"...keeping you great"
HEADLINES:
Cash From Patents -- FORTUNE Small Business Magazine is looking for a U.S. business owner or entrepreneur who has a patent or patents in their name. If so, they want to know whether that patent has been of any value to you and/or your business. Have you ever had to defend your patent in court and were you successful? Have you ever reaped any financial reward from owning a patent? Do you think the cost of filing for your patent(s) was worth it? Whether the answer is yes or no, they would like to hear from you, so if you think you fit the bill, or know of anyone who does, please contact Malika ASAP at malika_worrall@fortunemail.com.
Killer Cash Position -- John Ratliff, founder of Appletree, relied on a big line of credit (LOC) to support his growth. Not anymore. They just finished the best quarter in their history (answering phones!) and more importantly their best cash position ever with no need for the LOC. The key? A daily cash report. Noted John in an email this past week "I have been attending your sessions for nearly 4 years now...however hearing you say over and over to get a report of your cash position every single day never really resonated with me."
Daily Cash Report -- continued John "we have a great bank relationship, big line of credit and pretty healthy cash flow so I never really paid too much attention except monthly. We would be in and out of our line of credit 2 or 3 times a month, never for all of it, sometimes half but that is about the most we used. Finally it dawned on me that it was stupid to be doing that, so even though we were not in crisis or even mildly in danger I was majorly annoyed. So, I started getting cash reports daily (only took 15 years!) and wow what an insight that is. Today is September 30th, close of the 3rd quarter (hard to believe) and we just finished the best quarter in our history, and maybe more importantly our best cash position ever! No LOC use this month and a killer cash position. Thanks for finally getting the cash message through my thick head."
Embezzled Cash -- Jay Goltz, owner of Chicago-based Artist Frame Service and dear friend, wrote a scary piece for FSB magazine this week -- the con artist he hired as his accounts payable person who embezzled $75k of cash from him. Take two minutes and read his lessons learned. It's critical that you have two separate people handling your banking -- one person accountable for tracking the money coming into the company (treasurer/receivables); and a second person accountable for tracking the money leaving the company (controller/payables). Receiving a daily cash report also goes a long way to preventing embezzlement -- you can see daily changes tied to specific checks issued and amounts collected that let you see odd patterns of activity.
Free Cash Flow -- are your executives financially literate? A sample of C-Level executives to supervisors was asked to take a basic financial literacy exam and they flunked, scoring on average 38%. Most operations managers, marketing execs, etc. couldn't distinguish between cash and profit or an income statement from a balance sheet. And 70% couldn't pick the correct definition of "free cash flow." Here's a link to the results and some of the questions. As the study notes, it's hard for managers to increase cash when they are unaware of the balance sheet levers they could pull to increase cash flow. Thanks to Gary Moon, Managing Director of Ridgecrest Capital Partners and fellow Barcelonan now, for pointing me to this October 2009 HBR article.
Cashing In -- and this note from Rich Manders, Founder/President of AutomationSolutions, "As you may recall, using the skills gained at the MIT 2005 classes you taught and lots of help from EO and friends I was able to sell my business to a private equity firm. The Rockefeller Habits was a key to our high profitability and high multiple we received." It's our continued experience that companies that implement the Rockefeller Habits achieve superior profitability and valuations. Let us know if we can help.
Putting Cash to Work -- no book has more profound impact on my thoughts about money than Lynne Twist's Soul of Money. As she suggests, money is like water -- it's meant to flow with positive intention. For those that know how to properly put money to work, more money will flow to them; for those that hoard money or use it for bad intent, it will tend to stop flowing. Get the book (or hear her speak at the Growth Summit Oct 21) and be sure to read Chapter 5 first.
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