You can’t fix a problem you can’t see
As discussed in my previous article, cash flow mismanagement is a common problem among small and mid-sized businesses. Many owners do not have the experience to precisely pinpoint where cash flow mismanagement has occurred, nor the background to develop plans designed to counter those cash flow issues.
Cash Flow Analysis and Financial Statements
A typical small or mid-sized business owner can spend hours examining his or her company’s financial statement, and nevertheless fail to see the underlying causes of cash flow problems, whether they be mismanagement of receivables, problems in pricing strategy, erosion of margins, escalating operational costs or other cash flow problems.
Reviewing the same financial statements, I will spot red flags in cash flow that to my eyes just about jump off the page. The experience I’ve gained as a high-ranking officer of corporate finance departments makes the errors almost instantly recognizable.
What’s more, having witnessed similar cash flow problems countless times in my years as an Interim CFO, I can not only pinpoint the problems, but expeditiously lay out a strategy the business owner can employ to help counter the cash flow quandary.
Of course, helping business owners recognize and overcome a cash flow management problem they are currently experiencing doesn’t necessarily help them down the line, when problems with cash flow are likely to crop up again.
Learn to Read for Cash Flow Issues in Financial Statements
That’s why I take the time to teach the business owners with whom I work how to accurately “read” their financial statements for potential cash flow red flags. I can show the owner I’m counseling what lies behind those numbers. Those business owners who are serious about understanding their own financial statements begin to have their eyes opened to cash flow threats. They come to more fully grasp what they should be looking for in financial statements as the enterprise evolves.
Build a Custom Financial Reporting Template
For many business owners, I also build customized templates specific to their individual businesses. Each template provides a schematic that enables critical figures to be pulled from the company’s financial statement and more carefully tracked over time. The template is a way of ensuring a current problem doesn’t become a recurring one.
Does your company have cash flow problems that would benefit from analysis? Put me to work and I’ll ensure your small cash flow problem doesn’t become a fatal one.