Q2

Well, the second quarter is just ending. June 30^th is Monday and July 4^th weekend is NEXT WEEKEND!  2014 is halfway over.  

There is one more business day of the year to bring your business's Q2 objects down the field.  It's just a measuring point, but a very important one.  From a CFO's perspective after Monday can be the ‘lull before the storm’.  It is about to be an extremely busy and important time of year.  

We need to take a deep half-year look - see what we did well, things that we didn’t, and look forward and tune-up the second half year strategy and business plan.

It is halftime. In sport, during halftime the coach and the players review the first half's results, evaluate the competition, and develop a strategy and action plan for the second half.

That's exactly what CFO’s and business owners must do right now.

How did you do during the first half? What were your sales? What was your gross profit? How do they compare to last year's numbers? Compared to plan? How was your customer profitability? Expenses? Overall Profitability? DSO? Inventory levels? Cash in bank? 

It is extremely important to take a critical look your business profit and cash drivers - where you are today and prepare a second-quarter plan.  You need to check the scoreboard and develop what-if’s for the second half of the year. You need to plan your cash needs for the rest of the year and identify efficiency improvements.  You need to provide your team some inspiration.  What’s their mood?  What support do they need? 

Check and, if necessary, reset your mindset!  

So, use this ‘lull before the storm’ to get prepared now.  Take a couple hours and put pen to paper; numbers to Excel.

-         Review your first 2 quarters’ objectives - top 3 overall business goals

-         List some wins for the year so far

-         Begin prepping your team for the month end close – many balance sheet reconciliations and checklist items can get done in advance.  Do them next week.  Get solid numbers fast.

-         Identify all your business drivers (growth, profit, cash flow drivers) and have your historical data formatted.  If you haven’t done so, do.

-         Plan Cash needs now – update your 13 week cash flow forecast

-         Set-up the Q2 Team Meeting to review the scoreboard results and the 2^nd Half-Year Business Plan – set the deadline on your calendar now.  How about July 18th or the 23rd?  Book it  - if you're a big company or a one man show, book it on your calendar.  

-     Also, get prepared to take some time over the fourth of July weekend for some R&R.  It is summer and life is moving fast.  Get outside and enjoy it!

T

Effective Credit Policy, Process, and Procedures

Every organization who extends credit needs to have an effective credit policy, process, and procedure to protect their credit risk and to maximize cash flow. 

Policy = rules, process = activities, procedure = specific instructions.

A better overall process certainly can drive sales and provide better customer value, but remember - profit isn’t true profit until you collect the cash!

Many companies I work with have a credit process, but haven't formalized it as a policy, process, and procedure.  I strongly suggest all policies, processes, procedures be documented, reviewed/understood by your entire team, and used in training.  It's a great way to make significant improvements with operations - think efficiency, standardization, and franchise-like.

Outline your current credit policy, process and procedure; your external credit policies, your internal credit policies, and the credit granting and collection process and procedures.  See my website for example.  Spend time with your team and discuss improvements. 

Forms used, depending on credit limits, generally include: (see my website for some examples)

·        Credit Application summary page with credit decision summary

·        Credit Application

·        Credit Agency report

·        Credit Card Authorization

·        Bank and Trade References

·        Financial statements, tax returns, copy of driver’s license, etc.

Most companies I look at can do a much better job improving cash flow by tightening up their credit policy, process and collection procedures. 

Remember the power of the Days Sales Outstanding ratio (DSO).  In an $8mm company, an improvement from 46 days outstanding to 38 days results with approximately $175,000 of improved cash flow!  Get to 30 days and it’s a $350,000 pick-up in cash.

As one of your cash flow drivers, track your DSO metrics and develop improvement strategies to improve results.

Profit isn’t usable profit until you collect the money. 

Not My Last Bike Ride

Well, I just completed another lap around the sun. I celebrated my 54th birthday on June 4th. I love June 4th. It's a great day. I have always loved the sound of that date  - June 4^th.  I bet everyone feels the same way about their birthday date.

Anyway, I also just love June. The days are the longest, it’s starting to warm up, the leaves have just popped open, the grass is green - Summer vacations are just around the corner.  We can ride bikes almost every day outside.  June is just a great month in Upstate NY.

I find your birthday is a great time to reflect and spend some time thinking. I do the same thing around January 1^st.  It's important to celebrate and really think about the great things we’ve done at this point out lives. We all have great things to celebrate, but we rarely do. 

It's also great time to look forward and think of the things we want to accomplish and the dreams still left in us.  This can get stressful to when you think about the knowns and unknowns, but for me it helps keep me energized.

And think about where we are right now.

I spent some time this morning thinking about that and boiled that thinking down into my morning bike ride the other day.

The past is like my training up into the point. My body is fairly fit. I eat a strict plant based diet. I workout almost every day. Things could be better and they could be worse.  I am where I am based on what I’ve done up to that point. 

The future is the bike ride itself - the route and the expectation of completing the ride.  The improvement in health, the experience of the ride, the feeling of success.

The present is like climbing the hill on Ridge Rd.  About 2 miles long and halfway through the ride. Head down watching my pedals, breathing hard, and dripping sweat.  Barely looking 18 inches beyond my front wheel – seeing the road as it appears in the top part of my view just below my helmet.  Trying to have some conversation with Kurt though mostly in complete oxygen debt.  And then settle in for another 2 mile gentle climb.  

I think that’s where I am now in my life….halfway through and working really hard, enjoying the moment and the day.  Hoping it’s not my last bike ride.

Out of our group ride last Sunday, one of the guys mentioned that one ride will be our last bike ride. That concept scares the shit out of me.  But he is right. One day will be our last day. The obituaries are published every day. Think about that. Not one day has gone by without the obituaries. 

I’m not going to thinking about that - not in June anyway.

Enjoy the day, and I hope everyone makes the most of their laps around the sun.

Carpe diem!