Advisor insights from the field

Archive for January, 2011

Cash Flow Management Help for Entrepreneurs

Monday, January 31st, 2011 by Troy Schrock

We recently got a nice plug from The Shoestring MBA regarding our recently launched online course about cash flow management, entitled “Cash Rules for Entrepreneurs.”  With permission from author Bill McGuinness, we adapted some of his material from his book Cash Rules, added some practical tips and tools from our experience as ActionCFO advisors, and put together an online tool that we think will be very useful to business owners and CEOs of small and midsize companies. 

You can access this tool at www.cashrulesforentrepreneurs.com.  For a very reasonable fee, you get lifetime access to an audiovisual presentation, podcast, booklet, and helpful review sheets.  If you’ve been looking for a crash course (or just a quick review) of fundamental financial management concepts for your business, I think you will find great value in this tool.

Please be free with your feedback on it.  As we hear back from people, we can continue to improve the tool in the future.

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Choosing Smart Numbers (Part 1)

Tuesday, January 18th, 2011 by Troy Schrock

The first metric type in the list from the last post was leading indicators.  Since these metrics provide advance alerts for decision makers, we commonly refer to them as “smart numbers.”  Smart numbers should be viewed on daily – or at least weekly – basis.  Some organizations even monitor smart numbers on an hourly basis.

To help you in choosing smart numbers, here are a few general types I have seen in my work as an advisor:

  1. Revenue forecast.  For some businesses, this is based on factors like time of week/month/year, traffic volume, general economic attitude, etc.  For others, it is a view of the revenue
    pipeline – a cumulative view of upcoming work.  For example, it may be the dollar value of bids won and bids sold for a given period.
  2. Effectiveness of delivering on value proposition. Every business has a value proposition.  You should have a smart number that measures your effectiveness in delivering on that promise to the market.  For example, if your business has a guarantee or return policy, track how many times you have to honor that guarantee, which can be converted to the dollar value of damages
    related to missing on your promise.
  3. Cash position or availability.  Availability factors in cash-in-hand as well as cash available from a line of credit.  This may also take also take the form of modified working capital availability (total cash and receivables less payables).
  4. Measure of your base economic unit of value.  Every business has a base economic unit of value such as a billable hour or unit produced.  How many units have you produced and how many do you project to produce over a given time period?