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Reasons-Why-Budget-Is-Necessary-for-Business-Growth

Reasons Why Budget Is Necessary for Business Growth

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You’ve got a lot going on as a business owner. Maintaining a healthy cash flow while also meeting employee and customer expectations can be a daunting task. That’s why planning ahead with a budget is crucial to the growth of your startup. To keep tabs on your business’s cash flow, plan for its future, and make educated choices, a budget is an indispensable tool. In order to meet your short-term obligations, prepare for any unexpected costs that may arise, and reach your long-term goals with ease, it is important to create and adhere to a budget. In this article, we’ll go over why it’s crucial for your small business’s success to have a budget, and then offer some helpful advice on how to make and stick to one.

What are the basics of Budgeting?

You are the owner of a small business, and you are aware that proper management of your company’s finances is essential to the success of your company. A budget is an important tool that can assist you in attaining financial stability, planning for the future, and making decisions that are based on accurate information. The following are the fundamentals of budgeting, including its purpose, the significance of setting financial goals, and the advantages of having a budget.

  1. Define a Budget and Its Purpose: A budget is a financial plan that details the expected income and expenditures for a given time period (typically one year) for your business. Its goal is to improve your financial management by giving you peace of mind that you can pay your bills, put money away for the future, and put money toward growth opportunities. If you want to reach your financial goals, a budget can show you where you need to make cuts in expenses, price changes, or revenue increases.
  2. Explain the Importance of Establishing Financial Objectives: Developing a workable budget requires first establishing some sort of financial objective. You can better manage your finances, save money, and invest if you set and regularly review attainable financial goals. Financial objectives that are not SMART (specific, measurable, attainable, relevant, and time-bound) are unlikely to be successful (SMART). One possible goal for the coming year is to raise income by 10% while cutting costs by 5%. Making a budget that serves your long-term goals requires setting SMART financial goals.
  3. Discuss the Advantages of Keeping a Budget: There are many advantages to having a budget for your small business. Just a few of the many benefits are listed below.
    • Improved Financial Management: A budget is a useful tool for managing one’s finances and ensuring one’s ability to meet one’s financial obligations.
    • Accountability: A budget can be used to ensure that both you and your team are taking responsible financial action.
    • Financial Security: A well-planned budget can help you weather economic storms by preventing cash flow or other financial crises.

How to stay on track with Financial Reports

A small business cannot keep track of its finances without regular financial reports. They help business owners see how their company is doing financially and make better choices. Among the many financial reports available are income statements, balance sheets, and cash flow statements. Businesses can monitor their progress toward their financial objectives and make course corrections based on the information provided in these reports, which should be reviewed and analyzed on a regular basis.

Need help with Budgeting and Financial Management?

With BashoffCFO, you can develop a thorough financial strategy that will promote your company’s growth and development. Budgeting, planning, and controlling your cash flows are all areas in which we can assist you. When you work with us, you’ll get new insights from our data analytics, which are designed to find things like overspending, hidden patterns, lost revenue, waste, inconsistencies, cash flow leaks, and trends. You get fast, effective, and long-lasting results that have a direct, positive effect on your revenue growth, bottom line, customer retention, and competitive advantage. Contact us to learn how our offerings can help your company.

Getting Things Done

Getting Things Done: How to Beat Procrastination

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Do you find that you are continually putting off important tasks, or do you find it difficult to maintain your focus on your goals? Perhaps you’re dealing with procrastination, a widespread issue that hinders performance in both our private and professional lives. 

People who put things off often end up missing deadlines, missing out on opportunities, and not being able to reach their full potential. Achieving success requires recognizing and addressing the underlying issues that contribute to procrastination. By the end of this post, you’ll have a better understanding of how to break the habit of procrastination and increase your productivity so that you can realize your full potential.

What are the effects of procrastination

The habit of putting things off, also known as procrastination, can have a variety of adverse effects on both our personal and professional lives. When we procrastinate, we put off until the last minute the completion of important tasks, which can result in the following:

  • Missed deadlines and incomplete projects
  • Lower quality of work
  • Lost or missed opportunities
  • Decreased productivity
  • Decreased job satisfaction
  • Increased stress and anxiety
  • Cycle of negative emotions
  • Financial difficulties
  • Relationship problems
  • Limited success and satisfaction in life

How to break procrastination

Procrastination is a common habit that can hurt our personal and professional lives, but there are ways to break the cycle and become more productive. By using these tips and strategies, we can stop putting things off and reach our goals more quickly and easily.

  1. Set clear and specific goals. Define what it is that you want to accomplish and then set goals that are both specific and measurable to help you get there. To make your objectives more attainable, you should first break them down into more manageable sub goals.
  1. Reduce complex tasks to more manageable portions. Large tasks can be difficult to tackle, but if you break them down into smaller, more manageable steps, you may find that you have an easier time completing them. Instead of trying to complete everything at once, focus on completing one step at a time to ensure success.
  2. Keep yourself organized and focused by making use of a to-do list or a planner. To keep yourself organized and focused, it is helpful to jot down your responsibilities and priorities in a planner or on a list of things to do. You can keep yourself motivated and keep track of your progress by marking off tasks as you finish them and checking them off your list.
  3. Make yourself deadlines and follow through with them. You should give yourself concrete deadlines for each of your tasks, and you should hold yourself accountable for meeting those deadlines. You can motivate yourself to meet your deadlines by offering yourself rewards or by threatening to punish yourself if you don’t.
  4. Take away any potential sources of distraction, such as social media and email notifications. Your workflow can be disrupted by distractions, which can then lead to procrastination. You can better concentrate on the tasks at hand if you get rid of or restrict potential distractions, such as social media or email notifications.
  5. Practice time management skills like putting tasks in order of importance and setting aside specific times to work. Your ability to manage your time well can help you make better use of the time you have and reduce the likelihood that you will put things off. Organize your tasks in order of importance and set aside specific blocks of time each day to work in order to assist you in remaining focused.

Importance of productivity for success

In both our personal and professional lives, productivity is a key part of being successful. Productivity means being able to get things done quickly and well, making the best use of our time and resources. When we are productive, we can reach our goals faster and better, which can bring us more success, recognition, and happiness.

Productivity is important at work if you want to meet deadlines, finish projects, and reach business goals. Employers like workers who get a lot done, and those workers are more likely to be promoted and paid more for their work. Productivity can also make people happier at work because they feel like they’ve done a good job and are proud of it.

Productivity is important in our personal lives if we want to reach our goals and take care of our responsibilities. Productivity helps us make the most of our time and do what we set out to do, whether it’s doing chores around the house, pursuing a hobby, or working on a personal project. This can make you feel like your life has more meaning and purpose.

Ultimately, productivity is a very important part of both professional and personal success. By being more productive, we can reach our goals faster and better, which can lead to more success, recognition, and happiness in life.

Conclusion

It’s important to avoid the pitfalls of procrastination, as it can limit our accomplishments and happiness. However, we may be able to kick the habit of procrastination and boost our level of productivity if we take the effort to look into the underlying factors that contribute to it and then put together a plan to address those factors.

10-Warning-Signs-Your-Business-is-Being-Poisoned-What-You-Need-to-Know-1

10 Warning Signs Your Business is Being Poisoned: What You Need to Know

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Managing a company is a challenging and difficult endeavor to undertake. There are many things that can contribute to the success of a business, but there are also many ways that a business can be poisoned, which can lead to unfavorable results or even failure. Problems like poor communication and a lot of debt, inefficient operations and poor customer service, and so on, can hurt a company and stop it from growing as much as it could. In this article, we will discuss some of the most common ways in which a company’s reputation can be damaged and  offer some insight into the potentially damaging outcomes that can result. When businesses fully understand the problems that could arise, they are better able to come up with solutions to these problems and ensure their long-term success.

What are the signs your business is being poisoned?

  1. Poor execution by management. Ineffective management execution can lead to a host of issues that can corrode a company over time. One way in which this manifests itself is through a reduction in revenue and profits as a direct result of missed targets and goals. The company’s long-term viability may be jeopardized as a result. When employees’ morale drops because of poor execution, they may become less invested in their work and produce lower-quality results.

    If a company fails to satisfy its customers, it risks losing sales and market share as those customers go elsewhere. A company’s reputation can also be hurt by its repeated inability to do its job well. This makes it harder to attract and keep customers. Last but not least, sloppy work results in elevated risk and uncertainty, which hampers the ability to plan ahead and make well-informed choices.
  2. No consistent review of key metrics. Revenue, customer satisfaction, and market share are important metrics that can reveal a company’s health and performance. Without regular metrics reviews, a business may not be able to identify issues or areas for improvement, which can poison the business. If financial metrics aren’t reviewed regularly, a business may not notice declining revenue until it’s too late. A cash flow crisis may result.

    If customer feedback is not regularly reviewed, a drop in customer satisfaction may go unnoticed. This could cost the business customers and reputation. Failure to regularly review key metrics can lead to a lack of business insight, making it difficult to make informed decisions and address potential issues before they become major issues.
  3. No cash flow planning. One of the most typical and potentially disastrous errors that a company can make is skipping out on cash flow planning. Planning for a company’s cash flow, which involves forecasting that company’s cash inflows and outflows, is an essential component of financial management. This planning is done to ensure that the company has adequate liquidity to meet its financial obligations. A company that does not have a cash flow plan may not be aware of the potential cash flow gaps that it may experience. This lack of awareness can lead to cash flow problems, which can be detrimental to the company’s health.
  4. No staff training and onboard training. Considering that employees are a company’s most valuable asset, it is essential for a company to make investments in their professional development in order for the company to be successful. Without adequate orientation and training, new hires may be ill-prepared to do their jobs, which can have a negative impact on the company as a whole.

    For instance, if workers are not given adequate product knowledge training, they might misinform customers or fail to close deals. Consequently, this may cause dissatisfaction among customers and a drop in earnings. Similarly, if workers aren’t properly onboarded, they may struggle to adapt to the company’s values and practices, which can result in poor performance and low morale.
  5. Poor customer service. Any business depends on customer satisfaction. Negative customer experiences can damage a company’s reputation, trust, and revenue. Poor customer service includes long wait times, rude staff, and unhelpful interactions. Negative experiences shared by customers can damage the business’s reputation and customer base. Poor customer service makes customers more likely to switch to a competitor, decreasing loyalty. This is especially harmful in competitive industries.

    Finally, poor customer service may deter customers from returning. Poor customer service can decrease revenue, reputation, and customer loyalty. Thus, businesses must prioritize customer service and ensure customer satisfaction. This can boost revenue, customer loyalty, and business longevity.
  6. Poor communication throughout the organization. Communication is the key to collaboration and teamwork, and when it breaks down, it can cause many issues that can poison the business. Poor communication can cause misunderstandings, missed deadlines, and lower productivity. Employees who don’t communicate well may not know what others are doing, which can lead to duplication, missed opportunities, and decreased efficiency.

    Poor communication can also damage employee morale by making them feel unappreciated or uninformed. This can increase turnover and job dissatisfaction, costing the company. Finally, if employees don’t know the company’s goals or strategy, poor communication can cause them to lose focus. This reduces innovation, competitiveness, and market share. Poor company-wide communication can hurt productivity, employee retention, and competitiveness. So, businesses must make good communication a top priority and make sure employees work together to reach company goals. This can boost productivity, teamwork, and business longevity.
  7. Inefficient operations. Inefficient operations can make lead times longer, cause people to miss deadlines, and make a business less competitive. Inefficient operations waste time and money by wasting labor and materials. Costs may be higher than income, which lowers profitability. Employees may not be able to come up with new products and services because they don’t have enough time or resources to do so. New products and services may come out faster from competitors, making it harder to be competitive.

    Lastly, operations that aren’t working well can make employees feel like their work isn’t being used or that they can’t reach their goals. This can make them angry and less interested in their jobs. The bottom line of a company can be hurt by high turnover and low morale. Operations that aren’t run well can hurt productivity, competitiveness, and profits. So, businesses need to regularly look at how they run and find ways to make them better. Streamlining operations and getting rid of inefficiencies increases productivity, lowers costs, and ensures long-term success.
  8. Poor Culture. Organizational culture is the values, beliefs, and practices that shape employee behavior and attitudes. Poor culture can lead to low engagement, high turnover, low productivity, and low revenue. Lack of trust, transparency, or accountability can indicate a bad culture. Disengaged employees can lower productivity and turnover rates. Poor culture can also inhibit innovation and creativity because employees may not feel empowered to suggest new ideas or challenge current practices.
  9. No controls over purchases & inventory. Overstocking or understocking inventory can decrease revenue and increase costs. Overstocking increases storage and handling costs and risks inventory spoilage or damage. Understocking can result in lost sales, customer dissatisfaction, and market share. Uncontrolled purchases can also lead to unnecessary or duplicate purchases, increasing costs and decreasing profitability. Lack of inventory visibility can lead to emergency orders, overtime, and lost productivity. Uncontrolled purchases and inventory can also lead to fraud and theft, as employees can manipulate inventory records or buy unnecessary items. Uncontrolled purchases and inventory can hurt a business by lowering revenue, raising costs, and raising legal and ethical concerns.

    Thus, businesses must prioritize inventory and purchase controls, such as inventory management software, regular audits, and employee training. Businesses can avoid unnecessary costs, have the right inventory at the right time, and ensure long-term success by doing so.
  10. Excessive debt. Excessive debt can increase interest payments, affecting cash flow and profitability. This can also hinder strategic investments like expanding operations or launching new products or services. Excessive debt may make a company appear riskier to lenders, lowering its creditworthiness. This can raise interest rates and limit credit, limiting the company’s growth. Excessive debt may force the company to prioritize debt payments over other expenses like employee salaries or research and development, limiting flexibility. Since the company may not have the resources to grow, employee morale and innovation may suffer. Excessive debt can hurt a company’s profitability, competitiveness, and longevity. Thus, companies must carefully manage their debt and invest in long-term growth. Businesses can ensure long-term success by doing so.

Conclusion

Ultimately, businesses must be aware of the potential pitfalls that can poison their business and take measures to avoid or mitigate these issues. Whether it’s poor management execution, inefficient operations, or excessive debt, these issues can have significant negative repercussions and hinder a company’s long-term success. By staying aware and putting proactive steps to avoid these problems at the top of their lists, businesses can make sure they stay competitive and successful in their industries. Being aware of and prepared for these challenges is more crucial than ever in today’s fast-paced business environment, and companies that invest the time to do so will be better positioned for success.

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Why do you need a Cash Flow Statement?

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A cash flow statement is an important tool for managing money because it shows how much cash is coming into and going out of a business. Along with the income statement and the balance sheet, this statement is one of the three main reports that are used to figure out how well a company is doing.

What is included in a cash flow statement?

Cash Generated through Operational Activities. It is a section of a company’s cash flow statement that reflects the amount of cash that a company creates (or spends) as a result of carrying out its operating activities over the course of a certain amount of time.

Examples of Operational Activities are:

  • Sales cash
  • Payments to suppliers
  • Loan interest


Cash Generated through Investment Activities. Any and all sources and uses of cash derived from a company’s investments are considered to be investing activities. This list includes anything that has to do with mergers and acquisitions (M&A), such as the buying or selling of assets, the giving or receiving of loans, and any other payments associated with those transactions. In a nutshell, fluctuations in investment cash flow are related to changes in equipment, assets, or investments.

Examples of Investing Activities are:

  • Buying fixed assets
  • Buying stocks or securities
  • Lending money
  • Sale of fixed assets
  • Sale of investment securities
  • Paid back loans
  • Insurance payout

Cash Generated from Financing Activities. The net cash inflows and outflows used to finance a business are shown in a company’s cash flow from financing activities (CFF), which is a subset of the cash flow statement.  A company’s financial health and the efficiency with which its capital structure is managed can be gauged by looking at the cash it generates from its financing activities.

Examples of Financing Activities are:

  • Stock repurchase
  • Money collected from long-term debt
  • Long-term debt payments
  • Dividend payments

In Conclusion

A cash flow statement can help you assess your company’s financial stability, profitability, and future growth. It is used to figure out if a company has enough cash or liquidity to pay its bills and to make predictions about its future cash flow, which is helpful for budgeting.


How can BashoffCFO help

BashoffCFO uses its own cash flow management system to look into every part of your business and give you strategies and tactics that will turn your company into a high-performance cash flow machine. Let’s get started today! or call us at 410-952-6767 for a free consultation.

How does BashoffCFO do its full business analysis?

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The very first thing we do is examine the company’s activities and determine:

  • What its business is and its goal? 
  • What products and services does it offer? 
  • Who are the people, and how do they operate on a daily basis? 
  • How do they operate internally and with customers? 
  • How do they collect their money?

What are the areas that can cause cash flow problems?

Once we have a good understanding of how the business operates and what its true purpose is on a daily basis, we look at certain areas that cause cash flow problems, such as:

  • Revenue Sources. What exactly are the margins? What are your products and services, and what margins do they generate? Frequently, people will have products that sell well and have a high volume but have very low margins. If you look at the profitability of some of these products and services, you’ll see losses or very low margins, so we’ll analyze these products and services to determine what profits are being generated.
  • Business Expenses such as Payroll. We will also do a comprehensive review of all of your business’s expenses. Your equipment acquisitions. your daily expenditures, your payroll.

How can payroll cause a major cash flow problem?


Payrolls are big categories because labor is often the most expensive part of running a business, and there is often a lot of waste in labor that can be traced back to inefficient processes.

Poor processes and procedures within a business are often traced back to the fact that many businesses don’t have written procedures; instead, they operate day-to-day under the assumption that everyone understands what they need to do.

How BashoffCFO works?

At BashoffCFO, we look at how everything fits together and often make a flow chart to show how all the people, processes, and procedures work together. Because cash flow is the lifeblood of a business, everyone must strive to be paid and produce enough money to cover all expenditures and wages, as well as maintain sufficient cash flow, in order to continue a company and ensure its long-term sustainability.

Do you want to get in touch with BashoffCFO? Call us at 410-952-6767 for a free consultation, or click here to get started.

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What are the 5 most common cash flow issues?

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The phrase “cash flow” refers to the total amount of money that enters and exits your company over a certain time period. From a financial point of view, this is the end of both accounts receivable and accounts payable.

The flow of cash is a crucial factor in the success of small enterprises. Your company will need you to do at least some of the most fundamental accounting tasks, regardless of whether or not you believe yourself to be a “money person.” You need to keep a close watch on your cash flow if you want to be successful as an entrepreneur. If you don’t, you run the risk of getting into circumstances in which your business doesn’t have enough money to keep running.

To get started, it is important to evaluate some of the most frequent cash flow challenges that small and medium-sized businesses face. Below are some common cash flow problems.

  1. Late or partial payments. When it comes to cash flow issues, outstanding payments are one of the most significant obstacles, especially for small and medium-sized businesses encounter. According to the findings of one research, 54% of outstanding bills are paid late. This is a real cash flow problem, since you’ve already done the work but haven’t been paid for it. You will not only lose the profit from the task, but you will also lose the money that the job costs you to accomplish.
  2. Not enough cash reserves on hand. A cash reserve may be thought of as something similar to a financial safety net for your company. You may calculate how much cash reserve your company needs by dividing the total cash on hand by the total cash outflows. This will inform you of the number of days that your cash on hand will be able to make up for the lack of cash flow that is coming in from other sources.
  3. Excessive overhead expenses. In the context of your company, “overheads” refer to any recurring costs that aren’t directly associated with the manufacturing and sale of your goods. The cost of your rent, Internet service, and other utility bills are typical examples. Even while these expenses are necessary in order to keep your company’s doors open, they may be detrimental to your company’s cash flow, particularly if they begin to spiral out of control. When your overhead costs reach a certain threshold, it may become challenging for you to make payments on time, and in the long term, you may find that you run out of money altogether.
  4. Overstocking. There is one area that you need to investigate right away if money is tight, and that area is your inventory. If you find yourself in a situation with negative cash flow and money is tight, you should check into this area. An excessive amount of inventory, also known as overstocking, may have an effect on the flow of money into and out of your company. When you keep an excessive quantity of your raw materials or finished goods in stock, it may tie up considerable sums of money and occupy expensive warehouse space. Worse still, items that have been sitting on your shelves for an excessive amount of time run the danger of becoming obsolete and unsalable, which will result in decreased profits for your business.
  5. Poor or no financial planning. If you don’t do a proper cash flow forecast and don’t plan your budget beforehand, you increase the likelihood of experiencing cash shortages and put yourself in a position where you might find yourself in significant financial problems. It doesn’t matter if you come up with a fantastic financial strategy and an almost precise prediction; if you pursue a business model that results in negative cash flow, you’re going to get yourself into a lot of problems sooner or later.

How to fix cash flow issues?

Increasing your cash flow as well as your profit margins may be accomplished very effectively with the assistance of virtual CFO services. They assist businesses in regaining control of their financial situations and coming to choices that are in the organization’s overall best interest. A virtual chief financial officer may be obtained via outsourcing at a fraction of the expense of paying someone to work domestically.

What is BashoffCFO?

BashoffCFO is a group of High-Impact CFOs, Business Advisors, and Cash Flow Specialists, who focus on accelerating your cash flow and generating profitable growth. We work to rapidly increase your profitability, radically improve operational efficiency, and help you achieve exponential growth. 
Discover how BashoffCFO may help you succeed faster! Visit www.bashoffcfo.com or call 410-952-6767

5-Ways-to-Improve-Your-Companys-Financial-Position

How to Improve Your Company’s Financial Position

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To improve your company’s financial position, you need to take a detailed look at it and correct the aspects that are not functioning well. There are a variety of factors that influence how well your company’s finances are doing.

The following is a list of actions that you can start taking right now that will help improve your company’s financial position:

  1. Curb Your Expenditures. One of the most efficient ways to strengthen your company’s financial position is to reduce your expenditure to a level that is more easily manageable. Conduct a comprehensive analysis of your business to discover whether or not it is possible to locate more cost-effective alternatives to the supplies, equipment, and services that it requires. Investigate the possibility of obtaining bank accounts and insurance policies that have conditions that are more to your liking. Investigate the possibilities of making bigger payments on a more frequent basis or delaying them so that you may maintain a greater quantity of liquid assets in your possession.
  2. Maintain monthly records of all cash transactions. The most basic study of your company’s total financial position requires three financial statements: a balance sheet, a cash flow statement, and a profit and loss statement. If you do not have these three financial statements, you cannot undertake the analysis. Because you will be referring to these statements on a regular basis, you should make it a point to acquire in-depth knowledge of each one.

    On a balance sheet, your assets, liabilities, and total net worth are all weighed and measured against one another. A cash flow statement, which may also be referred to as a statement of cash flows,” is a kind of financial document that details an organization’s cash inflows as well as its cash disbursements over the course of a certain amount of time. It shows how things like running the business, making investments, and getting loans create cash and how that cash is then spent by the company. Furthermore, the amount of interest and income taxes paid by your company is detailed on the cash flow statement. The statement of profits and losses provides an indication of how your business is doing financially as a whole. It does this by contrasting the amount of money your organization is producing with the amount of money it is spending.
  3. Chase down overdue payments. If any of your payments go unpaid, it might have a significant negative impact on the cash flow of your business as well as its overall financial health. If this keeps happening to you, it might be time to call a debt collection agency for help. This may be the case if you discover that this is a recurring issue for you. In the meantime, you should make it a routine to often remind debtors of the obligations they have. This should become second nature to you. When establishing sales agreements, you should also make sure that the conditions are crystal clear about when the money is due as well as the penalties for missed payments.
  4. Consolidating one’s multiple spending obligations. When searching for ways to improve the company’s financial position, it is essential to take a detailed look at the business’s outstanding obligations. This will help you determine which measures will be most effective. If you have a significant amount of debt, you should assess whether or not it would be advantageous for you to consolidate that debt. When you combine all of your outstanding debts into a single monthly payment, you may often save costs and free up more time for yourself. It is advisable to carry out some investigation and consider a number of different possibilities before settling on a brand-new plan or arrangement.
  5. Improve the performance of your marketing initiatives. If you feel that your company’s marketing is falling behind the times, now is a great opportunity to study several tactics that might bring it up to speed. E-mail, social media, video, and retargeted advertising are some of the modern marketing channels and mediums that should be considered for use. Conduct experiments on all of your different advertising strategies to verify that you are getting a satisfactory return on your financial investment.

Why hire a Virtual CFO

A virtual CFO contributes to organizational leadership by keeping tabs on all the money matters, both now and in the future, through continuous strategy development. They are in charge of tasks that look to the future, such as budgeting, forecasting, vendor partnerships, tax strategies, compliance issues, and planning, all toward a better financial position. Do you need support to improve your company’s financial position? Call 410-952-6767 or contact us today for a FREE consultation.

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What is Free Cash Flow and How does it work?

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Free cash flow, often abbreviated as “FCF, is an efficiency and liquidity ratio that determines how much more cash a firm earns than it uses to operate and grow its business. It is calculated by deducting capital expenditures (CAPEX) from operational cash flow. For investors, free cash flow serves as an indicator of a company’s financial performance, which affects how much a company is worth. For small business owners, FCF helps them figure out if their business can grow, change, or make more money.

What are the types of Free Cash Flow

It is not always clear what is meant when someone mentions FCF. People may be referring to one of several metrics.

Here are the two most common types:

  1. Free Cash Flow to the Firm (FCFF).  This is the cash flow available to all funding providers (debt holders, preferred stockholders, common stockholders, convertible bond investors, etc.). It indicates the excess funds that a company would have if it had no debt.
  2. Free Cash Flow to Equity. This is the amount of cash that a company generates that could eventually be distributed to shareholders. It is determined by subtracting net debt issued from capital expenditures and adding cash from operations.

How Free Cash Flow Works

When a business has positive free cash flow, it can pay all of its monthly bills and still have money left over. Businesses that are performing well and have rising or high free cash flow metrics may desire to grow. Growing the free cash flow of a company attracts investors. These businesses can invest their extra income to get a return. On the other hand, if there is little money left over after paying for business expenses, the free cash flow is minimal. Because of this, investors may be less interested in the company because it may be less likely to make money in the future.

Having difficulty monitoring the financial performance of your business? Call 410-952-6767 or contact us today for a FREE consultation.

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Why does Liquidity Matter to Businesses?

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To stay solvent, businesses require money. Your business will struggle to succeed even with strong sales if it doesn’t have the cash to operate. However, examining your company’s cash flow status requires more effort than checking your bank account. Liquidity can be used as a metric to assess their capacity to meet short-term financial obligations. It serves as a gauge of your company’s capacity to turn assets—or anything else it owns with a monetary value—into cash. It is quick and simple to turn liquid assets into cash.

What is Company’s Ability to pay

A company’s ability to pay its short-term liabilities—those that are due in less than a year—is measured by its liquidity. For instance, you may determine that you have enough cash on hand to cover all of your anticipated expenses by looking at your current and future obligations. Or you could decide that you need to use additional assets and investments that can be turned into cash. The more liquid an asset is, the simpler it is to turn it into cash. 

Why is Liquidity Important?

The investments and assets that your business possesses have financial value. And liquidity refers to how soon, should the need arise, you can access this money. Here are a few reasons why it matters to businesses.

  1. Tracks the financial health of your business: You can learn about your company’s current financial performance and future financial planning by measuring liquidity.
  1. Liquidity Planning fills the gaps between when the business might run out of cash to pay for anticipated obligations: This involves coordinating the bills you anticipate receiving and the invoices you anticipate sending via accounts receivable and accounts payable. 
  2. Provides visibility for possible future investments or business expansion. When doing liquidity planning, you’ll also be keeping an eye out for times when you might anticipate having extra money that could be used toward other investments or business expansion.

How can a CFO help with liquidity?

The existence of economic uncertainty may cause you to continue to experience capital pressure in your company. Maintaining a steady flow of cash is very essential in order to satisfy unplanned obligations and pay for unanticipated expenses. When something like this takes place, it is the task of the Chief Financial Officer (CFO) to develop plans that will both increase the amount of money coming in and keep the amount of money going out under control so that the company may have the greatest amount of liquidity possible.

Need a virtual CFO to help you with liquidity? Let’s get started today! or call us at 410-952-6767 for a free consultation.


Is-your-Business-Adaptable-3-Questions-to-Ask-Yourself.

Is your Business Adaptable? 3 Questions to Ask Yourself

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Do you have an adaptable plan that guides your business into the future?  We all need a roadmap to help us get to our destination-and that roadmap must have options for changes along the way. Many companies focus solely on day-to-day operations and do not realize how frequently they must adapt to survive and thrive in today’s rapidly changing world full of uncertainty, disruption, new technologies, and constant risk. As any successful business owner will tell you, remaining agile is a key component to success. 

Here are 3 questions to ask yourself to help determine just how adaptable your business is.

  1. Are you focused more on past accomplishments than future goals? Perhaps, you have had a great quarter and profits are up, don’t let this take your focus off what’s ahead. Always maintain a strong sense of the next goal.  You should be constantly working towards improving yourself and your business even if at the current time you are performing profitably and efficiently.
  2. Do you know what others are saying about you? Customer or client feedback is crucial to finding areas of improvement. The more you know about how others view your organization, the better you can adjust where needed. Having a better idea of what works or what doesn’t means you will know how to invest your time, money, and resources for the best return.
  3. Are you watching social, economic, business and technology trends? It’s vital to your success to be aware of all the changes around us that could have an impact on your industry. Ask customers what problems they need solved, attend networking events, read publications, keep in touch with colleagues,  review your business on a consistent basis and most importantly, listen and look for changes.   

This quick self-examination is just a start. Get the help you need to thrive! Call 410-952-6767 and get your free FREE S.W.O.T analysis today.

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Bashoff CFO, LLC is not a certified public accounting firm and is not authorized to practice law or provide legal services.