Understanding the difference between Cash Flow and Net Income is a foundational step in running your business. Net Income is the first metric that business owners focus on and it truly is a good measure of the business growth. However, Cash Flow is an even more important metric that many business owners fail to track. Many business owners think that Net Income and Cash Flow are the same thing. They are interrelated but they are not the same. Think of it this way – Net Income is a point in time of your current Revenues minus Expenses whereas Cash Flow represents the ability to pay your bills. Cash Flow is dependent on timing and how much cash comes in the door and out the door which causes uncertainty in reporting. Because Cash Flow only represents money in your bank, your business can show a profit and still have no cash. Your business could be showing a profit but if the cash flow is low, then you may still face problems. You need to address this cash flow issue. By categorizing your spending, you will gain insight into where your money is going. Then you can take control and make more informed decisions when it comes to growing your business. Working with your customers to shorten the payment cycle can speed up money in the door and working with your vendors to set a pay cycle that is longer than your receipts cycle will slow the outflow of cash. These simple steps can help you take control of your cash flow. Having control of your cash flow provides opportunities for growth and flexibility and ultimately being able to pay yourself as an owner.

ClearPath Associates Fractional CFO Services are built on 4 Quadrants of Service • CFO Financial Advisory • Accounting • Bookkeeping • Cleanup and Historic Accounting With our CFO Advisory Services, we translate your data to what’s relevant for your business so that you can take the actions needed to maintain success. We focus heavily on analysis – both financially and operationally. While you’re busy working ON your business, we work IN your business focusing on analytics to protect the money your business makes and examine all the various ways you can make MORE of it. Within the broad scope of our Accounting Services, we help prepare budgets, manage cash flow, establish and monitor financial policies and procedures, create and enforce internal controls, collect and analyze financial data and profitability of key products/services. We comply with federal/state/local legal requirements and organize fiscal year-end tax information for your company’s tax preparer. Our bookkeeping services range from classifying transactions at the onset of each month to reconciling the books at the end of each month. We record and store your financial transactions, typically in QuickBooks. We manage your accounts payable and accounts receivable and can handle payroll and expense reporting. At the end of the month, your financial statements will be delivered to you. With our Cleanup Service, we “clean up” your books. We’ll take a look back to ensure that your previous bookkeepers were on top of your numbers and that your bank statements are reconciled. Although this is typically a one-and-done type service, cleanup and historic accounting could also prove important before equity/debt funding and investor presentations.

Many small businesses struggle with the financial side of their business and can’t afford to hire a full time CFO, yet they need the insight of a financial expert. T he Fractional CFO is a great resource for these businesses. A Fractional CFO can provide valuable financial expertise at a fraction of the price. A Fractional CFO is one that works with many businesses for a few hours a month or a few hours a week. Assisting many other businesses provides the CFO with a wealth of knowledge over many industries as well as a diverse “rolodex” of others who they can gather advice from. The Fractional CFO can streamline your accounting processes so you can focus on revenue building and profitability. They can prepare and interpret your Financial Reports and provide vital insights. By getting you the data you need in a timely manner, you will be able to make better and more informative business decisions. A Fractional CFO only provides a portion of what a small business needs. Small businesses also need help with tactical accounting and day to day financials. This is where hiring a fractional CFO Service comes into play. ClearPath Associates provides that CFO Service. We serve the underserved market of small business entrepreneurs that just can’t afford a bookkeeper, accountant and a CFO. By hiring a bookkeeper only, the business might suffer a bit because not all aspects of the accounting and finance side are being looked at. The typical bookkeeping firm will only get you 80% to your goal. Add the CFO advisory skillset and your goals will be met!

Can you answer YES to any of these questions: • Are you trying to do everything on your own? • You are a great visionary, but are you struggling with cash flow needs? • Do you need a trusted partner who is a sounding board for decision making and planning? Then you need a CFO! Typically, when a small business is in growth mode, they need a strategic partner that is numbers focused to steer them in the right direction towards profitability. Whether it is Part-Time, Fractional, or Outsourced, a CFO can help. The Chief Financial Officer title can sound intimidating to a small business entrepreneur. But don’t be scared away. The CFO can provide oversight of your financials, prepare for the future by helping you with forecasting your revenue and expenses, cash flow management, choosing a bank, securing a loan, analyzing project profitability, streamlining processes, identifying and tracking key performance metrics and other strategy decisions. A CFO can keep your business financially fit. Do you think you might be ready for CFO services? Contact us now for a free 30-minute consultation.

Understanding how much cash that you need to “keep the lights on” in a business is important so that you know your break even point – where revenues equal expenses. Creating a budget will help you understand where this point is. It is also used for growth purposes so that an owner can understand what revenue they need to bring in to support hiring and investments in operations. Without a budget, a company runs the risk of spending more money than they have or not building an emergency fund or working capital. The best way to create a budget for small businesses is to start bottoms up by looking at what expenses you have or will need to run your operations. You can check your industry trends on typical costs involved in running your business. Add in costs specific to your niche as well as add in buffers for unexpected costs. The total of all of these will be your break even point. You need to at least bring in this much revenue/cash. 5 STEPS TO CREATE YOUR COMPANY BUDGET: Step 1 : Research industry trends and standards for costs and revenues. Check your industry trends on typical revenues for your size company. Ask yourself if you have a solid plan to meet that revenue goal in the next 12 months. How much profit do you want to make? Stress test these assumptions for your particular business. Step 2: Create a spreadsheet outlining your expenses and revenues expected. Some typical expenses to consider when budgeting are Costs of Goods Sold, Salary/Payroll tax, Contract labor, Rent/Utilities, Office Supplies, Software, Business Insurance, Accounting and Legal Services, Tax Payments Step 3 : Factor in a buffer to allow for unexpected changes. Add in additional costs and hold back some spending Step 4: Review your budget and look for ways to cut or delay costs. Can you reduce your rent? Can you get better payment terms with your suppliers? Step 5. Review the business budget periodically and consider developing a rolling forecast. A budget is static and is developed for the upcoming fiscal year whereas a rolling forecast is a living document that is updated regularly throughout the year to reflect changes in the industry or economy. Small business owners should review their business at least quarterly to ensure they are on track. Reviewing more than once a year allows for the business to pivot and make changes as needed to meet their goals. Still not clear on where to start? Hire a professional to make sure that you have enough money to keep the business up and running. Let ClearPath Associates help you navigate your path to profitability.