Feedback: October 2014

by Jason R. Kaplan | Steve Macias | Lynne King Smith

Question: Leaders of companies often use a particular mechanism to keep tabs on the financial health of their business. What do you use to keep tabs on your company’s level of financial health?

Jason-R-KaplanJason Kaplan is owner and founder of The Driver Provider, among other entrepreneurial pursuits. The Driver Provider, with offices in Phoenix, Tucson and Jackson Hole, Wyo., services private clients worldwide for all occasions up to large conventions for Fortune 100 companies. Kaplan says while The Driver Provider is in the transportation industry, it is in the business of customer service. Brooklyn-born, Kaplan was raised in Arizona and graduated from Arizona State University.

Jason R. Kaplan
President and CEO
The Driver Provider
Sector: Transportation

It takes the watchful eyes of the right team and several measures to accurately see how we have done, where we are at today and what we can expect in the future. Here are a few of the financial and operational metrics we regularly monitor:

Solvency — Do we have what we need in the bank to cover our monthly/quarterly/yearly expenses? How many months could we survive if sales abruptly stopped?

Overhead per dollar of new revenue — We want to grow revenue but we also keep an eye on what we are spending to support that growth.

Revenue diversification — We strive for repeat/recurring business and track and measure revenue from new customers; we are a healthier business with a good mix.

Cash is King — This might be the easiest metric to measure. We want to see an improving cash position every month.

One also needs to be careful of just relying on the standard financial ratios as many of them are backward-looking. Qualitative measures ultimately flow down to the financial health of your business. Items such as customer suggestions and complaints are closely monitored.

Steve-Macias

Steve Macias is the co-owner of Pivot Manufacturing, a Phoenix machine shop that works with companies in the defense, aerospace, semiconductor and alternative energy fields. Macias also sits on the boards of the Arizona Commerce Authority, Arizona Manufacturers Council, Arizona Chamber and the Arizona Hispanic Chamber of Commerce.

Steve Macias
Co-owner, President and CEO
Pivot Manufacturing
Sector: Manufacturing

As the owner of a small business, I find it is absolutely true that cash flow is king, so every day when I arrive at work and again before leaving for the day, I check our near-term and mid-term backlog, accounts receivable and accounts payable. Doing so enables me to get a reasonably clear picture of where we are financially and where we will be for the next several months.

My nature is to tend to focus on horizon events and big projects, so I had to force myself to look at the daily, weekly and monthly cash flow trends to avoid any bad financial surprises. By extending the backlog and cash flow view to mid-term in addition to day-to-day, we can make adjustments and refocus our efforts should we need to pick up some additional work or pull in a project to positively affect cash flow.

The other side of that coin is that as long as signs are good, it enables us to look at longer-term projects that will positively affect cash flow months or a year or two down the road.  

Lynne-King-Smith

Lynne King Smith is CEO of East Valley-based TicketForce, one of the leading ticketing companies in the U.S and Canada. She co-founded the firm in 2003 and manages its daily operations, marketing and online presence. She is an enthusiastic small-business leader who enjoys blogging and is passionate about social media, technology and inspiring people.

Lynne King Smith
CEO
TicketForce
Sector: Technology

The financial health of our company is my No. 1 responsibility. Keeping tabs means multiple things — internal controls and processes, regular and timely reports, and analyzing business data regularly.

My favorite tool is a Financial Dashboard, which is a single Excel document we created and store in the cloud. There are tabs for Financial Statements, Billing Reports, Accounts Receivables and Accounts Payables, and Debt Schedule. It is updated each month and always shows the last 12-month period. This allows us to compare month to month — we can see trends, and make decisions based on facts and good data.

The owners then meet quarterly for a full day with our CFO at a location off-site to pore over the numbers, analyze trends and do strategic planning.

It’s easy to get caught up in the emotion of your business — and going with the gut is important at times. But having both the data and expert analysis truly helps me sleep at night, keeping our business healthy for our employees and clients.

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