Background:
The bookkeeper sends me the company’s weekly cash flow report and weekly sales budget every Friday. She also sends it to the owner and managers. The weekly cash flow report states the amount of cash at the beginning of the week, what was collected and what was disbursed. She then estimates cash in and cash out for the following week based on payables and receivables. The weekly sales budget is a revenue budget based on the overall budget for the year. It breaks down the monthly sales goals into weekly goals for all of the departments. It’s an easy way to make sure the company is on track from a revenue perspective. Assuming that your pricing is correct then you will also be on track from a profit perspective. Send me an email (rking@ontheribbon.com) if you’d like a sample of these two reports.
Back to the events:
Until September the company was making its revenue budget almost every week and for the weeks they didn’t make budget, the revenues the following week or weeks more than made up for the deficit. They missed budget the first week in September. Ok, it was Labor Day week and potentially a little slower. Nothing to worry about or take action about. The company missed budget the next week. Now it is time to be a little concerned. I sent back an email asking whether everything was billed, was work slowing down, etc. If it was slowing down, we could have done some marketing to generate revenues. I was told there were some large jobs coming up and we would see them in upcoming weeks. This email sequence got louder and louder because the company did not, or barely made budget through December. I watched the ending cash go down each week. I got no response to the inquiries and concerns. Then on Christmas week I got an email from the owner saying they were out of money and how did this happen! I asked him whether he even looked at the weekly reports and my emails about them. He said not often. Sometimes you have to be hit between the eyes with a 2X4 to pay attention! Review your weekly cash flow report every week. Your bookkeeper should put it on your desk before she leaves on Friday afternoons with the report is a list of aged payables and aged receivables. Review the reports. Circle the bills you want paid so your bookkeeper can prepare the checks for your signature. Look at the aged receivables and circle any customers you want called about collection and follow up.
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