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One of the more important CFO Services is Business and Cash Flow Forecasting. This CFO Service gives the business owner the foresight to take action. Many business owners operate their business on a day to day basis without any business and cash flow forecasting and without thinking about what is going to happen next month, next quarter or even next week! As a result they never understand the benefits of business and cash flow forecasting and guess what? Their competition does understand the benefits. Their competition understands that business and cash flow forecasting:

• Reveals weaknesses and strengths in your organization.
• Finds solutions to solve those weaknesses and improve on those strengths.
• Helps you to learn more about your business.
• Helps you to be proactive about addressing potential trouble down the road like for example, a cash flow problem.
• Makes people in the organization accountable
• Gives the business owner piece of mind

One of the problems with business and cash flow forecasting is that once the forecast becomes 30 days old it is stale, outdated and most times forgotten. To address this problem the state of the art CFO performs what are called rolling forecasts. Rolling forecast capability allows one to enter actual results for the most recent month and then the rest of the forecast rolls forward for the next 12 months. This is called a 12 month rolling forecast and should be done every month to keep the forecast current. I usually prepare a 24 month rolling forecast for my clients to get a longer range perspective of where the business is going. With these updates the CFO and business owner can make changes as needed as well as identify any other problems. The rolling forecast makes the forecasting process a monthly occurrence and a monthly planning process that adds tremendous value. With my clients I also combine the results of the rolling forecast with an analysis of the key performance indicators for the month.

With tools like the rolling forecast, the business owner can be on top of their game and gain a competitive advantage against the many business owners who do not do so!

Michael Barbarita
Next Step CFO
CFO Services
781-326-3822
yourcfo@nextstepcfo.net

Cash Flow Problems

In a future post I will talk about how to alleviate Cash Flow Problems. In some of my previous posts in other blogs I have mentioned some causes of Cash Flow Problems, but in this post I thought I would identify as many causes of Cash Flow Problems as I can. Cash Flow Problems are caused by:

1. Too much inventory.
2. Too much salary to owner or too many withdrawals by owner.
3. Doing business with customers who are slow paying or who do not pay at all.
4. High Overhead too high.
5. Too much interest expense on debt.
6. Under capitalization from the beginning
7. Unexpected casualty not covered by insurance.
8. Excessive purchases of fixed assets and capitalized costs.
9. Operating losses
10. Paying bills too quickly

The above bullet points represent the key causes of Cash Flow Problems. As previously stated in future posts I will identify ways to alleviate Cash Flow Problems once these events occurs.

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