"Lack of money is the root of all evil."
Dear Friend:
When George Bernard Shaw said, "Lack of money is the root of all evil.", he was undoubtedly referring to broad social issues. But, this proposition is uniquely appropriate to business management.
Typically, management focuses on profits, growth, market share, competitive advantage, etc.. These are fitting goals and evaluation tools. However, the fuel and the lubricant that give life to business is "cash". Cash Flow is the life blood flowing through the business cycle.
"Troubled Business" are troubled in many different ways, but the majority of these entities have concomitant cash flow issues. Remedial cash management may not resolve the business' systemic problem, but it can buy the time needed to address them.
How do you get cash under control? The answer is build a "cash proforma" and use it in making decisions.
Yogi Berra observed, "If you don't know where you're going, you'll wind up somewhere else." A cash proforma is the essential tool in knowing where you are going in cash terms. Think of a cash proforma like the headlights of a car. They both illuminate the turns and obstacles you face as you move along. They provide the reaction time needed to avoid disaster.
Kraska Management Group principals and associates have worked with many troubled businesses. Our first focus, in helping these clients, is cash management. Our Cash Triage Program starts with building a detailed 13 Week Rolling Cash Proforma.
Our 13 Week Rolling Cash Proforma:
- It is a week by week (where necessary day by day) and item by item projection of cash receipts and cash disbursements.
- It reflects:
- An item by item review of actual receipts and actual disbursements history, usually covering the previous twelve to twenty-four months.
- A customer by customer review of receivables aging and collection history.
- A creditor by creditor review of payables aging and client operating needs.
- If an Asset Based Loan (ABL) is in place or contemplated, it incorporates a projection of "availability" based on receivable and/or inventory levels.
- It is a living, changing tool:
- New information and understanding is continually incorporated into the details of the proforma.
- Where actual receipts and/or disbursements differ from proforma, the reasons are determined and reflected in updates to future expectations.
- The proforma's forward time frame is incrimentally extend weekly as time goes by.
To learn more about our programs and what we can do for a distressed business, please contact one of our principals or associates.
Best Regard,
Your Friends at Kraska Management Group
Prepared by Dennis Kraska
Kraska Management Group, Inc.