Archive for the ‘Profit’ Category
10/14/2009 | 8:57AM
CFO WISE founder, Ken Kaufman, appeared as a Guest on the Small Business Trends Radio Show that aired October 13 at 1:30pm EST
PLEASANT GROVE, Utah, Oct 13, 2009 – CFOwise founder, Kenneth A Kaufman, appeared as a guest on the Small Biz Trends Radio Show that aired on October 13, 2009 at 1:30pm EST. Ken was intereviewed on the following topic: Unlocking the Cash and Profit Hidden in Your Financial Statements.
Ken Kaufman stated, ”Anita Campbell has turned Small Business Trends into one the foremost authorities on starting and running a business. It was an honor to be a guest on her weekly radio show.” In addition, Ken mentioned that listeners to the program will have an opportunity to visit the CFOwise website to receive a free industry report.
Staci Wood, the Operations Manager at Small Biz Trends described Ken with the following excerpt,”In addition to his role as Founder & CEO of CFOwise, a regional Chief Financial Officer (CFO) firm with over two centuries of senior-level executive experience, Ken Kaufman also currently serves as the part-time CFO for a dozen start-up, emerging, and medium-sized companies in many different industries. Ken will share the insights he has gained from helping entrepreneurs and small business owners use their monthly accurate and timely financial statements to drive cash flow and profitability to new levels.”
Click here to visit podcast website
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About CFOwise With over two centuries of senior-level executive experience, CFO wise is the premier provider of permanent part-time CFO services to start-up, emerging, and medium-sized companies in the United States. For more information, please visit: www.cfowise.com or contact Kim Waldron at 801-380-5615.
About Small Business Trends Small Business Trends is an award-winning comprehensive online publication for small business owners, entrepreneurs and the people who interact with them. They offer a variety of features to help you stay informed about the small business market.
05/21/2009 | 8:45AM
Business incubation program recruits CFO firm to train new businesses on how to Maximize Cash Flow.
PLEASANT GROVE, Utah, May 21, 2009 - CFO WISE is proud to announce that its Founder & CEO, Ken Kaufman, will be a guest speaker in the Provo Technology Xelerator workshop series. Ken will be presenting three workshops that teach entrepreneurs how to drive their Profits, improve their financial health, and maximize their cash flow.
CFOwise founder Ken Kaufman commented on this opportunity to share his knowledge with others in the community by stating the following, “The Provo Technology Xelerator creates an amazing opportunity for the entrepreneurs who participate. With the bestowal of scholarships, each entrepreneurial firm receives free office space and no cost mentoring and coaching in how to get their businesses off the ground and running. I look forward to being a part of this exciting initiative.”
About CFOwise
With over a century of senior-level executive experience, CFOwise is the premier provider of permanent part-time CFO services to start-up, emerging, and medium-sized companies in the United States. For more information, please visit: www.cfowise.com or contact Kim Waldron at 801-380-5615.
About Provo Technology Xelerator Workshop Series
The Provo Technology Xelerator is a collaborative partnership of the Provo Business Development Corporation, the Technology Center at Novell, and Broadweave. The Provo Technology Xelerator helps emerging technology-based ventures to accelerate their time to profitability through facilitating access to money, markets, and mentors. Provo Tech X connects innovative ideas, talented entrepreneurs and experienced technicians with needed resources to create new technology-based companies. Provo Tech X is a catalyst of the entrepreneurial ecosystem of Utah Valley. For more information please visit: www.ProvoTechX.com .
05/8/2009 | 3:37PM
Profit and cash are not synonymous, although many entrepreneurs, founders, business owners, and CEOs do not understand why.
The reason lies in the very format of the statement of cash flow. Cash flow is derived by taking NET INCOME for the period and adjusting it for the various non-cash and balance sheet account changes during the period. It is very uncommon that, once going through that calculation, the net income and cash flow will be the same in the same period. And if they are equal, it is almost always a matter of chance that have to do with working capital, capital expenditures, and financing activities during the period.
Why should we care? A company who runs their business purely on cash flow will make bad decisions. A company who runs their business only on net income will also make bad decisions. With both (and an accurate balance sheet), we have the tools to improve profitability and maximize cash flow. Do your competitors run their business in this way? You either need to level the playing field, or make this one component of your overall competitive advantage with your CFO Consultant.
04/10/2009 | 2:29AM
INTRODUCTION
Business is about cash flow. Whoever coined the phrase “Cash is King,” must have been in business. But an entrepreneur’s bank account can sometimes be the most misleading source of information about how the business is really doing.
THE CASH VS.PROFIT DILEMMA
Your profit and your cash will almost never equal each other in the same period. This is one of the most difficult concepts for small business owners and entrepreneurs to understand. Here are two examples to help you understand the difference between the two.
EXAMPLE 1 – POSITIVE PROFIT, NEGATIVE CASH FLOW
Let’s imagine you start your business and in the first month your sales explode. You generate $100,000 of sales and you are amazed. Your gross margin on your sales is 50%, meaning your gross profit is $50,000. Since you are a new business with very little overhead expenses, you only spend $10,000 in this category. Your profit for the month is $40,000. But does that mean you have $40,000 of profit in the bank? Most likely not.
While you were having this great month, you spent $60,000 on overhead and your costs of goods sold. Assuming you paid for all of these during the month, your cash outflow was $60,000. But what about your cash inflow? Assuming you extend net 30 terms to your customers, you didn’t collect any of your sales for the month during the month. So your inflow is ZERO. The bottom-line of this example is this: $40,000 of profit, but a negative $60,000 in cash flow. Profit does not equal cash!
Perhaps the biggest challenge that this situation presents is that while you celebrate your fantastic first month in business, you can’t figure out why all of your checks are bouncing. An additional challenge is that the you may actually think something is wrong with the business and make a bad decision as a result.
EXAMPLE 2 – NEGATIVE PROFIT, POSITIVE CASH FLOW
For the second example, let’s assume month 2 of your business has sales of only $10,000. Assuming a 50% gross margin and $10,000 in overhead expenses like last month, this business will post a net loss of $5,000 for the month. But what about cash?
Well, assuming all the customers pay on time, you collect the $100,000 of sales from last month, and you pay your cost of goods sold and overhead expenses of $15,000. Your net cash flow for the period is a positive $85,000. So, the company recognizes a loss but nets $85,000 in cash flow. Again, profit does not equal cash and the bank account balance is at $25,000 at the end of month two.
The biggest challenge with this scenario is you look at the bank account balance and feel great. If you fail to realize you need to improve next month’s performance you will quickly erode all of your profit from the first month.
THE COMMON ENTREPRENEUR QUESTION
Most entrepreneurs will, at some point, ask a version of the following question when they are looking at their financial statements: “How can this report say I lost $20,000 last month when I know I have $50,000 in the bank today?” This question is usually followed with: “This report must be wrong.”
Knowing that cash and profit almost never equal each other in the same period, the fact that the two are different potentially validates the accuracy of the financial statements. Understanding the dynamic difference between profit and cash will empower entrepreneurs to improve both their profit and cash. And it can also be the catalyst to correctly forecast their company’s cash flow.
CONCLUSION
How can entrepreneurs best understand the difference between their profit and cash? The best way to accomplish this is a thorough review and analysis of the company’s monthly financial statements (which should include, at a minimum, a balance sheet, income statement, and statement of cash flow) by a CFO Partner. In addition, the exercise of forecasting these statements will help validate and invalidate your assumptions on a monthly basis until you have a firm grasp on all of the moving parts in the company’s cash flow.
Should entrepreneurs look at their bank account balance regularly? Sure, so long as they agree to not be fooled by the balance.
04/3/2009 | 2:31AM
Here are the details and schedule:
Entrepreneur’s Financial Statement and Analysis Course – Parts 1 through 3
Geneva Building (1410 West 1200 South, Orem, UT 84058) Room GB 203
Part 1 – Thursday, April 23, 2009- 5:00-7:00 pm- Improving Profit through the Income Statement (Profit and Loss Statement)
Part 2 – Thursday, April 30, 2009- 5:00-7:00 pm – Strengthening Financial Health through the Balance Sheet
Part 3 – Thursday, May 7, 2009- 5:00-7:00 pm- Maximizing Cash Flow through the Statement of Cash Flows and Obtaining Clarity through Financial Modeling
These are the classes you have been asking for – what the numbers mean on the three financial statements and how to interpret those numbers to make sound financial decisions every Small Business Owner and entrepreneur needs to know how to read financial statements. And the classes are FREE. If you are in business bring your company’s yearly financial statements (profit and loss, balance sheet, and statement of cash flows) for 2007 and 2008 to each class. Between the first and second class, our CFO Partners will use a software program to calculate each company’s key financial ratios and measurements as well as compare these numbers to the benchmarks in their respective industry. As always our Part-Time CFO’s will keep everything completely confidential. The following is a brief description of each class:
- Part 1- Income Statement- April 23- Drive Your Company’s Profitability
- Revenue Recognition and Modeling
- Cost of Goods Sold
- Manufacturing and Selling, General & Administrative Overhead
- Gross Margin and Net Margin
- Break-Out Variable and Fixed Costs
- Calculate Break-Even
- How to use this information to Improve Profits
- Part 2- Balance Sheets- April 30- Improve Your Company’s Financial Health
- Assets = Liabilities + Equity
- Current Assets
- Fixed Assets and Depreciation
- Other Assets
- Current Liabilities
- Long-Term Liabilities
- Equity/Net Worth
- Need to Reconcile Each Account Each Month for Accuracy
- Financial Ratios to Assess Business Health and Why Business Health is Important
- How to Use the Numbers to Improve Financial Health
- Part 3- Statement of Cash Flows- May 7- Improve Your Company’s Cash Flow
- Cash from Operations
- Cash from Investing
- Discuss Cash from Financing
- Common Cash Traps
- 3-month Cash Flow Projections
- How to Use This Information to Improve Cash Flow
- Sources and Types of Financing
- Basic Principles and Formulas of Firm Valuation
You can attend one, two, or all three of these sessions. Even though the classes are FREE, we ask that you register so we will have enough handouts. Registration is required for this class- contact our office at 801-863-8230 or sbdcinfo@uvu.edu.
This class will be taught by Ken Kaufman, founder and CEO of CFOwise. For more than a decade Ken has built a reputation as a leader who is respected for his integrity, work ethic, and commitment to lifting people and companies to new levels of achievement. Ken has served in several leadership roles, including CFO Partner, COO, VP of Administration, and VP of Sales, in start-ups, mid-stage companies, and large multi-national corporations. His experiences cover a variety of industries, including construction, real estate, financial services, business services, medical/dental, distribution, and outsourcing. In two of his executive roles, Ken helped a start-up grow to over $100 million in annual sales in just four years and he helped a medium-sized company almost triple its operations in just three years. Ken has served as a court-appointed receiver and has negotiated “workout” proceedings for several insolvent entities. He was recognized as the top producing manager in a Fortune 500 firm. He has developed and presented numerous business plans and financial forecasts that have successfully obtained the debt and/or equity financing required for growth.
01/5/2009 | 6:35PM
Top-line sales are much less important than gross profit – so pay your sales staff accordingly. Most businesses struggle with how to structure the compensation for sales reps. We don’t want it to be so complicated that no one can understand it. But we also need it to incent the behaviors that will most help the business achieve its objectives. If a sales rep is paid just to bring business in the door with no other qualifying criteria in place, the sales rep will eventually bring in a lot of unprofitable business. In fact, I watch an entire company drop into insolvency and then permanently close its doors because one sales rep was paid very well to bring in very unprofitable business. We are in business to generate sales, from which we subtract our direct costs (also referred to as cost of goods sold and cost of sales). The amount left over is called gross profit. Our gross profit needs to exceed our fixed and overhead costs, or we will be in trouble in a hurry. So, we need sales reps who create gross profit for the company, not sales. Start changing the focus of the sales reps now. The competing theme to this is the desire to bring in more sales. A good sales manager and CEO will define the parameters within which sales reps may work to get business, and they will give the largest rewards to sales rep who help the company achieve its desired gross margin and provide financial help for small business.
12/12/2008 | 3:29AM
I was shocked to read a recent article in the USA TODAY titled: Rush to Earn Nothing
The 4-week US Treasury Bills recorded their lowest auction rate in history at 0%. Investors were willing to let the US Government borrow their money for four weeks for no return. There are several implications of this: We have to think this through logically. Investors make their investment decisions based on their risk vs. return criteria. US T-bill investors are specifically seeking low risk options for their money. Instead of earning some interest over the next four weeks, these investors accepted a zero percent return.
First, they must continue to have great confidence in the US government’s ability to repay their principal investment.
Second, they must feel like there will be no inflation over the next four weeks. One dollar today will still be one dollar in four weeks. Both of these reasons are good signs for our struggling economy, but we still have a long way to go.
