I recently looked at my appointment activity over the last six months; I was curious exactly how many companies I’ve personally met with over that period. I was shocked to learn that it was 110 companies that were looking for various forms of capital. As I looked back and reflected, I was looking for “the one thing” that can help a company make a decision about which financing vehicle is right for the business. Overwhelmingly, I always come back to the future cash flow projection. Nine times out ten when I ask a business owner if they have gone through this exercise, they say yes and they hand me a future profit and loss statement. This is not what answers my questions or the business owner’s questions. The Cash Flow Statement answers the most salient of questions: What is the need? When does it occur? What can be satisfied via traditional financing? What “hole” will be left? This is an often neglected piece of information that should not be ignored, most of the time it is a more than difficult report to generate and often requires the help of your CPA or advisor. Don’t neglect it, get to know it, it answers the big questions.
Comments
“Great observation Cole. As a CPA and having served as a CFO in several businesses, understanding where your cash flow is critical and too often overlooked. Companies need to keep an eye on immediate needs, and develop the ability to forecast for the near future.”