Those who...
1. Track everything
2. Track nothing
Whether ignorance or information overload - neither is ideal.
Instead, choose fewer, but more meaningful KPIs.
The #1 reason a company fails:
Cash flow issues.
Track this metric to thrive:🧵
Those who...
1. Track everything
2. Track nothing
Whether ignorance or information overload - neither is ideal.
Instead, choose fewer, but more meaningful KPIs.
The info can be applied to:
1. Finance
2. Operations
3. Customer Management
One centralized KPI keeps departments working together.
The best part?
It's centered around cash.
The time (in days) it takes a dollar to go from product or service to cash in the bank.
Note: CCC is used for inventory investments, but the service equivalent is called:
Service-to-Cash Cycle.
Same principles, so we'll use CCC for simplicity.
In days, and...
Above 0 = longer to sell & collect cash than to pay vendors.
Below 0 = faster to sell & collect cash than to pay vendors.
The lower, the better.
Higher numbers indicate current or future cash flow issues.
How is it used across departments?
Strong CCC means there is cash to fuel growth.
Without it, growth must be financed.
It's risky - with larger receivables, comes larger payables.
When bills are due & there's no cash...
You know what happens.
Make cash collection a priority & finance teams can analyze new opportunities instead of restructuring debt.
Collecting cash quickly is a function of operational efficiency.
Product/service, sales, A/R, & A/P teams must be working together with accurate and timely information.
This is easier said than done.
Low CCC = effective management.
Getting great payment terms from customers & vendors requires quality relationship management.
Consistency, reliability, & being liked will dramatically improve the cash position.
Treat them well and be clear with expectations.
Extremely.
Harvard Business Review credits a negative CCC for Amazon's survival of Dot Com bust.
By collecting before spending, sustainable growth was possible.
Competition was financing product purchases, hoping to collect.
A viscous cycle.
With my SEO company, Bright Line Media, I collect cash 21 days before I owe vendors.
It wasn't always this way.
I once paid a vendor 2X before getting paid and it prompted change.
Here's what I did:
1. Payment date to the 5th
2. Must pay via Stripe
3. NO physical checks
Receivables, solved.
I negotiated better payment terms by always paying on time & promising to pay via ACH (no fees).
Payment Date 26th.
21 Days from collection to payment.
New sales enter into this cycle & never incur an out of pocket cost.
Quick Summary:
1. Don't overproduce / hire
2. Collect cash quickly
3. Set consistent payable cadence
4. Cross department communication
Build a healthy company - on the cash you're owed!
Follow me @barrettjoneill for more on business, growth, & SEO.
More from Barrett O'Neill
More from Accounting
Building conviction on existing portfolio stocks is complex topic. I am still learning and have only 2-3 years exp. Lot of learning is inspired from @varinder_bansal as part of omkara family, listening to old colleage @connectgurmeet on news channel and @unseenvalue posts
https://t.co/KQkupOeFzp financial statements and results on quarterly basis to evaluate whether your thesis on company is still intact through growth in revenue, profits and cash. You cannot rely only on whats app forwards or brokerage updates.
2.Quarterly Con-Calls post result covering enviornment of the sector in which company operates, future expansion plans, & companies confidence in responding to fund managers. (For eg, in my evening walks, i listen to con-calls on You tube rather than music to utilize the time.)
3. High conviction is build when you compare py qtr or py year con call scripts and see whether company giving forward statements were met in subsequent quarters or not. For eg company said they will be doing CAPEX for 100 crores in FY 2020 and then we can see current state.
4. Profits not growing qtr or qt or yr on yr is not the sign for low conviction. You need to screen the balance sheet to see if the company has taken huge R&D expenditure which they believe is right for company as they build new products for future years, then that make sense
https://t.co/KQkupOeFzp financial statements and results on quarterly basis to evaluate whether your thesis on company is still intact through growth in revenue, profits and cash. You cannot rely only on whats app forwards or brokerage updates.
2.Quarterly Con-Calls post result covering enviornment of the sector in which company operates, future expansion plans, & companies confidence in responding to fund managers. (For eg, in my evening walks, i listen to con-calls on You tube rather than music to utilize the time.)
3. High conviction is build when you compare py qtr or py year con call scripts and see whether company giving forward statements were met in subsequent quarters or not. For eg company said they will be doing CAPEX for 100 crores in FY 2020 and then we can see current state.
4. Profits not growing qtr or qt or yr on yr is not the sign for low conviction. You need to screen the balance sheet to see if the company has taken huge R&D expenditure which they believe is right for company as they build new products for future years, then that make sense
