It is important to conserve cash resources in no matter what type of an economy you are operating in. Being able to have a Professional Chief Financial Officer to call upon on an as needed basis is a valuable and cost effective tool. Cash Flow Forecasting is one of many CFO Services that a Part time CFO can perform. Business owners need to know in advance if cash flow problems are on the horizon. It does no good to the business owner to find out today that he has a cash flow problem right now because there is simply no time to fix the problem. Business owners need to have time to address issues (especially cash flow issues) before they happen in order to be able to review all options and make the best decisions. In addition, as it relates to cash flow problems the business owner needs time to find funding sources. Click on the link below to listen to all of the CFO Services a Part time CFO can provide on an as needed and cost effective basis.

 

 


Feeds for CFO-Chief Financial Officer [Information on the Value of an outsourced Chief Financial Officer ]

1.
Knowing What Your Product Or Service Costs - Author: admin Posted: Tue Jul 27,... http://ow.ly/18kQ9p


2.
Controlling Your Health Care Costs - Author: Tina Wright Posted: Wed Jul 21, 2... http://ow.ly/18eGP6


3. Bookkeepers and the CFO Work Great Together
I had a prospective client/business owner recently who was ready to hire me. He said before he hired me he had to ask his bookkeeper their opinion. The bookkeeper had not met me and did not know me and although I thought it was a strange way to operate I said that was fine. When I followed up with the prospect he said that the bookkeeper thought that a Part time CFO was not needed and based on that, the business owner said he was not going to hire me.

I was surprised by this. I felt bad for the business owner on how he would let the bookkeeper make such a decision. I told this prospective client and business owner that in my experience there were only two reasons why a bookkeeper would say no to CFO services without knowing or meeting the CFO:

1. The Bookkeeper is acting very inappropriately in the day to day responsibilities of their job (possibly stealing) or;

2. The Bookkeeper is afraid to have their numbers scrutinized in fear that inadequacies in the bookkeeping will be exposed.

The point is that bookkeepers and CFO's work famously well together. They compliment each other. The Part Time CFO goes into the engagement happy when they know a bookkeeper is on staff preparing the numbers and the CFO and bookkeeper work together to make sure the numbers are right so the best business decisions can be made for the client. The Bookkeeper and CFO are a powerful combination in terms of helping the business generate accurate financial numbers. That is why when a bookkeeper repels a CFO who they do not even know or never met, that should raise the eyebrow of the business owner.


4.
EPISODE24 - Options For Troubled Businesses - Cyber CFO Sho - Author: admin Po... http://ow.ly/188Ccb


5.
Business Owner Trap - Author: admin Posted: Sun Jul 11, 2010 12:50 pm ... http://ow.ly/185O7Y


6.
Benefits of a Part Time CFO - 15 minute Presentation - Author: admin Posted: W... http://ow.ly/182EKG


7. The CFO Must Find The Softest Landing Possible
One of the biggest challenges I have as a Part Time CFO is working with distressed companies. These are companies that are very insolvent and have had a recent history of significant operating losses or were companies that were always on the edge and then developed more significant problems during the current economic downturn. These are usually companies whose business owners never admitted there was a problem until it was too late. These are usually companies who did not prepare business or cash flow forecasts or a strategic plan or exit plan. These are usually companies who are reactive versus proactive. Since in business it is 80% ingenuity and guts and 20% luck, these could be companies that were simply not lucky.

When working in these situations you look for the softest landing possible. 95% of the time the softest landing possible is viewed by the business owner as a nightmare. This is understandable because the softest landing possible usually isn’t selling the business for millions of dollars which is the dream of most business owners. Most of the time the softest landing possible crushes the hopes and the dreams of the business owner and it is not an easy position for the CFO.

The personal liability situation of the business is an important consideration when seeking the softest landing possible. Usually the rule of thumb is the more personal liability exposure the harder the landing. This is usually the case because the more personal liability exposure the business owner has the less the impact the corporation has to protect the business owner.

I am going to write about 3 possible options when a business is insolvent that may provide the softest landing. I am going to explain each one only briefly because I am not an attorney and I urge everyone contemplating these options to consult an attorney.

1. Bankruptcy – I think we are all familiar with this one. This may have to be combined with personal bankruptcy of the business owner due to excessive personal liability incurred in the business. Another consideration with this route is also the cost. It can be expensive especially the business bankruptcy. Sometimes a bankruptcy filing can be used as leverage with creditors and also at times with hostile partners. You have two forms of business bankruptcy which are Chapter 7 which is a complete liquidation and closure and Chapter 11 which is a reorganization. With a Chapter 11 or reorganization one of the most important factors is will the trade supply you? This is when the business owner has to rely on whatever relationship equity they have built with the trade. Chapter 11 is only viable if there is some type of debtor in possession financing available or if operations can be funded by only paying current expenses and a very small piece of old debt.

2. Private Foreclosure Sale – This is when there is a bank or other senior creditor in first position to be able to take all of the assets under a security agreement with a filed UCC. An acceptable offer is made to the senior creditor by an outside investor usually for less than what is owed the senior lender but probably for more than the senior lender would get if they liquidated the company. Only the assets of the company are simultaneously seized and sold to the investor in a private foreclosure sale. The liabilities are left in the old company. A deal is made by the outside investor with the current business owner for either equity in the new company or a job/consulting position or both depending on the business owners desires. Available cash before the foreclosure sale is used to pay down or negotiate with personal liability creditors. Another consideration with the Private Foreclosure sale is how the trade will react. On one hand the trade loses what ever the company owed them, but on the other hand they could perceive new management and new majority ownership and a new day to do business with someone who will pay.

3. Strategic buyer – This is when you can find a buyer who is in the substantially the same business. A strategic buyer will be in a better position to work fast and also will pay the most while seeing an opportunity to expand their business. The strategic buyer buys all or selected assets and none or selected liabilities. The purchase price and earn out (there is likely to be an earn out as we are talking about a depressed business with an uncertain future) needs to exceed personal liabilities and any secured creditors with perfected security interests (filed UCC’s). The seller needs to be prepared to offer settlements to creditors giving priority to creditors with personal guarantees. This is not easy to do but can be a way out. In this option the trade knows the strategic buyer and although the trade knows they have probably lost the receivable they have a stronger company to do business with who they are familiar with.

Once again, these are all complex strategies and every situation is different. Experienced lawyers must be obtained to see if any of these options is right for you. I have personal experience with all of these scenarios and it is important to review each option carefully to flag the risks and opportunities. These are 3 possible options to provide the softest landing possible for an insolvent company. The challenge here for the CFO is to explore all of the options available to the company knowing that each option likely presents unpleasant downsides for the business owner and you must identify the option that presents the least unpleasant downsides. Keep in mind that it is also likely that the worst thing you can do is nothing. Therefore it is important that the Chief Financial Officer stays focused on continuously influencing the implementation of the softest landing possible.


8.
Answers To Commonly Asked Questions - Author: admin Posted: Sun Jun 27, 2010 3... http://ow.ly/17UnAn


9.
Why You Need a Part Time CFO - in 15 seconds - Author: admin Posted: Tue Jun 2... http://ow.ly/17RxF1


10.
C-Suite Belief Systems May be Causing Mediocrity - Author: admin Posted: Sun J... http://ow.ly/17JRtA


11. The Value In Business and Cash Flow Forecasting
As a Part Time CFO I have the following questions:

Does the small business owner see the value in business forecasting?

Does the small business owner see how the business forecast helps you to become proactive versus reactive?

Does the small business owner see how the business forecast allows you to take a look into the business’s future using multiple what if scenarios allowing the small business owner to understand what is going to happen and arming the business owner with multiple strategies ready to implement depending on which scenario becomes reality?

Does the business owner see how commonly asked questions like:

Should I add or cut a product line?
Should I add or cut a location?
Should I add or cut an employee?
Should I Lease or Buy Equipment?
Should I add a truck or van?
Will I need more cash in 6 months?

can all be answered through business forecasting?

Does the small business owner see how you can solve today’s problems with business forecasting?

I don’t think they do!!

Sorry for the rant, but I just do not understand why the value of business forecasting is underestimated by the small business owner. Fortune 500 companies and large businesses are always forecasting and they see tremendous value in it. To the Fortune 500 Company everything is about what is going to happen next and how can we strategize for what might happen next. Everything is about being proactive because if you are reactive the quality of decisions go way down and the value of your stock and the value of the company go down and people get eliminated! To many small business owner’s who have viable businesses the lack of business and cash flow forecasting will reduce the quality of their decisions and the value of their companies and they will be eliminated. Do you think these Fortune 500 companies would spend the huge amounts of time on forecasting if it was not important, if it did not add tremendous value, if it did not work? It is not valuable only to the Fortune 500 Company because they are big. It is valuable to the Fortune 500 Company because it is an effective way to operate a business!

Many small business owners will say “Gee I wish I saw that cash flow problem coming”. The point is, it would be very likely to identify a cash flow problem in advance with the right business forecasting tools. In addition, you will be able to avoid other problems like for example, inventory problems, because for each level of sales you plug into a forecasting model you will get an optimum inventory and receipt plan. If sales start to slip or increase, you will be able to adjust to a new and different receipt and inventory plan. It is widely known and accepted that the quality of decisions are much better if they are made proactively versus re-actively. Is there such an urgency to simply survive one more day in your business and block all possibilities for planning and for being proactive? Even if you wanted to do that and just survive another day there are part time CFO’s and business consultants out there who can do the forecasting and planning for you in order to give you the immediate and long term picture you need. I know, this sounds very self serving because I do business forecasting, but as a small business owner who has owned retail, manufacturing and service companies all of my life I constantly relied on business forecasting and strategic planning to run my businesses and it was valuable.

The proper business forecast is a solid predictor of the future not because the forecast or person doing the forecast is some kind of soothsayer or gypsy lady that has ESP, but because one can enter multiple “what if” scenarios covering as many different likely possibilities as one would like. With each scenario a strategic plan can be developed. As any one of these scenarios start to unfold, the business owner can work the strategic plan devised for that unfolding scenario.

One of those scenarios that you want to look at could include something like “what would the financial picture look like if you cut or added an employee, cut or added a location, cut or added a truck, cut or added a product line, leased or bought equipment and what will the impact on cash flow be for anyone of those scenarios.”

And guess what, I have a solution for those small business owners out there who are only worried about the problems of the day and wants to be in reactionary fire drill mode all of the time. For those of you only worried about the problems of today, a business forecast can help identify how to solve those problems that are happening right now! The proper business forecast that prepares monthly projected income statements, balance sheet and cash flows encompass everything that is happening in the business and therefore can solve any problem and/or answer any questions. This includes identifying the best course of action and the softest landing for troubled businesses as well.

A client was having a cash flow problem and there were a number of factors on the surface that were causing the problem: They were:

1. Too much debt
2. Owners Salary too high
3. Selling prices too low

However while doing the forecast for a scenario where sales were flat to the previous year, the forecasted inventory receipt plan that correlated with those flat sales was much less than what happened the previous year. This forecast showed that inventory turns could improve by 1.5 times and this efficiency in inventory receipt and turns would increase free cash flow by $40,000 per year. This improvement would have never been made if the forecast was not done. Furthermore, finding this kink in the armor took pressure off the owner to have to reduce their salary and it took pressure off the business to have to increase prices too much in a competitive environment.

By the way I want to repeat something. The proper business forecast will have projected monthly income statements, monthly balance sheets and monthly cash flows all tying into each other. If your forecast does not have cash flows, then throw it out with the bathwater. It is no good!

Attention Small business owners. See the value in being proactive versus reactive. See the value in answering questions you ask yourself every day, see the value on putting together a strategic plan based on what the forecasts tell you, and for those of you who are just trying to survive one more day, see the value in solving today’s problems today through business and cash flow forecasting.


12.
Labor Burden - Author: admin Posted: Sat May 15, 2010 10:49 am http://ow.ly/17o2Su


13. Calculating Overhead
There are 3 components of cost. These 3 components of cost are material, labor and overhead. As a Part Time CFO, I see a lot of business owners eliminating overhead from their cost calculations. This can lead to operating losses and cash flow problems. Usually the reason the business owners misses overhead is they do not understand how to calculate overhead nor do they know how to incorporate overhead in their analysis.

The easiest way to calculate overhead is as a percentage of sales. Take all of the projected overhead expenses for the period you want to analyze. The period can be a month, quarter or year and divide these projected expenses by the amount of projected sales. As you go forward if sales are lower or higher than projections by 10% or more you should recalculate the overhead rate based on the new projected sales. The same recalculation needs to be done if your projected expenses are off higher or lower by 10% or more. This percentage needs to be applied to the sales dollars associated with each sales transaction or quote. You can also simply take last year’s actual results for overhead and sales and perform the same calculation on actual results instead of projected results. I like to use projected results. Other than sales there are other ways to calculate overhead using labor dollars or labor hours, but I like to use sales.

There are many schools of thought regarding the calculation of overhead and incorporating overhead in cost calculations. Some do not like accounting for overhead in their cost calculations because they say no matter how much the sales price exceeds material and labor, the overhead will begin to be paid and that is their only objective. I say a couple of things about that. First, sales better be high enough otherwise if you employ this school of thought you will guarantee yourself you will not be profitable. Even if sales exceed material, labor and variable overhead by just a few dollars you will eventually pay for all of the fixed overhead but the sales must be high enough and that is a huge risk. Second, an argument can certainly be made that a sale that at least covers some overhead is better than no sale at all, however are you sure there is no other sale out there that you are not making that covers more of your overhead or all of your overhead or do you justify giving your product and service away just to make a sale knowing it is covering some overhead?

Note I added the term Variable Overhead above. Sometimes there are expenses that a business owner calls overhead, which can be considered overhead but are actually expenses that are variable to sales. Expenses such as credit card fees or gas where a service performed is going to require going to a specific location need to be identified as variable. Variable overhead should be incorporated as part of the expense component deducted from the selling price to determine profit before fixed overhead.

My view on overhead is that the business owner needs to know what the overhead component of their product or service is so that they know what their true bottom line is on each and every transaction/quote. Unless your expense and/or revenue projections are way off, knowing the true bottom line on every transaction will give you the piece of mind that all costs are accounted for and that the bottom line on the transaction/quote is credible. At the end of the day the business owner can use their own discretion as to whether a sale that does not entirely cover fixed overhead is worth making. If it were me I must be extremely confident that there is no other sale to make that will give me a better return before I would accept a sale that only partially covered fixed overhead. For example let’s say you know with reasonable certainty that your business is in a state of low demand maybe due to seasonality or economic conditions. If I am convinced there is no other sale out there that is going to give me a better return or if I think the customer is worthwhile to keep because the customer will give me long term potential at higher profit margins then I would make the justification that I am at least covering some fixed overhead. Otherwise make sure your selling price covers all three components of cost which once again are Material, Labor and Overhead.

Calculating Overhead is one of many important CFO Services.


14.
Posted by Zackary Gleiberman, in response to Any advice on - Author: admin Po... http://ow.ly/17nxgy


15.
5 KEYS TO BUSINESS SUCCESS - Author: admin Posted: Sun May 09, 2010 7:30 pm ... http://ow.ly/17kvtK


16.
Posted by Richard Gabel, in response to Which New Business - Author: admin Po... http://ow.ly/17i6D2


17.
CFO's first make sure the client understands - Author: admin Posted: Fri Apr ... http://ow.ly/17ekvF


18. Exuberance
One of my clients is having a real good year. I know that is unusual for the current economic environment but this particular client makes very unique and effective sales presentations which has lead to his success.

My client recently (within the last two weeks) added some new employees in order to keep up with the demand and he asked me if he should buy a new truck. He said he thought it would make one of his new crews more productive.

I said “hold it” as I immediately went back to my business experience and how when I had a peak in demand and was doing really well how I went overboard with capital expenditures, how I added locations and how I added product lines as I thought the great demand was never going to end. This was a big mistake. I said to my client “Exuberance” as I thought of my own exuberance. I went on to tell my client that we have not even tested our new employees to see if they are going to make the cut as permanent employees and we are thinking about buying trucks to make them more efficient. My client went on to say that he could take one of the new guys and let him go solo on the truck to do some lower end jobs. I told my client that we should do nothing and review this in another two months. In two months we will see if we still have the same sales backlog, we will see if the new employees are working out, we will also have a better idea how as a business we handled this excessive amount of sales activity from a quality standpoint and we will know if it is profitable to do these smaller jobs. We will also have a better idea to see if there is time to market the smaller jobs for the truck strategy my client talked about. I told my client that business owners (me included) have a tendency to really over spend when times are good. They almost do it because they have the cash available to do it and things are going so well so they think they need to capitalize on this success without thinking that these great times are not going to last forever and the overspending still has to be paid for. As I told my client this he began to understand and he thanked me for putting the breaks on the idea. I told him you must be equally as disciplined in managing upturns as in managing downturns and you must never think you can afford something just because the cash is currently available. You must constantly look to conserve cash unless a real return on the investment can be forecasted with accuracy and all of the other areas of the business are stable and tested as cash is the lifeblood of your business.

This exchange between my client and I is just one more example of how it is a great advantage for a business owner to have an entrepreneurial chief financial officer. The entrepreneurial CFO can reflect back on the many real life business experiences and apply those experiences for the benefit of their clients.


19.
Successful Real Estate Business is REAL! - Author: HAMZA1234 Posted: Mon Apr ... http://ow.ly/17ceFE


20.
3 Secrets to Overcoming Your Fear of Self-Promotion - Author: admin Posted: M... http://ow.ly/17bu7q


21.
Michael Barbarita Interview on WBNW 1120 AM on CFO Services - Author: admin P... http://ow.ly/178qNS


22.
Family Business Ownership Succession - Author: admin Posted: Thu Apr 08, 2010... http://ow.ly/171RY4


23. CFO Core Concerns Conference
This is a special post to let CFO's know about an upcoming conference.

If you need answers to any of the following questions, you can’t afford to miss the CFO Core Concerns Conference:

· How do I identify the most threatening risks to my organization?

· What cost cutting and working capital techniques really work?

· What are the latest best practices in pricing strategies?

· As the credit crunch continues, what alternative financing sources should I explore?

· What are the keys to maintaining worker morale in the wake of downsizing?

· How should I prepare for future financial regulation?

CFO Core Concerns Conference


24.
You are Invited Into My Internet Conference Room - Author: admin Posted: Thu ... http://ow.ly/171fgB


25.
Private Foreclosure Sale - Author: admin Posted: Sun Apr 04, 2010 10:31 pm ... http://ow.ly/16Zks5