can work with you on an as needed basis to help you meet your goals and spend more time with customers.

In mid 2009, Elaine Pofeldt, a reporter for Crain's Small Business Magazine, contacted me regarding an article she was developing about small business owners who try to sell or close their businesses. The article entitled "Preserving Your Reputation for Your Next Venture" was published on Friday, January 8, 2010. Elaine differentiates closing a business from other forms of exit such as filing for bankruptcy protection.

For the small business owner, it is imperative that prior to closing they get their "house in order." When they begin another venture, as many small business owners do; they're reputation is paramount and if tarnished from prior ventures, they'll have problems with future business opportunities.

Please take a moment to read the article by clicking here