"How To Grow Profits by 30% or More in 90 Days or Less"  A Six Part Mini-Series:    Lesson 2 Author Steve Pohlit www.stevepohlit.com Copyright 2006 All Rights Reserved.This article may be republished and redistributed without restrictions with this resource box.

Update:

In the introduction to the first lesson I wrote: "If you follow the steps in this mini-course and apply them to your business you will achieve the stated objective of growing profits by 30% or more in 90 days or less."  The truth is that in every instance where a business followed this program, profit growth far exceeded 30% in less than 90 days.

Remember:

A mini course is viewed by some as a teaser for a more comprehensive book, manual, or consulting project. I don’t have a book or manual finished to sell you and while I am always interested evaluating new clients, you will be able to take action to achieve improved business performance immediately with the information in this series. 

Your comments are encouraged and welcomed. I would be pleased to answer your questions once you have completed evaluating all six parts of this series. There is a link for the additional information I will need in preparing to address your questions at the end of the course.  Let’s get started:

Lesson 2:

A brief summary of what we have accomplished to date: you should now understand the structure of the eight week cash flow. You have received a big bonus which is an example of this Excel spreadsheet. It is one that I started using for a company that did not become a client. Using this worksheet you should be done with the first assignment which is to complete the basics of the cash flow worksheet for your company. If you have not done that you should stop reading and complete it now.

I receive emails, faxes and calls from people following this series saying things like:

" Steve it is the holiday season and I can't get to it"

" Steve, I had a real crisis in my business and I couldn't get to it"

" My dog died, so I couldn't work on it." 

" My spouse called and said if I didn't get home right now there would be a divorce"

" It is my birthday week."

" I was called out of town unexpectedly."

OK! Fine! It is your business! If you continue to do everything the same then "the same" results is what you can expect.

Steve’s Law of Measuring Cash Part 1: If You Cannot Buy Something or Pay Someone.. It May Look Like Cash...It May "Seem" Like Cash... But It Is Not Cash.

A business "invests" in a computer network, including new machines, software and suporting services. The bill comes in and is paid. Cash goes down. The financial analyst has convinced the owner their new network will improve productivity and will pay for itself in 22.5 months. 22.5 months later, profits as a percentage of sales have not changed. What do you think? Was this a successful project?

Another business does not know it's production costs because information is fragmented. They invest in a networked system and in three months have a meaningful actual versus budget report of top down product line performance with variances identified in a manner that provides for corrective action. They establish a plan of action with target dates for completion and accountability. Production costs achieve budget in the next three months and there are instances of favorable variances. Gross margin and net cash profit increase by 30% over what was reported the previous three month period.

Before you conclude this is about the effective utilization of computer networks, I can assure you it is not. There are very large companies, using laptops and excel spreadsheets to manage their business.

Steve’s Law of Measuring Cash Part 2: The Only True Measurement of Business Success Is The Trend of Your Company's Cash Balance When Properly Measured.

You should begin to get the idea I will be showing you more about what to measure in order to achieve your profit goal. Again the goal here is to grow profits by 30% or more in 90 days or less. Please turn you attention to the financial flash worksheet in your sample eight week cash flow worksheet.

The financial flash report is the summary of business liquidity and there are a lot of items to be addressed in completing this report. In this session we will address sales, accounts receivable and inventory. Based on the guidance provided you should be able to complete the other areas. First a few important comments:

Every section of financial flash may not be applicable to your business. For example, if you do not have inventory, you obviously will not be spending any time on that section of the report. Also, you will notice sections for payroll and one labeled do not use. Do not use means do not use for this business. I have trucking company clients where we track revenue and cost per mile. I have retail clients where we track same store sales. The point is this worksheet can be and should be customized for your business. You want to develop and track select Key Success Factors for your business and track them on the financial flash.

Sales:

This ties into the work you have started on the eight week rolling cash flow. The easiest way to forecast and track sales weekly is to go out about a year, adjust for seasonal swings and finalize sales dollars by month. Once you have monthly sales it is easy to arrive at a weekly sales number. At this point base your forecasts on existing sales trends. If you are consistently trending up or down or if your sales are basically flat, use the current trend in your assumptions for sales. If you are really good with Excel you can link your weekly sales forecast on the flash worksheet to your 8 week cash flow.

Once you have your sales forecast done then this is a simple matter of entering the actual sales for the week and the schedule shows you how well you are doing against forecast.

Accounts Receivable

Accounts receivable is cash in your customer's bank account and not yours. The longer it is not in your bank account the greater the risk it will never be there. The accounts receivable section of the flash report highlights the aging of accounts receivable and compares the progress or the deterioration against the prevous week. If you have a problem in accounts receivable. This will help identifiy that problem. You can then develop a plan of action to collect accounts receivable that are delinquent. Remember all receivable problems begin with the granting of credit at the time of sale.

Inventory

If your business has inventory  include it on the flash report. If you are a manufacturer with retail stores  track both manufacturing inventory and retail inventory. If you are trucking company you will not have inventory in the traditional sense but you will have an inventory of trucks and possibly trailers. All the work you will be doing related to inventory like other areas of information will not be on the flash report. However the flash report is your starting point for the additional work you will be doing to improve cash profits. It is your company's weekly report card.

Other Areas:

By now you should be getting the idea of how this report is completed and you should be in a postion to complete other areas applicable to your buisness including accounts payable and payroll. For some companies I add a fixed asset section and long term debt section but those are not part of liquidity so the totals are not included in the liquidity calculation. Again the report can be structured to suit your particular business. The goal in increasing profits not reports. This is week 2 and the clock is ticking.

Your Lesson 2 Assignment:

1. Update your 8 week cash flow to add a new week. This is a rolling cash flow statement and you must update it every week.
2. Schedule your first cash flow and financial meeting for next week with key management staff. The meeting ideally should be very early in the week and very early in the day. Monday morning first thing is a good time. By then you will have enough information to show people what the results of what you are stating to work on.
3. Complete the financial flash worksheet section.

Next Week: Now here is where we begin to start taking action to make money.

In summary your assignment  is to determine your available cash and your near term liquidity. You are also scheduling a meeting now to introduce key people to the information and goal of increasing profits by 30% or more in 90 days or less.  Note: if you don’t do this or are not interested in doing this but want the results, call me.

This is Steve Pohlit and my number is 727-587-7871. Email Contact

I’ll meet you at the next lesson which will be in your email in about a week.

Be well and prosper,

Steve Pohlit
www.stevepohlit.com