cash

The Challenges of Dealing with the Cash Flow Statement

The Challenges of Dealing with the Cash Flow Statement

It’s interesting how over the years, companies make adjustments to the rules that always seem to work in their favor.  Generally, the reporting transactions are accurate and legal, but may paint a different picture of the financial health of the company.  As a lender or trusted advisor, it’s important to understand the shortcomings of the reporting system. This understanding is key to maintaining awareness of important issues that impact how cash flows through a company.  Let’s look at a few problems within the three main sections of the cash flow statement.  Cash generated from:
1) Operating
2) Investing
3) Financing activities

Even in a Cash Business, Cash Can Be Tight

Even in a Cash Business, Cash Can Be Tight

It’s amazing how cash can slip through the fingers of even the most frugal small business owner. It just happens without you realizing it. It’s not like anyone walks out the front door of their house and says, “I’m going to spend all the cash in my business, so I have to struggle to make payroll.” For some business owners, this is never the case, but for others it is an ongoing struggle.

The process starts by making sure you have enough money to make rent and cover most of your fixed expenses. Then your vendors want paid for the last order before they will deliver the next. You have unexpected repairs happen the same month as you initiated an advertising campaign. Then a snowstorm hits the area and traffic through your store comes to a grinding halt. It happens just that fast in some businesses.

Like video games? Your small business is more like one than you think.

Like video games?  Your small business is more like one than you think.

I grew up being among the first generation of video game players.  To be honest, I still dabble with them when I’m bored.  The evolution of the games has been amazing to see.  But what I have not enjoyed is the evolution of the controllers.  What started as a knob that I could rotate to move a cursor up and down the screen (Pong), has become an assembly of buttons, triggers, and joysticks (PS4) that I rarely know how to operate correctly.  It’s overwhelming to try and figure out the thousands of combinations you have to instantly create to be successful in playing a video game today. 

Goodwill – No; not the thrift store. The pot of gold.

Goodwill – No; not the thrift store. The pot of gold.

Are you hoping to turn your small business into your retirement?  Then you should know how to build goodwill!  Goodwill is the amount of money someone will pay you for your business, over and above the value of the assets.  It’s a big imaginary number that represents how well you run your business, and how safe a purchaser thinks your business is to buy.

Run it like you’re selling it. Get the most out of your small business.

Run it like you’re selling it. Get the most out of your small business.

Have you ever placed a car you own up for sale?  What is the first thing you do?  You clean it up.  You fix the things that need it.  You get the french fries out from between the seats.  You get the car ready to present to someone else with the hope that it will attract top dollar.  It’s natural for us to do this.  We are trying to get the most out of our car.

A curious thing happens right after you clean up your old vehicle.  Especially, if you are still driving it daily.  You get behind the wheel.  You like the way it rides better, smells better, looks better, etc.  You even start to think, “This is a pretty nice car.”  All of the issues that made you ready to sell have suddenly disappeared.  What a bonus!  You get the benefit of riding in a “pretty nice car” throughout the entire period that it sits on the market.  In the end, you get an offer that makes you happy.  In the meantime, you received the benefit of a car that was providing the operator with great value.

Do OVER! You can call one for your small business anytime

Do OVER! You can call one for your small business anytime

It’s New Year’s Eve and I often take time to reflect on the previous year.  I call it an After Action Review, from my time in the Army.  It gives me a chance to look at what went right, what went wrong, and what I could do differently.  The do differently part is always the most exciting, mainly because I get a “do over”.

It’s interesting to watch children at play and see something that obviously doesn’t go their way, or causes disruption in the cadence of their game.  They defer to the most simple of concepts and call a “do over” to remedy the situation.  The “do over” is probably the single most overlooked solution by adults running a small business.  If things aren’t going your way, just call a “do over”.