Manifest: The Cash Flow Project
In my last Manifest entry I stated that our "Finances are Fucked". While I'm a fan of hyperbolic language, the more accurate statement would be "Our finances are incredibly strong. Our cash flow is fucked.".
For the last month, we have been working hard to improve our short term cash flow challenge (hitting us for about four months from May - August). Before getting into where we're at now and our next steps, here's the message I shared with our leadership teams on Monday, February 6th. I hope the transparency here can help other leaders and entrepreneurs navigate similar situations, should you find yourself in them.
How it started...
Good morning,?everyone. I hope you all had a nice weekend!
To kick off the week and, for some of you, your employment with C&C Group, I have an important project for us to tackle, together... I'm calling it "The Cash Flow Project". As you'll read, below, I am going to provide a very transparent overview of the current situation and the strategies we need to implement immediately.
There has been one downside to our newly acquired Eyereturn business at MPL... the cash flow model. As a result, C&C Group is going to experience a challenging cash flow situation starting the week of April 17th that will most likely last until the end of fiscal 2023 (August 31st). Please note that, while cash flow will be concerning, our P&L (actual financial performance) is projected to remain incredibly strong. The silver lining here is that, once we have made it through these next 6 months, C&C Group's cash flow is projected to be the healthiest it has ever been. We are faced with a short-term cash in vs. cash out problem. In order to weather this storm, we need all of our company's leaders focused on these five key objectives, presented in order of importance:
1. AR/AP FORECASTING ACCURACY
We currently have the projected and actual AP and AR mapped out for MPL Buying (as well as the rest of C&C Group, obviously). I would like to see a meeting set up to go over our cash flow forecast line by line to ensure the current situation is 100% accurately presented both in terms of dollars in vs. dollars out but, also, that all formulas in our sheet are pulling through correctly (yesterday I found a sum error in the "cash from revenue line" that, when corrected, added nearly $700,000 in balance over the next six months .?Moving forward, I would like to see our Cash Flow Forecast (CFF) updated daily vs. weekly.
2. SECURING ADDITIONAL FINANCING
BDC has offered to finance a portion of our acquisition of [redacted] to the tune of $250,000. The issue here is that I have already accounted for this additional financing when reporting on our current state, above. In addition to this BDC funding, I will be working closely with our account manager at RBC and connecting with other Tier 1 banks to see how much additional credit we can capture.?Ideally, we will have an additional $750,000 lined up by the end of April.
3. ACCOUNTS RECEIVABLE PERFORMANCE
There are two key strategies we need to execute here:
4. ACHIEVING SALES TARGETS
Our Q2 Group-level sales target is $2.267 million. Today, we are at 82% of that target with 3.5 weeks left in the quarter. On the MPL side, we need to hit our February buying target. On the C&C side, we need to close two additional website sales in February and secure deposit payments in March.
Our Q3 Group-level sales target is $2.3 million, $1.3 million from C&C and $1 million from MPL. These are business as usual targets that sees C&C keep up its delivery capacity / project cadence with the current team and MPL working against the budget Chad and I put in place with the addition of the new buying business.?
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While it's business as usual, I will be more scrutinous on our monthly and weekly performance targets through Q3 to ensure we don't have any slippage.
5. AVOIDING PAYMENT SLIPPAGE AT THE DELIVERY LEVEL
There are only three ways that we experience payment slippage from active projects / clients:
It is imperative that all project teams are prioritizing team capacity and task allocation against billing milestone deliverables (always but especially for the next few months). And we need to enforce our contract terms for when we are allowed to bill clients who cause project delays.
For the latter point, here, I want to stress that (A) these conversations should never come out of left field and we need to be highlighting this specific contract / SOW clause BEFORE our clients are signing off on them and (B) enforcing them should never feel like some sort of battle or confrontation with a client. If a client is delayed, this is par for the course in our business and we need to remain flexible to those shifting timelines (within reason) BUT we must decouple project timelines from billing milestones in these circumstances. Most clients will be understanding and take accountability for their delays, in my experience.
CONCLUDING THOUGHTS
I want to stress that there is no silver bullet strategy that will resolve our looming cash flow challenges. Rather, to have smooth sailing over the next four or five months, we need to execute all five of the strategies, above, and remember to follow a few of our core values in the process;?Craft with Passion, Be a Crew, Love the Journey.
As I said, initially, the silver lining is that even if we?didn't?improve short term cash flow (April - August), our long-term position is?already?the healthiest it has ever been in C&C Group's history. Regardless of what happens in the next few months, we will head into fiscal 2024 (September) in a strong position that will allow us to continue fuelling our growth, manage a recession without a great deal of stress, or most likely a combination of both. What we can achieve in the next 120 days will only further position us for long term success!
Thank you all for your hard work, I'm looking forward to tackling this challenge as a Crew.
Dave
How it's going...
While we still deep in the woods, it has been incredible to see what we have accomplished as a team in the last month. "The Cash Flow Project" has occupied most of my time and it has felt like I'm getting a finance MBA in the process. Stressful but rewarding.
Ensuring the accuracy of our AR/AP forecasting projections.
All of our efforts this past month have shifted out the start of our challenging cash flow from the week of April 17th to the week of May 1st and reduced the scope of that challenge by 66%. I'll share another update on The Cash Flow Project next month.
The Elephant in the Room...
"Dave, did you not just take your team on an all expenses paid trip to Mexico? That seems like a stupid idea given everything you've outlined, above." Yes, we did and, yes, it is. But... the trip was booked this past summer / fall before the opportunity to take over Eyereturn's business ever surfaced. So, it is what it is. And what it was was a great fucking time. More on that in the next edition of Manifest.
Partner at Daughter Creative
2 年Love the transparency here and the level of detail. Congrats on involving your whole agency and the progress you've made!
Loves Big Ideas
2 年Fucked or not, this is a fascinating and encouraging glimpse into both finances and leadership in action.. Thanks for sharing!
Brand Builder | Founder of Kleurvision | Cover Model | Co-Founder of Access IO ????
2 年Wu-Tang is for the children! And now I have it playing in the background while I work. Cash flow is hard, especially in the agency world.