Cash Flow Mishaps: Stories from BAM Practitioners

We asked BAM practitioners to share their insights about cash flow. Here are 6 mini-stories of BAMer ‘cash flow mishaps’ or near misses!

[Read Part 1: 10 Cash Flow Tips and 10 Red Flags from BAM Practitioners]

6 Cash Flow Stories

One cash flow mishap we’ve experienced is significantly underestimating cash needs to service a period of significant growth. This can happen when long lead time raw materials are needed, with up-front payment. It can also happen when financing growth requires organisational learning and capacity building, it then takes extra time to ramp up production, and the working capital cycle is longer than expected. Another real danger is when a series of smaller mishaps all happen at the same time, for instance low quality raw materials, late delivery of materials, late payment by customers for finished products. Each of these on their own are manageable, but create a serious issue when stacked together. We have been able to develop some cashflow forecasting tools using MS Excel which give us visibility on future cash needs, including graphs, which feed into weekly reporting. This has been invaluable to us. – MH, Manufacturing, Asia

 

A few years ago I led a new initiative at our company to build a software product for retail banking. I was hoping that the recurring revenue from product sales would offset the erratic cash flows that are typical of a project-based software company. A project team of eight members spent 18 months building the product and we spent another year having a sales team sell the product. For a small company like ours the outflow of funds in this experiment resulted in a major blow to our cash flow for a couple of years. What I learned from this costly mistake is that a project oriented service company is not automatically good at being a product sales company. They are two different types of organizations with different team structures and competencies. – Joseph, IT, India/USA

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10 Cash Flow Tips and 10 Red Flags from 10 BAM Practitioners

In a truly great company, profits and cash flow become like blood and water to a healthy body: They are absolutely essential for life, but they are not the very point of life” – James Collins, Good to Great

As Jim Collins so wisely said, cash may not be the ultimate point of a company, but it is like blood to the body – essential for survival.

We asked 10 BAM practitioners to share their insights about cash flow. Read below the 10 tips they shared and also 10 ‘red flags’ – the tricky situations they have encountered where cash flow can easily trip you up.

In Part 2, we share 7 short stories of ‘Cash Flow Mishaps’ – real-life cash flow challenges that BAM practitioners have encountered

As one BAMer summed up, “Cash flow is an important indicator of how a business is doing, don’t take your eye off it!”

Cash flow tips from BAM Practitioners – Do:

1. Always watch your cash flow very carefully and plan ahead at each stage.

2. When business planning, find a cash flow projection template and someone who will force you to fill it in!

3. Use forecasting tools and technologies to help you watch and manage cash flow on an ongoing basis. Read more

Numberphobic? 3 Key Ideas to Increase Chances of Business Survival

by Dawn Fotopulos

According to an Intuit survey from 2015, 87% of small business owners do their own books and 47% claim financial illiteracy. It’s not a surprise that more than half of small business start-ups never survive to see year 5 of operations; it’s remarkable that half do. If you follow start-up history out to year eight, the failure rates are in the 80+ percentage. Any thinking person would take their start-up capital and go to Las Vegas. You’d have much better odds of winning there.

What if, by learning just a few key ideas, you could double even triple your probability of small business survival? What if a one day commitment of your time could change the next twenty years of your future and the future of your household? What if what’s in this article prevents your small business from becoming a statistic? It can. Here’s how.

Every business owner needs to answer three key questions:

  • Am I making money? (Showing a profit)
  • Do I have enough money to pay the bills? (Enough cash flow)
  • Am I building wealth or destroying it? (Building net worth)

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Financial Planning: How Do I Prepare to Present to Investors?

by Mike Baer

Funding for your new business is obviously crucial – no cash, no business. So let’s think about this from an investor’s perspective. What is it that interests him or her? What does he or she want to see? What questions answered?

Here’s what I’d be asking:

  • What exactly is the product or service that you intend to sell? Don’t assume that I understand it. Make it simple for me.
  • What is the market demand for this? Is it a cool idea, a “me too,” or is there a real demand? In other words, do people really need/want your product or service?
  • Who will your competitors be? How is your idea better than and different from theirs?

This first set of questions is about your viability in the market place. Is this a real business? This second set of questions is about you. Can I count on you? Read more

Important Issues to Consider in Financial Planning

by Colleene Isaacs

Let me start by saying, I hate dealing with financials! In a perfect world, I wouldn’t have to think about or plan for the financial aspect of doing good business. Or better yet, I would have some really smart CFO-type deal with it, and be done with it. Unfortunately, as far as I know, we don’t live in that world. So just like everyone else, we have to do the financial “due diligence” (homework), necessary to do business well. There are a lot of great resources to assist as you begin your planning process, particularly when it comes to the financial matters of business. One suggestion I would make is save yourself a lot of grief, and apply a template like the “Business Model Canvas” to your planning process (see the book Business Model Generation.)  This model follows a somewhat lean startup methodology, and is a great way to visually scan and plan for all the aspects of business planning and design. 

Let’s really focus on some things you should be thinking about financially when you start the business start-up journey – a journey that is a very winding road, never a straight path!

Expect the Unexpected

A general principle is start with Plan A, but always have a back-up plan(s). You only have a limited insight into what the future will bring. You may be faced with geo-political situations, product development delays, weather, material sourcing issues, local permitting requirements and delays, transportation issues, broken equipment, etc. that you were not expecting. Any of these external elements, can severely impact planning and business execution schedules, as well as the finances required to support those activities. Just know that wherever there are opportunities for something outside your control to fail, there is a real possibility that it will.  Read more

Business Planning Part 3 Introduction: Financial and People Planning

We start a new series on The BAM Review blog this month that will focus on developing your business plan: Financial and People Planning.

In previous series we have covered Business Planning Part 1: Introduction to Business Planning and Business Planning Part 2: Product and Market. In Part 3, a new series that will take us up to the middle of December, we will focus on two essential elements in the business planning process: money and people!

Show Me the Money

Crunching the numbers and working out financial projections during the planning stage is a major part of discovering whether your business model is viable or not. Until you start to work out your costs, price points, sales forecasts, cash flow projections, break even point and so on, your business idea will remain just that, an idea. Even if you don’t need to present your plan to outside investors, you will still need to create a financial plan so that you know whether your business model can ever be profitable and how much working capital you will need to sustain it through launch. Read more

Los Negocios como Misión es Más Grande de lo Que Crees

by Mats Tunehag

Los Negocios como Misión, (en adelante BAM, del inglés Business as Mission) puede sonar como algo un tanto extraño pero, aun así, es un concepto capital y una praxis ineludible.

Eso no significa que BAM sea la estrategia definitiva, ni la solución a todos los problemas. Se trata, en realidad, de un movimiento global, en pleno auge, de cristianos que, desde el ámbito laboral, se preguntan: ¿Cómo puedo hacer para combinar trabajo y servicio a las personas, en sintonía con los propósitos de Dios, y ser, además, un buen gestor de los recursos del planeta y obtener el necesario beneficio?

BAM no pretende sustituir las formas tradicionales de servir a Dios y a las personas en todo lugar y nación. BAM no es tampoco un método para creación de fondos. Ni trata de incorporar actividades propias de la iglesia al ámbito empresarial.

BAM, se plantea la importancia de una responsabilidad social corporativa (RSC). Pero yendo todavía un paso más allá: BAM es RSC+.

Estamos comprometidos con una misión en la empresa y a través de la empresa. Que puede materializarse, por ejemplo, en una actuación justa. Podría incluso tener como lema “Empresa Justa”. Ese término, y otros similares, pueden ayudarnos a entender la naturaleza transformadora y total de los negocios como misión. Read more

Three Reasons Why Employment Beats Charity

by Peter Greer and Phil Smith

Do you remember how you felt when you received your first paycheck? In middle school, I mowed elderly Mrs. Johnson’s lawn. She would inspect my work and acknowledge that I had cut close enough to her barn and not missed any sections under her apple trees. Then she would invite me into her house, offer me a cold Tang mixed with her special spices, and pay me for my work. I enjoyed a strong sense of satisfaction as she thanked me for a job well done.

Relying on charity might provide enough for a bare existence, but it will never be enough to help someone off their knees.

Charity will never allow an individual to flourish in the way God created humankind to be—productive in caring for the earth and using the strength and skills He gave. And besides, charity isn’t what those living in poverty want.

We’ve all heard the saying, “If you give a man a fish, you feed him for a day, but if you teach a man to fish, you feed him for life.” These well-worn words contain an important truth: Who would settle for an occasional fish dropped off on their doorstep if they had the opportunity to start their own fishing business? Read more

Do You Have Clear KPIs for Your Kingdom Business?

by Larry Sharp

What if Jesus was your boss? What if he was the chairman of your board? What if you reported to him each month for your KPIs (Key Performance Indicators)?

What would he expect that those KPIs would be? How would he measure how you are doing?

A wise owner or manager continuously keeps his KPIs in mind. He knows that accountability is a key factor in driving results. So it is with God as the owner of our businesses because Kingdom business owners see themselves as stewards.

KPIs should be clear, short and understandable to everyone in the business. They should be measurable and uncomplicated. Either you achieved them or you didn’t; they are not fuzzy.

Profitability

We expect secular entrepreneurs to think profit margins and growth. But what about Kingdom business owners? Yes, definitely. Jesus himself established a KPI for profit as a measure of success when he told the parable of the talents (Matthew 25: 14-30). He made it clear that everyone is entrusted with wealth in unique proportions. In his example he told of one who received five bags of gold and he doubled it; another received two and he doubled it. Both were commended because they “put their money to work.” Jesus said, “Well done.”

On the other hand, one person received one talent and did nothing with it. We might have thought Jesus would have said: “…oh well, he is just not a business guy!” No – he also was expected to be profitable and when he did not even invest the gold in low-interest accounts, he was called “wicked”. Read more

Bad Math: Why Be a Business Professional?

by João Mordomo

Why be a business professional (or any other type of professional) when you can be a “Great Commission professional”? Here’s my first bit of math: “Great Commission = to make disciples of all peoples” (see Matt. 28:19-20.)

Many of us have been taught bad math. We’ve learned two formulas in particular whose conclusions can lead to confusion and a lack of clarity about what God wants to do in and through us. Here’s what I mean. We’ve learned that “Great Commission = clergy” and “Business professional = laity”.  

The almost inevitable result of this bad math is to think that the people who hold real value in God’s eyes are the clergy, the full-time religious workers. After all, we are told, they are all about “the Lord’s work,” and they “give up so much” to serve Him in “full-time ministry.”

The flip-side of our conclusion is that, sure, laypeople have some value, but it’s more about the money they make (that they then give as tithes and offerings) or the abilities they have (“hey, would you be interested in teaching a Sunday school class?”).

But that’s not what the Bible teaches! Look at what Peter writes in 1 Peter 2:9, and then get ready to jump for joy (out of your plush leather executive chair, or off of your factory floor, or… well, you get my point!)

But you are a chosen people, a royal priesthood, a holy nation, God’s special possession, that you may declare the praises of him who called you out of darkness into his wonderful light. – 1 Peter 2:9

Did you read it? If you are not jumping for joy already, maybe I can help. Read more