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Every week, I speak with business owners who ask me pretty much the same thing: "Ted, we have a pile of money coming in all the time... so why does it feel like we're always broke?"  Fair question. My answer surprises a lot of people… “It’s not how much comes in that matters… It’s when” Time is actually more critical to your success... and your survival than money is. If your collections are out of alignment with your payables... You will experience Cash Poverty. And that's when even sharp business owners get forced into making the mistake of borrowing funds to "catch up" on bills which is virtually always a deadly slippery slope. Example: You sell a project for a price you know will create a profit. Then you complete the job and everything went well and without any major problems. Great. You made the profit you were expecting!… On “paper” that is. Your financials, specifically your Profit & Loss statement is that “paper” because it measures among other things, profitability. So to the naked eye, it appears the project was close to perfect... But there’s an invisible problem… Profit doesn’t pay your bills or your payroll or anything else for that matter. That’s why I wrote that goofy post a few weeks ago that asked, “Can I Take My P&L to Publix?” Here’s what really happened… Imagine you finished a $100,000 project. A project that you know cost you $90,000 to complete, which will leave you a profit of $10,000 or 10% net operating profit (NOP). Nice. Your bookkeeper posted the sale in QuickBooks along with all the invoices you paid related to materials for that project, the payroll for the people who did the work and in the background and QuickBooks also kept track of your normal business expenses during the timeframe that project was in progress. Things like office staff payroll, your paychecks, equipment payments, fuel, insurance, insurance and insurance payments… And now that the job is complete, if you opened the “reports” section in QuickBooks and looked at the P&L for the project, it supports that expected profit. So far so good. Except, your customer won't pay for another 45 days.
You don't have enough cash to comfortably get through the month. I've watched profitable companies close their doors for one simple reason: They ran out of cash before they ran out of work. That's why I tell every business owner this: Cash, not profit is the oxygen that keeps your business alive. Profit is the score. But even when the Buc’s win a game on Sunday, the players still need their paychecks… their cash... if they want to stop at Publix on the way home to buy the kids Popcorn Chicken. Now, you can survive a while without making a profit. But you cannot survive very long without cash. That's why successful owners don't just ask: "How much did we take in this week or even how much profit did we make?" They ask: "How much cash will be in the bank on Friday?" That one question changes everything. The important distinction between those questions is the word “Friday”. Because a day is a unit that measures time. And time is a measure of speed.... The principle is, profit without speed is as dangerous as no profit at all… because it can have the same effect on your business. Get your financial brain focused on time... What we want to be looking for is not just payments… it’s Payment Velocity. That is how you keep yourself from feeling like you’re broke all the time. And Payment Velocity is something that must be discussed before the project is started and monitored all the way through it. Additionally, you must have a process in place that deals with slow payers... and there must be someone in your office who is trained and well suited to handle those situations. That person is worth their weight in gold... literally. Of course, you can still come up short on a Friday afternoon if you have a customer who simply doesn't pay on time at the last minute. So it’s actually not enough to know what’s going to be left in the bank on Friday this week... You’ll want to know the answer to that question six or eight weeks in advance, so you’ll have time to adjust if someone pays late. If you wait until Thursday afternoon... You're out of options. That’s why it’s critical to have a cash forecasting tool to keep you ahead of trouble. We’ll get into that next week. So, until next Friday... keep your eye on the cash. Or even better... Remember... profit is important. Cash is essential. See you next Friday. 
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6/18/2026 Why 80% of small business owners are in for a rude awakening... And what you can do about it.Read Now
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| You know how, when your toothpaste tube is new and full, you don’t pay much attention to how much you put on your brush? You just grab it and give it a good squeeze. And, why not… There’s plenty in the tube right? But when it’s almost empty, now that’s a different story. Even if you have a brand new tube within arms reach! |  |
You do whatever you have to do to get every last molecule of that stuff out, don’t you? You may even put it on the counter so you can push down on it with both hands. I’ve seen people use the bathroom door to squeeze some of that mint flavored sugar infused paste onto a toothbrush.
So, what can that tell me about running my business you may ask… A lot.
When the tube is full, you’re not thinking about how inefficient you’re being and you’re definitely not thinking about what it’s going to cost to buy a new one. But when it’s almost empty, you suddenly become the Ebeneezer Scrooge of personal hygiene. Why is that?
Because, while we should strive to be efficient with all of our resources at all times, human nature doesn’t work like that. But introduce lack into a scenario and suddenly we become expert Lean, Six Sigma Kaizen practitioners like we have a Ph. D. in business from MIT.
Ok, so how do we apply this to running a business?
I suggest starting with your daily operating (checking) account. Most small business owners put everything that comes in… into that account. Then they (or their bookkeeping team) pay bills, make payroll and purchase the necessary supplies or materials needed to run the business.
So what’s wrong with that you may ask…
The problem is, when the account balance is flush, we all tend to take our eye off the ball (financially speaking) just a little. Like we do when we have a full tube of toothpaste. That breeds inefficiency and sloppiness with your most important resource… your cash!
What we suggest is, estimate how much of every dollar that comes into your business will be profit after all the bills and payroll (including yours) are paid. It may be 10% or 20% or it may be 1% in your case. That’s fine but whatever you think it is, every Monday morning, total up every dollar that came in the week before, pull your estimated profit % out and put it into a different account.
Actually, you should put it into 2 different accounts. One account for taxes and one account for profit/savings. Put 1/3 of the amount into the tax account and 2/3 into your profit/savings account. (Don’t worry about running out of money in your operating account… you can always pull some back in if necessary).
If you do that, you will be creating a culture across your entire organization that says "we pay attention to efficiency and financial stewardship at all times around here".
So next time someone in your organization thinks, “oh, I’ll order a little extra _______ for this project so we don’t have to worry about running out", whether that ______ is $10,000 of construction materials or a case of paper clips from Office Depot, they’ll think twice. (And if they don't... there won’t be "fluff" sitting in your checking account for them to overspend anyway).
Additionally, won’t it be nice to tell you CPA next March that you already have the money you need set aside in your tax account for Uncle Sam?
And oh yeah, that conversation will happen after you used the majority of the money in your profit/savings account (the money you didn’t let leak out of you business on inefficient spending) for adding to your retirement plan… and a nice vacation with your family!
So, what can that tell me about running my business you may ask… A lot.
When the tube is full, you’re not thinking about how inefficient you’re being and you’re definitely not thinking about what it’s going to cost to buy a new one. But when it’s almost empty, you suddenly become the Ebeneezer Scrooge of personal hygiene. Why is that?
Because, while we should strive to be efficient with all of our resources at all times, human nature doesn’t work like that. But introduce lack into a scenario and suddenly we become expert Lean, Six Sigma Kaizen practitioners like we have a Ph. D. in business from MIT.
Ok, so how do we apply this to running a business?
I suggest starting with your daily operating (checking) account. Most small business owners put everything that comes in… into that account. Then they (or their bookkeeping team) pay bills, make payroll and purchase the necessary supplies or materials needed to run the business.
So what’s wrong with that you may ask…
The problem is, when the account balance is flush, we all tend to take our eye off the ball (financially speaking) just a little. Like we do when we have a full tube of toothpaste. That breeds inefficiency and sloppiness with your most important resource… your cash!
What we suggest is, estimate how much of every dollar that comes into your business will be profit after all the bills and payroll (including yours) are paid. It may be 10% or 20% or it may be 1% in your case. That’s fine but whatever you think it is, every Monday morning, total up every dollar that came in the week before, pull your estimated profit % out and put it into a different account.
Actually, you should put it into 2 different accounts. One account for taxes and one account for profit/savings. Put 1/3 of the amount into the tax account and 2/3 into your profit/savings account. (Don’t worry about running out of money in your operating account… you can always pull some back in if necessary).
If you do that, you will be creating a culture across your entire organization that says "we pay attention to efficiency and financial stewardship at all times around here".
So next time someone in your organization thinks, “oh, I’ll order a little extra _______ for this project so we don’t have to worry about running out", whether that ______ is $10,000 of construction materials or a case of paper clips from Office Depot, they’ll think twice. (And if they don't... there won’t be "fluff" sitting in your checking account for them to overspend anyway).
Additionally, won’t it be nice to tell you CPA next March that you already have the money you need set aside in your tax account for Uncle Sam?
And oh yeah, that conversation will happen after you used the majority of the money in your profit/savings account (the money you didn’t let leak out of you business on inefficient spending) for adding to your retirement plan… and a nice vacation with your family!
In his time managment masterpiece, "18 Minutes", Peter Bregman totally hits it out of the park with dozens of super doable productivity hacks that WILL improve how you get things done.
Here's an example: At the end of each [working] hour, take a brief moment... just a minute or so to reflect on what you did during the last 60 minutes. It's not easy to remember what we did during a certain time period days or even hours ago but hopefully, we can reflect back on the last hour!
This habit will give you a real gut check when it comes to how we use our most valuable posession... our time. And he wrote that long before the greatest time thief ever invented was right at our fingertips... which makes this discipline about a million times more important today.
This habit will give you a real gut check when it comes to how we use our most valuable posession... our time. And he wrote that long before the greatest time thief ever invented was right at our fingertips... which makes this discipline about a million times more important today.
Here's what I did to help me remember to do this. I took 5 minutes to set an alarm on my phone at 59 minutes past every working hour... (7:59am, 8:59am, etc). I picked out the least disruptive alarm I could find on my phone which is "beep once".
So every hour, when that thing goes off, I intantly take just 1 minute to ask myself... hmm, what am I doing right now and what have I been doing for the last 60 minutes? Admittedly, I don't always like the answer but I think that's the whole point of this exercist... Improving my productivity by holding myself accountable!
Give it a shot!
So every hour, when that thing goes off, I intantly take just 1 minute to ask myself... hmm, what am I doing right now and what have I been doing for the last 60 minutes? Admittedly, I don't always like the answer but I think that's the whole point of this exercist... Improving my productivity by holding myself accountable!
Give it a shot!
 | Have you ever had your accounting team come into your office and say... "If I take care of those invoices you promised to pay, we're not going to make payroll..." If so, you probably made some adjustments to your payables, a few uncomfortable phone calls to vendors and made sure your people all got paid (of course). |
Then you sat down in your office... alone... and asked yourself, "why does this keep happening even when we have so much work?" Sometimes the answer is, "it is what it is" That's the price of growth and being busy... Congrats!
But...
Wouldn't it be nice if you could have a little heads up before your bank balance gets to that point... instead of getting kicked in the stomach at 3pm on a Friday...?
You can!
With a Cash-Flow Forecast. A simple to use spreadsheet that will tell you if your bank balance is going to dip below your "comfort zone" and... it will do that for you weeks in advance... Not days... Not Hours... WEEKS in Advance.
Which will give you the luxury of time to make a plan get everyting & everyone paid on your your terms and usually on time... instead of dealing with a 3 alarm, 3pm fire on Friday afternoon.
You can ask your CPA for help or find one online pretty easily... Either way, you'll be so glad you did!
But...
Wouldn't it be nice if you could have a little heads up before your bank balance gets to that point... instead of getting kicked in the stomach at 3pm on a Friday...?
You can!
With a Cash-Flow Forecast. A simple to use spreadsheet that will tell you if your bank balance is going to dip below your "comfort zone" and... it will do that for you weeks in advance... Not days... Not Hours... WEEKS in Advance.
Which will give you the luxury of time to make a plan get everyting & everyone paid on your your terms and usually on time... instead of dealing with a 3 alarm, 3pm fire on Friday afternoon.
You can ask your CPA for help or find one online pretty easily... Either way, you'll be so glad you did!
| With all the unpredictable things that happen in your business in any given week, it’s sometimes hard to keep your eye on where you want it to go. There’s a way to create a guidance system or GPS that can keep your company (and your people) on-track when you get distracted by the inevitable fires that come along. |  |
It’s done with reports. Nothing fancy, business owners don’t have time for long winded over-complicated reports. All you need are a few easy to scan snapshots to keep your progress aligned with where you want to go. That being said, it’s critical that those reports be more like a windshield than a rear view mirror. Here’s what we mean:
I often see some type of tracking of "sales closed" or "last week's production" reports. And, accounting usually keeps owners up to speed on how much money is (or isn’t) in the bank to make it through the week.
That’s good however, these types of reports contain “lagging indicators” or “lagging metrics”; because they tell stories you need to know about what’s happening in your business but only after the story is over… Which begs the question, how can you control what’s going to happen in your business when all you’re able to look at is the past?
The answer lies in creating reports that look forward. The data and info in these types of reports are called “leading metrics”. For example, if you’re tracking leads generated and the number of appointments or calls made by your sales team, you can predict future sales (as long as you know the average closing ratio across your sales team).
That forward looking information from your sales department can be easily converted into usable data for your operations team affording them the ability to properly control needed staff and manage inventory levels to prevent over-spending among other things.
Once you have an idea about what sales (and collections from production performed by your ops peeps) will look like in the future, you can have your accounting department prepare a cash-flow forecast that will predict with accuracy what your bank account will look like well into the future.
A good cash-flow forecast will also double a great budgeting tool that can tell you if you can invest [more] money into marketing, or equipment, or people without putting yourself behind the eightball down the road by overspending.
So, look at the reports you are receiving from your team and ask yourself, “how much of this info is telling me what’s going to happen as opposed to what’s already happened”?
If you find your data is all rear view mirror stuff, get your people together and brainstorm how you can create some “leading metrics”… you’ll be so glad you did.For some tips about how to create more metrics for leading your company to more efficiency, productivity and profitability.
I often see some type of tracking of "sales closed" or "last week's production" reports. And, accounting usually keeps owners up to speed on how much money is (or isn’t) in the bank to make it through the week.
That’s good however, these types of reports contain “lagging indicators” or “lagging metrics”; because they tell stories you need to know about what’s happening in your business but only after the story is over… Which begs the question, how can you control what’s going to happen in your business when all you’re able to look at is the past?
The answer lies in creating reports that look forward. The data and info in these types of reports are called “leading metrics”. For example, if you’re tracking leads generated and the number of appointments or calls made by your sales team, you can predict future sales (as long as you know the average closing ratio across your sales team).
That forward looking information from your sales department can be easily converted into usable data for your operations team affording them the ability to properly control needed staff and manage inventory levels to prevent over-spending among other things.
Once you have an idea about what sales (and collections from production performed by your ops peeps) will look like in the future, you can have your accounting department prepare a cash-flow forecast that will predict with accuracy what your bank account will look like well into the future.
A good cash-flow forecast will also double a great budgeting tool that can tell you if you can invest [more] money into marketing, or equipment, or people without putting yourself behind the eightball down the road by overspending.
So, look at the reports you are receiving from your team and ask yourself, “how much of this info is telling me what’s going to happen as opposed to what’s already happened”?
If you find your data is all rear view mirror stuff, get your people together and brainstorm how you can create some “leading metrics”… you’ll be so glad you did.For some tips about how to create more metrics for leading your company to more efficiency, productivity and profitability.
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Of course, I don’t mean stop improving your business… I mean, don’t fall into the trap that so many business owners have, especially this year… focusing and maybe even hyper-focusing on growing sales & revenue.
Obviously, managing sales is super important but, too much emphasis on “growing your business” can take your focus off what you should really be thinking about most… growing your profits… Especially these days.
My purpose for sending you this letter is to get you to hopefully pause for just a moment and ask yourself…
How much of my time do I really focus on our profitability and building cash?
Do I know what my margins (gross and net) will be for this year, this quarter… this month?
Pre-Covid, did we always have the cash reserves in the bank that we should?
Why not?
If you’re not constantly thinking about these types of questions, I’d like to ask you one…
What are you concentrating the majority of your energy on?
Operations?... Sales?... Why something didn’t get done properly last week?
You pay people good money to manage that stuff, (that’s their job), so you can have time to focus on the one and only thing that can protect your business in this crazy world we now live in; Generating Profits & Building Cash… As the leader of your company… That’s your job.
If I’m being a little tough on you, sorry… but my job isn’t making people feel good… It’s making people money.
As we enter the last months of 2020, here’s wishing you all the best as you navigate your business through the rest of the year and make plans for a profitable year to come.
Ted
Obviously, managing sales is super important but, too much emphasis on “growing your business” can take your focus off what you should really be thinking about most… growing your profits… Especially these days.
My purpose for sending you this letter is to get you to hopefully pause for just a moment and ask yourself…
How much of my time do I really focus on our profitability and building cash?
Do I know what my margins (gross and net) will be for this year, this quarter… this month?
Pre-Covid, did we always have the cash reserves in the bank that we should?
Why not?
If you’re not constantly thinking about these types of questions, I’d like to ask you one…
What are you concentrating the majority of your energy on?
Operations?... Sales?... Why something didn’t get done properly last week?
You pay people good money to manage that stuff, (that’s their job), so you can have time to focus on the one and only thing that can protect your business in this crazy world we now live in; Generating Profits & Building Cash… As the leader of your company… That’s your job.
If I’m being a little tough on you, sorry… but my job isn’t making people feel good… It’s making people money.
As we enter the last months of 2020, here’s wishing you all the best as you navigate your business through the rest of the year and make plans for a profitable year to come.
Ted
Were you thinking there might be more stimulus help coming from Washington this year?
Wall Street was… which is why the DOW tumbled 700 points almost immediately on Monday morning following the death of Ruth Bader Ginsburg.
The passing of Supreme Court Justice Ginsburg, and the [confirmation] circus that's coming to town because of it will suck up all the oxygen in congress between now and the election... maybe even until the inauguration on January 20th, 2021... Nothing else will get done in Washington. Bet on it.
That means us little guys are on our own... again.
Hopefully you're holding your own through all the challenges this year brought but with the uncertainty about what flu season, media coverage of the virus and the election results may do to consumer confidence and the economy, one thing is for certain... having as much CASH RESERVES AS POSSIBLE in the bank should be your highest priority.
So, my recommendation is, keep your eye on the ball... and that ball should be your Profits & Cash!
To help you with that, I've compiled an 18 page Business Profitability Guide that distills the best ideas and tactics for increasing profits and building cash that I've come across during my 40 years in the trenches...
You can download it by Clicking Here...
No charge of course. I want you to have it as my gift.
(it's not doing anyone any good sitting on the hard-drive of my computer)
So, enjoy... and best wishes as you continue to lead your company through 2020 and into the better days that lie ahead!
Wall Street was… which is why the DOW tumbled 700 points almost immediately on Monday morning following the death of Ruth Bader Ginsburg.
The passing of Supreme Court Justice Ginsburg, and the [confirmation] circus that's coming to town because of it will suck up all the oxygen in congress between now and the election... maybe even until the inauguration on January 20th, 2021... Nothing else will get done in Washington. Bet on it.
That means us little guys are on our own... again.
Hopefully you're holding your own through all the challenges this year brought but with the uncertainty about what flu season, media coverage of the virus and the election results may do to consumer confidence and the economy, one thing is for certain... having as much CASH RESERVES AS POSSIBLE in the bank should be your highest priority.
So, my recommendation is, keep your eye on the ball... and that ball should be your Profits & Cash!
To help you with that, I've compiled an 18 page Business Profitability Guide that distills the best ideas and tactics for increasing profits and building cash that I've come across during my 40 years in the trenches...
You can download it by Clicking Here...
No charge of course. I want you to have it as my gift.
(it's not doing anyone any good sitting on the hard-drive of my computer)
So, enjoy... and best wishes as you continue to lead your company through 2020 and into the better days that lie ahead!
Ted Frangos is a retired managerial accountant and business analyst who lives in Tampa. After a long career helping small and medium size business owners reach their profitability goals, he decided to hang it up in February 2020 when it became obvious that flying around the country every week wasn’t such a good idea in a global pandemic. He now uses his time to help local business owners navigate their way through the rest of this year as painlessly and profitably as possible.
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