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2013

TrackCashflow_Body.jpgBy Iris Dorbian.

 

For business owners, tracking cash flow is one of the most tedious, yet necessary tasks. Just one simple misstep can cause a massive operational and financial challenge, leading to delays that could culminate in shutting down the business.

 

Small wonder then that more business professionals are now turning to real-time business dashboards to gauge cash flow, rather than rely upon on-the-fly calculations or out-of-date ledger statements. But because computers, like human beings, are not infallible, there are guidelines that small business owners should follow to increase the effectiveness of using dashboards to track their money. The following are several tips courtesy of experts:

 

Identify key metrics

To better track your business cash flow via a dashboard, it’s imperative that you first pinpoint key metrics that are critical to your fiscal operations. Alex Gassey, founder of StratPad, a financial planning and management app for the iPad, says: “Set goals for these values and track them on a business dashboard, at least monthly.”

 

According to Gassey, whose StratPad includes a business dashboard called StratBoard, some commonly used metrics that influence cash flow are: accounts receivable days (how long it takes customers to pay you), accounts payable days (how long it takes you to pay suppliers), and cost of goods sold versus inventory ratio. 



 

Be accurate with your data

There’s nothing that will wreck your goal of trying to gauge your cash flow more than entering wrong or outdated information into your dashboard. Always be extremely vigilant and careful when entering data.

 

Caroline Cummings, vice president of business development at Palo Alto Software, a maker of LivePlan software, which offers a dashboard feature that can be used to track cash flow, strongly endorses this best practice.

 

TrackCashflow_PQ.jpg“Make sure that whoever is entering data [into your dashboard] or wherever you’re pulling the data from, that it’s the most up to date so that you are looking at true numbers,” she says. “Otherwise you’ll be making decisions that could end up hurting your business because you think you’re looking at your expenses correctly, but you’re not.”

 

Increase speed of money flowing into the company and slow speed coming out of it

To help streamline your cash flow operations via your dashboard, you might want to deliberately modulate the movement of money going to and from company coffers.

 

Gassey cites a hypothetical example: “Say your accounts receivable days are currently at 67, you might set a goal to get that down to 30 days within six months,” he explains. “Customers are paying you sooner, thereby increasing the speed at which money comes in.”

 

At the same time, he adds, you might want to enhance this faster infusion of cash by negotiating with your vendors to increase your accounts payable days. “This will increase the amount of cash you have on hand,” he says.

 

Track cash flow from day one

Don’t wait until a few months after you launch your business to gauge how much money is flowing into and out of your register. Do it immediately after you set up shop, otherwise all the passion and hard work that you’ve invested in your startup might be for naught.

 

Cummings concurs. “Most small businesses fail because they run out of cash,” she says. “But really that’s just the symptom. They run out of money because they’re not watching their cash flow. They’re not tracking which product is under-performing. They’re too busy working in their business and not on their business.”

 

To remedy this, Cummings recommends every small business owner review his or her business dashboards on a daily, weekly, monthly, and quarterly basis. By doing this, “they can see what the profit centers are and where to make adjustments.”

 

They will also be better equipped to size up revenue goals and see how they compare with their desired target. Other questions Cummings says small business owners should ask themselves while tracking their cash flow on a business dashboard are: Where are they with expenses and cash flow? Who owes them money and how much? Also, who do they owe and how much?

 

SBC newsletter logo.gifPaul Jarrett, founder of the year-old health and fitness e-commerce site Bulu Box, agrees. In fact, Jarrett credits his use of LivePlan’s business dashboard software as being a catalyst to his raising $1 million in funding. By being able to accurately measure and track his company’s cash flow operations, Jarrett was able to present to investors a realistic picture of where his business was headed.

 

“I think a lot of entrepreneurs I know wait a little too late to start tracking certain things,” Jarrett says. “Also, small business owners need to make sure the way they track and measure remains consistent. Spend some time upfront to ensure that things are set up properly because if you change things a few months into the year or two years down the road, a lot of what you’ve been doing won’t matter anymore.”

 

To bolster his point, Jarrett notes the following: “I don’t think it’s any coincidence that around the time we got our dashboard nailed down to what was really important, we started to see the growth of our company. We were able to focus on what we were making money on [as opposed to] what we thought we were going to make money on. Having a business dashboard helped us figure that out quickly.”

 

A business dashboard that can help you accurately and effectively track cash flow can be a best practice for success. But it must be harnessed properly. Otherwise it won’t matter how state-of-the-art your software is.

QAJeffLanza_Body.jpgby Erin McDermott.

 

Jeff Lanza left one front in the battle to fight fraud, retiring from the Federal Bureau of Investigation in 2008. Now, he’s on another: He’s an in-demand speaker for businesses large and small, detailing how malicious hackers are targeting poorly prepared companies and alerting them about how to avoid becoming a victim. Business writer Erin McDermott recently spoke with the former agent about the big picture on small business hacking, misconceptions about the aftermath, and ways to try to stay one step ahead of the bad guys.

 

EM: How did you come to work on computer crimes during your days at the FBI?

ML: I was working on various crimes with the FBI. I started out as a white-collar crime agent and investigator and I was also covering public corruption and fraud. I was on the White Collar Crime Squad, so from time to time we handled fraud cases, and that morphed into computer crime. Eventually, it got pushed into its own squad because it was so big. I didn’t work on the Computer Crime Squad, but I did a lot of public speaking about computer crimes as time went on, because of how I personally felt about how important prevention was. I went out to businesses and the community to talk to people about what the threats were, with the hope that they wouldn’t get victimized.

 

EM: Hacking attacks on businesses and identity thefts seem to be in the news almost daily. Why do you think we’ve turned a corner into such proliferation?

ML:  The short answer is it’s easy to do and small to mid-size businesses make very good targets. They have enough money to go after, but often have less controls than large, Fortune 500 companies—and they may become much more vulnerable because of that. Companies are sometimes in denial that this could happen to them and they don’t take appropriate steps to protect themselves. All it takes is one weak link in the chain: an employee who clicks on an email that he or she thinks is coming from UPS ends up downloading a virus, and the next thing you know banking credentials are stolen and money is transferred out of the account. It is as simple and quick as that. The bad guys know there’s little risk because they’re often in foreign countries and out of the jurisdiction generally of the FBI. And they can do it to massive amounts of people and have just a few respond to get a big windfall.


QAJeffLanza_PQ.jpgEM: Aside from the basic protections that everyone should be doing—firewalls, VPNs, strong passwords, antivirus software, locking up your hardware—how should SMBs start thinking about staying safe going forward? How can they keep abreast of scams and online tricks?

ML: Staying abreast is easy—become members of groups in the community that work to fight these things. The No. 1 group to join, if you have a business, is InfraGard, which is an FBI-sponsored group. They have regular meetings and talk about these types of threats. Even if they’re in a city that doesn’t have a chapter, they can get the newsletter. Another: Read papers like The Wall Street Journal and the New York Times, where they have stories about these threats all of the time.

 

One of the most important things a company can do to stay safe is education—making sure your employees aren’t just taught about basic computer security on their first day on the job and then forget about it. There has to be refresher training all of the time and top-of-mind awareness. Always be talking about computer security and about not clicking on links from unknown senders or with unknown attachments, or on unknown emails seeking banking information.

 

EM: Symantec’s 2013 Threat Report showed 83 percent of SMBs surveyed told the security software maker and the National Cyber Security Alliance they weren’t concerned about the rise in hacking. Do you see any signs of progress—that the threat is starting to be taken seriously?

ML: No. To be honest, when I talk at these SMB sessions, to the audience this is new information. The reaction is “I had no idea.” You give them examples of the more recent events we’ve had, and they’re like “Oh my gosh, I can’t believe this is happening.”

 

 

This interview has been edited for length and clarity.

 

Disclaimer: The opinions expressed are solely those of the author and interviewees.  You should consult a qualified computer and data security expert to assist you in developing and implementing sound technology-related policies and practices.

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