Status:

At the end of this week we will be at the mid-point of this course. At the end of the today's session you will have nearly all the tools you need to achieve the goal of a 30% increase in profits in 90 days or less. The measurement of the 90 days starts on day one of the course.

If you have not done the first two assignments, stop and go back and do them. This course is sequential. Each session is built on the base developed in previous sessions. If you don't have the right foundation, the building crumbles.

Based on the completion of the first two assignments you are likely seeing some opportunities. Today we will go through what you cover in your first cash flow and financial flash meeting and we will also explain how to prepare for managing primary assets and liabilities.

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 3:

Your assignments last week were to update the eight week rolling cash flow to add an additional week, complete the main sections of the financial flash and schedule the first meeting of your company's leadership team to review what the results of your work on the cash flow and financial flash.

The assignment meant you had to do a lot of work. At the beginning phase of using  "The Profit System" you naturally will be working hard because you are learning how to reallocate your time and business resources for increased profits. Some of this is new. Maybe the concepts are not new but the discipline of "how to" is likely to be new.

Steve’s Law of Business Performance Part 1: If You Keep Doing Everything The Same As You Have Been, Your Business Results Will Change....They Will Be Worse!!

Let's address the cash flow and liquidity meeting you are going to have this week. First you must have a specific time, you must decide who should be there, you need to develop a meeting agenda and (the hardest part)  you must let everyone know the meeting is mandatory. The best way I have found to reinforce the importance of "showing up" is to give the participants a section of the meeting. Then if they miss a meeting because of some crisis they will know that there are others in the meeting who will feel the impact of someone missing.

Staying with attendance for a minute, there are ways of scheduling the meeting to make it easier for all to attend. For example, a sales manager may say they need to be traveling to see customers. That can be OK but they need to pause and call in by phone to the meeting. Sometime the person responsible for operations will have a crisis. Candidly that can happen and it is your first responsibility to run the business. However if there is a crisis every week then you have another problem.

What is on the agenda that you send out in advance (usually a day in advance)?  The first thing is the title of the meeting, date, start time, end time and key points to be addressed. Notice I included end time. These meetings should be scheduled for about an hour and they are the same time every week if weekly.

Here is a list to the typical meetings that occur under the "The Profit System" method:

Weekly Cash Flow and Financial Flash
Weekly Sales Meeting
Weekly Operations Meeting
Weekly Meeting on Staffing
Bi-Weekly or Monthly Meeting on Accounts Receivable
Bi-Weekly or Monthly Meeting on Inventory

Depending on your business some meetings that are scheduled for bi-monthly or monthly can be held weekly. In some crisis situations, a meeting on certain issues is scheduled daily.

Depending on the industry, other meetings may be necessary. For example: a real estate meeting if your company is building or adding new locations; a meeting on maintenance if your company has a lot of equipment like my trucking company clients; other than liquidity, sales and operations there are no absolutes to The Profit System. You define the meetings based on the key success factors of the business.

A final point on meetings: at every meeting someone must be assigned to take the minutes and issue them within two days of the meeting. The minutes are designed to document the decisions made during the meeting on actions that are to be taken to strengthen business performance. Those actions should be documented, have a person assigned who is accountable for the action and have an agreed upon due date for completion. Then the first thing done at the start of the meeting is to review the minutes of the previous meeting and the status of the implementation of action steps. Hopefully you are beginning to see the built in accountability of The Profit System.

Steve’s Law of Business Performance Part 2: You Get What You Inspect Not What You Expect!

Financial Flash: Accounts Receivable Management Module

In Lesson 2 we discussed accounts receivable as being cash in your customer's bank account and not yours. The starting point for accounts receivable is your credit policy. Granting a customer credit is a privilege for them not a right and they need to earn by being credit worthy.

Accounts receivable are summarized in your accounts receivable aging report. For the accounts receivable section of The Profit System, get a binder where the aging statistics are the first schedule. Then have a separate worksheet for each account that is part of those that are past due. People assigned to collect accounts receivable are then responsible for documenting what they are doing to collect the accounts. This documentation is the basis for the accounts receivable review meeting.

The accounts receivable section of the flash report and the detailed analysis highlights the aging of accounts receivable and compares the progress or the deterioration against the previous week. If there is no progress or if there is a deterioration of the past due balances expressed in dollars and percent, then additional action is required.

Financial Flash: Inventory Management Module

In last week's lesson we said: "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."

The starting point after you have the summary numbers for the flash report is to detail the inventory of your company by category. This is a supporting schedule to the financial flash report and is the first schedule in your inventory management module binder. The items to include depend on your business. They might be raw materials, work in progress, finished goods and supplies. Each of the categories might have sub categories. For example: raw materials could include: steel, wood, axles, brakes, wheels etc. Finished goods might include number of units by model. Note on one extreme are restaurants that may have only two or three days of product on hand. A manufacturer of utility trailers may two weeks or more supply of axles depending on the lead time from the vendor. At this point there are many variations depending on the industry of your company.

The goal of this exercise is to identify the rate of inventory turnover by category. Ultimately you want to make sure you don't run out of product that is your best sellers. You cannot sell what you don't have and you make no money with product sitting in inventory. You need to work on achieving a balance.

Financial Flash: Other Management Modules:

All companies I have consulted on improving profits have employee issues. Manufacturers, retailers and trucking companies in particular have huge employee turnover issues. In Lesson 6 we will address human resource management for improved productivity and reduced turnover. For now be aware this area needs constant monitoring and management.

If you have a manufacturing, retail or trucking business fixed asset management and maintenance will be an area that required planning and management. If your key fixed assets break down you lose your revenue generators. If you have a restaurant or other retail business with multiple locations and have a plan to add more locations, real estate management will be important to you. The key here is to target those areas of your business that are important to your profit growth plan and have a disciplined system to ensure your goals for those areas are being achieved.

Your Lesson 3 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. Distribute the minutes from your first cash flow and liquidity meeting.
3. Schedule the first sales meeting. If this meeting is on the same day as your financial meeting, schedule it opposite times. For example in the afternoon if the financial meeting is in the morning. I have found first thing in the morning and the early part of the week the best times for meetings. Schedule your most important meetings Monday and Tuesday morning at 8:00 AM
4. Schedule your first accounts receivable, inventory, maintenance, staffing, fixed asset and real estate meetings depending on which of those are important to your business.
5. Prepare the support information needed for each one of the meetings you have scheduled. Use the cash flow and financial flash as a guide plus notes from this and prior two lessons. In the remaining 3 lessons you will receive additional insight on addressing key areas of the business that can become part of your meetings but do not wait for this get started now.

Next Week: Sales Development

In summary the goal is to increase profits by 30% or more in 90 days or less. This goal and specific numbers should be written and pasted in your conference room and key offices.

Shameless Plus Number 1: I have been through this process numerous times. I know how to guide most companies to achieve great results fast. I know where to look for the rugged rocks that can damage your ship. I can get you a fast return on your investment in my fees. 

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, Business Consultant
www.stevepohlit.com