When was the last time you had a surprise with a cash balance, cash availability receivables, inventory, a job and the list just keeps going. Did you go into fire fighting mode to put the fire out only to get swamped with the next problem?
When we interview our new clients we ask what processes they have in place for reporting and the frequency of this reporting. It is not a surprise any more to hear that this isn’t in place, or is in place but not followed, isn’t meaningful or I’m too busy to deal with it!
Every business has this issue and the opportunity to make this something that weekly can give management a barometer of where they are on what is vital for that businesses success. There are items that likely would look the same generally for a lot of companies coupled with specific reports that are necessary for the unique aspects of each company.
Your goal as you think through this is: what information would help you to know where you were at a glance in summary form, along with what information do you need in detail. I have provided some ideas below that are general but hopefully will help get you started. I would suggest weekly would be the appropriate frequency for these.
Summary
• Net liquidity
Checking
+Receivables
+Inventory
Less Payables
Less Credit Line
Less Other Current liabilities
= Net liquidity
• Credit line availability
• Backlog of open orders
Detailed Reports
• Accounts receivable aging
• Accounts payable aging
• Inventory
• Job costing
Now the question comes down to whom in your company has the ability to pull this together and who should be doing it. For the detailed reports: if you have an accounting staff, calls should already be noted on the receivable aging on actions to be taken on past due balances. Inventory over/under stock coupled with back order problems need to be monitored. In job costing how are you tracking with regard to budget and best use of staff. These tracking entries will help to reduce the panic in your day-to-day business operations.
Tim Garrison
The Controllership Group
317-572-1225
timg@thecontrollershipgroup.com
Tags: cfo outsourced, indianapolis small busines
