An outsourced CFO’s step-by-step process to managing cash flow for growth-minded businesses
If you’re a growth-minded business, what’s the best way to manage your cash flow during uncertainty??
Financial expert Patrick Arnold gives us the step-by-step process he uses as an outsourced CFO.?
Step 1: Unveiling the metrics that drive financial results??
To truly understand your organisation's financial statements, it's essential to identify the non-financial metrics that influence those results. Walk down the financial statements and uncover the factors driving revenue, variable costs, and the mix of fixed costs. By pinpointing these levers within your day-to-day operations, you gain control over your financial outcomes.?
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Step 2: Analysing historical financials and non-financial metrics??
Take a deep dive into historical financials and related non-financial metrics to gain insights into your profitability margins. Measure metrics like revenue per customer, cost per employee, and fixed overhead margins. This analysis unveils your organisation's strengths and identifies opportunities for improvement. Understanding who you are as an organisation is crucial to building a solid foundation for growth.?
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Step 3: Embracing long-term forecasting??
Once you know your profit margins and have a clear vision of where you want to go, it's time to develop a rolling forecast. Look ahead and anticipate your customers' needs and future market trends. By aligning your skill set with these future demands, you position yourself as a leader in your industry. Long-term forecasting allows your organisation to stay sustainable without being overly influenced by short-term economic fluctuations.?
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Step 4: Comparing actuals to the plan??
Creating a forecast is only the beginning. To stay on track, regularly compare your actual financial results to the projections outlined in your plan. Understand the fluctuations and variances, acknowledging both successes and areas for improvement. This knowledge is invaluable as it informs future decision-making and ensures continuous growth.?
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Step 5: Transparency through management reporting??
Transparency is key throughout your organisation. Implement transparent management reporting at all levels, from operational managers to owners, investors, and other stakeholders. By aligning everyone with your long-term plan, you foster a shared understanding and collective effort towards your growth objectives.?
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By incorporating these steps into your organisational strategy, you unlock the potential for exponential growth. Remember, management reporting and forecasting provide the insights and foresight needed to make informed decisions and stay ahead of the competition.??