The Year is Almost Over. Do You know Where Your Profits Are?
As I work with firms around the country helping them to improve their financial performance, I invariably find that cash flow and collections are near the top of the list for immediate action.
Many companies are absolutely terrible about collecting their money.
It is not unusual for companies to have 100 or more days of sales in their Accounts Receivable.
The challenge I often face is to make them to realize how much it is really costing them financially and emotionally.
If only they would invest a little bit of time up front most firms could easily reduce their accounts receivable to 50 days or less.
One method that I use to get their attention is to calculate how many years of profit are in the accounts receivable. You can make this simple calculation as follows:
Divide your Accounts Receivable Dollars by your Annual Profit Dollars.
This number will equal the Number of Years Profit you have in Accounts Receivable.
Please use this calculation with care as the number may scare you.
Some firms can easily have 3 or more years of profit in Accounts Receivable.
Imagine what you can do with the money.
Pay off your line of credit, invest in the newest equipment, acquire another firm.
The possibilities are endless.
I have developed a systematic approach to vastly improving cash flow and for the first time I will be offering this program at a public seminar.
Details as to when and where will follow in the January Newsletter