How to Make Your Bank Fall In Love With You!

Bankers hate to be surprised. The worse thing you can do is to suddenly surprise your banker with bad news that should have been shared earlier. If you do this, you lose their trust and their faith in you and your business. Financial stress doesn’t just happen, it evolves over time. In their minds, you knew it was coming, ducked acknowledgement of the problem and didn’t give them any warning. At this point, it is typically much harder for them to help you – assuming they now want to.

So…don’t surprise them by consistently delivering to them a business update EVERY month (example at end)! 

Early on at RAPID, one of my mentors, Steve Cerri, strongly encouraged me to send out a monthly update to my shareholders (people who had invested money in RAPID and owned a part of it), our banker, our CPA/ accountant and our lawyer. Our bank quickly fell in love with both RAPID and me. Our personal banker was so impressed with us proactively providing this information that he forwarded the email to other bankers and eventually it reached the bank President. Within a few months, the bank held us up as a shining example of a great customer. Everyone at the bank (and eventually other area banks) knew who we were! Our financial results were not important – it was the proactive communication that counted. The bank knew we would not surprise them. And when we went to them for more money to expand, they bent over backward to help us.

What should a Monthly Update consist of? A pdf of the Balance Sheet (last day of month), the month’s P&L and the YTD (Year to Date) P&L through the end of the month. In the email body you should highlight metrics (at least 3 and not more than 10 key numbers) and how they compare to previous numbers, good news and bad news, and future plans.

Metrics should be such things as revenue, number of customers, number of new customers, Account Receivable Days, backlog, bookings, number of quotes, number of orders, % of revenue of largest customer or largest five customers. Any number/ metric that shows the health of your business and that you have decided are important to your success. 

The other benefit of sending a Monthly Update is that you can’t fool yourself. “And you are the easiest person to fool” (Richard Feynman). No head in the sand ignoring a bad month or hoping things will turn around. It forces to you to face facts and accept reality which is the first part of fixing a problem. And it was the start of how I learned financials/ accounting as I now had to go into QuickBooks and make sure the information was correct before sending.

Here is an example of an email body:

October was a good month. We increased sales to $435,688 and YTD sales stand at $4,234,567 which are 12% and 11% respectively over 2019. Our goal of hitting $5,000,000 in 2020 revenue looks solid! The backlog ended at $1,890,675 and we booked $357,883 (slightly lower than average) on 23 orders. No new customers were booked but we did ship our first job to New Age Aerospace. Receivables are $856,725 which is 62 days, an increase from September’s 59 days.

The team was excited to see our new Cobot unload its first parts from one of the Haas mills. This will help narrow the skills gap and now allows the machine operator to focus on more value-added activities. Unfortunately, we received word that the pandemic has caused one of our top ten customers to close at the end of the year. Receivables are not anticipated to be a problem as they are a division of a Fortune 500 company. We are working hard to replace the lost revenue by increasing revenue from our existing customers as well as identifying potential new customers who fit into our shop profile. Our new estimating software, Paperless Parts (shameless plug ??) has reduced quote turnaround time from four to two days on average and customers are telling us they appreciate the streamlined quote and more estimator engagement (the estimator is spending less time on inputting redundant information).

Looking ahead, we see a strong finish to the end of the year with enough backlog to keep us at steady over-time through December. Our 2021 planning is beginning, and we anticipate adding two new machining centers and possibly two more Cobots to meet demand. The labor market remains tight and we may need to bump up hourly pay to remain competitive. Good problems though to have after the uncertainty of the pandemic shutdown!