Nearly every business owner I talk to is interested in growing. But sometimes the plans are erratic, spur of the moment, or not fully formed. That doesn’t mean that they won’t work, it’s just more painful that way.
Growth can come from a number of different approaches – new product lines, an acquisition, new channel of distribution. How do you make sure that the right plan is in place, and there’s enough money to do it?
The company was profitable, but after some moves to expand the business, they were worried about depleting their cash reserves and using up their line of credit with the bank—which would put a halt to further expansion plans.
A plant tour revealed a huge rack with old, rusty, trade-in equipment that they didn’t know how to value or deal with. Additionally, they started importing private label equipment to sell. This was a speculative expansion that required major cash investment. In light of their growing service business, inventory in the parts department was, unfortunately, bursting at the seams.
The company had acquired a business in a neighboring state. The price was right, the acquisition well-managed, and it earned a quick payback. The decision was made to add another location.
Considering that the company had gone through most of their credit line and prior year’s profits, there were questions about where the cash went. The recent acquisition, inventory in their new private label line, and the increase in parts inventory had cost $850,000.
Since data drives decisions in any business, the accuracy and presentation of information can eliminate misunderstandings about the company’s financial position.
Even well-run, profitable companies can find ways to improve. Every company has dark corners where troubled items have been placed. Out of sight, out of mind. Accurate reporting ensures that everyone is on the same page so that agreement is more easily reached on the best next step forward.
Since everything that happens in a company flows down to the financials, an experienced CFO can provide clarity not only through financial reporting but into operations that directly impact the bottom line.
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