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Your Key Performance Indicators & How You Measure Business Success

Cash Flow Problems – Their Causes And Solutions

If you’re a business owner, it won’t have taken long for you to appreciate why there is so much talk about the importance of cash flow in any business start-up books you may have read.

>>> Why Cash And Cash Flow Are Important

You’ll have found that it is easy to spend money but much more difficult to make sales and to collect the cash when it’s due to be paid.

In this article I’m going to look at:

  • How businesses get into cashflow difficulties
  • How cashflow problems can be fixed

[continue reading…]

in 1 – Your KPI, Business Problems And Mistakes

Customer Lifetime Value And Why It Is Important

In this article we are going to look at possibly the most important concept and key performance indicator in any business, the customer lifetime value (CLV).

You will see the concept also referred to as:

  • The lifetime value of a customer (LVC)
  • The marginal net worth of a customer (MNW)

The Definitions Of Customer Lifetime Value

It is a KPI that explains how much a customer on average is worth to a business of its entire relationship.

You will see some people refer to it in terms of sales revenue.

This is wrong and misleading. It can cause you to make the wrong decisions about attracting and retaining customers. [continue reading…]

in 1 – Your KPI, 6 – Revenue Regeneration

Break Even Point Analysis is a very simple to understand financial model of a business which I believe every business owner should understand.

It can be quickly used to help guide business decisions that will impact on the financial performance of the business.

When I have taught this idea to business owners and managers in Finance For Non-Financial Managers courses, the people have been amazed at how the financial fog lifts and things start to make sense.

A Quick Summary Of Break Even Point Analysis

A business is said to break even when it operates at a sales level that neither makes a profit or loss.

The two big issues to focus on are:

  • Costs can be split into two categories – those that vary directly with sales volumes and those that are fixed over a short time period.
  • Contribution margin rather than sales revenue is the real income of a business.

The Break Even Point Formula which calculates the break even point is:

Fixed Costs
Contribution % or Contribution per unit [continue reading…]

in 1 – Your KPI

Financial Foreplay by Rhondalynn Korolak – 5 Stars

Financial Foreplay: Whip Your Business
Into Shape – Take Home More Cash
by Rhondalynn Korolak

Book Review Rating – 5 Stars

Can you make finance and accounting sexy?

Author Rhondalynn Korolak does an excellent job in her book.

This is not your average, very dry and boring finance for non-financial managers book.

As the title suggests, there is a frisson to the way she educates you on the need for more effective financial control in your business.

The Approach Used In The Book

The training is delivered in a charming and easy to read way. [continue reading…]

in 1 – Your KPI, Best Business Books

How To Get Credit Customers To Pay Faster

Following up on the articles

>>> How To Increase Cash Receipts In A Cash Flow Forecast

>>> How To Get Payments In Advance From Customers

we will look at credit control and the issue of…

How To Get Credit Customers To Pay Faster

There are two issues with collecting the cash for sales made on credit accounts:

  • the agreed credit period – when payment is due.
  • getting the money on or around the agreed payment date.

[continue reading…]

in 1 – Your KPI

How To Get Payments In Advance From Customers

Following up on the article

>>> How To Increase Cash Receipts In A Cash Flow Forecast

We will look at the issue of getting payments in advance of doing the work from your customers.

How To Get Payments In Advance From Customers

One of the fastest way to increase cash receipts in your cash flow forecast is to ask for receipts in advance (although you would ask customers to pay in advance from their perspective). [continue reading…]

in 1 – Your KPI

Many years ago I was told the banker’s mantra and it’s always stuck with me as the explanation for why all businesses need effective financial control.

Turnover Is Vanity, Profit Is Sanity But Cash Is Reality

Read it in, learn it and take it to heart.

It contains one of the core secrets to long term business success.

Turnover Is Vanity [continue reading…]

in 1 – Your KPI

The Dangers Of Fixed Cost Creep

Fixed Cost Creep happens when fixed costs increase as sales and activity volumes increase.

This idea may seem strange.

The basic definition of a fixed cost is that it stays constant.

In reality it increases as the business commits to further costs. Hopefully it increases at a much slower rate than variable costs.

Not recognising and adapting to this idea can give a business owner unrealistic expectations about future profitability.

It can also lead to an assumption that fixed costs shouldn’t be or can’t be reduced if volumes are reducing either deliberately or because the business is going through a hard time. [continue reading…]

in 1 – Your KPI

If you need to improve your cash flow, you have three options:

  • Increase the cash receipts into your business
  • Reduce the cash payments going out of your business
  • Best of all, do both.

This article will focus on the first…

How To Increase Cash Receipts In A Cash Flow Forecast

First the basics:

What Cash Receipts Can A Business Have? [continue reading…]

in 1 – Your KPI

The Margin of Safety is a very useful measure that should be used together with break even point calculations.

The break even point identifies the sales volume or value where a business neither makes a profit or loss in the period.

>>> Why Break Even Point Analysis Is Important

>>> The Cost Volume Profit Relationship

>>> How To Calculate The Break Even Point Of A Business

What Is The Margin Of Safety?

The margin of safety is the extra sales value or volume the business has sold in a period in excess of the break event point.

Here is a quick example. [continue reading…]

in 1 – Your KPI