Tag Archives: business management

Cash flow

Common Issues That May Affect The Cash Flow Of The Business

Do you know where your cash is? Common issues that may affect the cash flow of the business.


Have you ever asked yourself the question, “I am making a profit, but I don’t know where the cash is?” Many business owners tend to manage their business strictly from the income statement.

An income statement is very important to a business as it provides a historical view of what transpired in the company over a period of time and gives the business owner, banks and other investors a better perspective of what contributed to the net profit or loss reported. However, the income statement does not necessarily translate into an increase or decrease in cash.

Understanding how the income statement results will impact the cash flow of the company is equally important, yet often ignored.

Anyone running a business needs a clear vision of how his/her business decisions affect the finances of the company to achieve the desired success desire. Cash is king. Every business owner should have a clear understanding of the financial implications of his/her business decisions to increase the chance of success.  If you don’t take control of your cash, it will most certainly take control of you.

Here are some common issues that may affect the cash flow of the business:

1. Invoices issued upon the shipment of product or the delivery of services are delayed because the supporting information has not been processed in the accounting system on a timely basis.

2. Past due receivables are increasing because customers are experiencing cash flow issues themselves.

3. Customers are paying their invoices short because of product quality issues or invoicing errors.

4. Inventory is increasing faster than sales because of over-purchasing inventory components in comparison to current production needs.

5. Staffing is increased to meet short-term demand without any confidence that the demand will continue to support the additional cost.

Monitoring these issues is not a difficult thing to do. A simple report incorporating income statement and balance sheet information every month will focus management in the right areas and help to improve the cash flow of your business. This report should identify the customers who management must contact to resolve quality and past-due collection issues. It should also identify excessive inventory issues and other cost drivers that may impact the financial results of the business.

Next, management must become disciplined to obtain its cash balance from the accounting system and not the bank. Your bank statements will not show checks that have been written and not presented to the bank for payment, nor will they show receipts that have not been deposited at the bank. These unreported bank transactions should represent the difference between the bank balance and the cash balance reported in the accounting system. Relying on your accounting system cash balance, which is periodically reconciled to the bank balance, will allow you to avoid serious and expensive mistakes.

Finally, management must establish a process to create cash flow forecasts to understand where the cash will be during the next 13 to 26 weeks. Establishing cash flow projections is simply using a few basic principles with your intuition and knowledge of the business.  Adjust for any significant changes you expect to happen that are different from the past, and never project revenues that you cannot be fairly certain will occur as this will create a false sense of security.

Finally, review the projected cash balance weekly to determine any unexpected shortfalls.  Further analysis will identify priorities that management must focus on to resolve the issue identified in the forecast and avoid real problems in the future.

Understanding your cash flow will give you peace of mind and help you start to take control of the financial side of your business. In addition, it will provide the management team with a course of action to grow the business profitably while knowing where the cash is.

For more information about understanding your cash flow, visit b2bcfo.com.

Business Management

Leadership Vs. Management: What’s The Difference?

Leadership and management, management and leadership; some individuals see these terms as interchangeable synonyms. However, there are several important differences.

First, let’s differentiate between a manager and a leader. Managers are to exercise executive, administrative and supervisory direction of a team, group or organization. A leader, on the other hand, is future-focused and works to influence or guide a group of individuals to achieve a common goal through inspiration rather than task completion.

So what are the key differences, and what skills and traits are necessary to succeed as a manager and as a leader? A manager generally receives his/her authority based on his/her role. A leader’s authority is innate in his/her approach. A common expression also tells us that leadership is doing the right thing, while management is doing things right.

Jerry L. Mills, founder of B2B CFO, says that every organization has three types of employees: finders, minders and grinders.

The Finder: The entrepreneur, the visionary, the leader, the idea generator and the catalyst for future change — finders work in the future.

The Minder: The administrative, accounting and operational staff of the company — minders are historians; they work in the past.

The Grinder: The people who do the physical work of the company, grinders may be construction workers out in the field or telemarketers at a desk. Grinders work for today and are not concerned about the future or the past.

When organizations work in tandem allowing each employee to both know and execute his/her role, things run smoothly.

As a business owner, at times I’ve made the mistake of trying to be everything to everyone. I have learned to recognize in others and within myself the traits most important to posses in order to maintain a clear vision. I have also learned what traits I need as a manager to help our business succeed. These traits are cross disciplinary and can be applied whether you work in plumbing, finance or the arts.

Business Leaders Skills

Lead by example 

Pitch in wherever needed. A leader cannot be afraid to get his/her hands dirty. When your employees are in the trenches, you’re in the trenches.

Passion 

Your leader must believe in what he/she is doing as well as the work the company, organization or team is engaged in. This is not an instance where faking it until you make it will work.

Organization 

Without clear organization, your company will be chasing its own tail and wasting valuable time.

Delegate 

The leader cannot do or be everything to everyone. Successful delegation includes giving ownership of the work their assigned.

Communicate Effectively 

Employees, or grinders, need to know their work is important. Be precise, specific and concise.

Business Management Skills

Great customer service skills 

No matter the business, no matter the location, no matter the service, a manager cannot succeed without being service-minded.

Self-motivation and dependability 

Managers must be capable of doing their job without being micromanaged. They must be committed to putting their all into the job every day. Managers need to be capable of making even the most challenging of circumstances a success.

Integrity and trustworthiness 

By hiring someone that you can trust, you’ll reduce your own stress levels. The business owner will be able to place his/her focus on growing the business.

Be a team player 

Managers must be committed to their team. A manager is the liaison who has to be able to work well and communicate with both employees and executives.

Conflict resolution abilities 

Serving as liaison allows the manager to be in the know from both ends. They need to be able to see conflicts as they arise and nip them in the bud before they turn devastating.