Retail Observer

RETAILOBSERVER.COM FEBRUARY 2018 64 A s Warren Buffet once said, "When the tide goes out, you see who's not wearing a bathing suit." Do you feel the tide going out on your business? Is it because you don't think like a CFO? Why do some shops prosper and others fail? In the corporate environment, you cannot leave financials to someone else, not even your accountant. No one knows your business as well as you and no one cares as much about your business than you do, so it's important to have at least a basic understanding of your financials. Then you can start to think like a CFO. Every company lives or dies based on cash flow, so the more we can learn to anticipate and react to changes in cash flows, the better we can manage our companies and maintain a positive cash flow. SO WHAT IS CASH FLOW? Cash flow is the money that is moving in and out of your company's bank account each month. Although it does seem sometimes that cash flow only goes one way (out), it does flow both ways. • Cash In: Cash is coming in from the service work that you do or the sales that you make. One of the hardest things to project is gross revenues and that is why it is important to keep good historical records. They will help you project same time sales in the future. • Cash Out: Cash that is going out of the business for parts, vehicle purchase or maintenance, fuel and equipment, conventions and training seminars etc. and hopefully, not refunds. Think of your business cash flow as a picture of your personal checking account. If more money is coming in that is going out, you are in a positive cash flow position and you will have enough to pay your bills. If more cash is going out than coming in, you are in danger of being overdrawn. SO WHY IS CASH FLOW SO IMPORTANT? The SBA (Small Business Administration) says that inadequate cash reserves are the top reason that most businesses fail. While the budget is our guide, we need to manage the cash flow and ensure that each month it remains positive. When you look closely, one thing is clear: business failures share common characteristics, and the companies that fail are the ones who don't believe that the rules apply to them. The number one rule in business is to always keep a close eye on your cash flow. If you haven't started a reserve fund to support a poor cash flow month, then perhaps now is the time. A reserve of three to six months is best practice. Many feel that a goal of six months is not achievable but if you start now, you will quickly see how the fund grows. There are many ways to do it. (Tip: just take the revenue from one call per week and put it away. Increase that in your more profitable times of the year.) Soon you will have the reserve that you need. With that done, you will begin to feel the freedom to make improvements to your business, purchase a new vehicle, improve your life style, and lesson the anxiety of the slack times. The establishment of a reserve is an essential part of being a CFO. WHY YOU NEED TO THINK LIKE A CFO S E R V I C E D E P A R T M E N T RO Ralph Wolff, Industry Relations, PSA Certified Service Center www.certifiedservicecenter.org

• Cover