Leadership – 5 Keys to     Profitability     Tim McLellan    Partner, B2BCFO®      October 3, 2012      www.b2bcfo.com
Key Success Factors•   Timely Billing•   Cash Discounts•   Variable Compensation•   Breakeven Analysis•   Timely and Accur...
Timely Billing• Timely Billing – Owner should be involved  in monitoring billing process each month.• Review report of Unb...
Billing / Collection• Owner should review a copy of the Aging  each week.• Aging should contain notes on expected  payment...
Cash Discounts• Most Flooring Dealers make 4 – 7% in a  good year. Those making the 7% are  taking all cash discounts.• Ca...
Discount Math• Taking a 3% discount each month equates  to a 36% annual interest rate.• Banks LOC rates generally 5-7% per...
Variable Compensation• The more people that are paid based on  job performance, the better. They all  have skin in the gam...
Variable Compensation• From personal experience – the more  compensation $$$ (greater %) at stake,  the more chance the jo...
Breakeven Analysis• Know the monthly Breakeven Sales  amount for your business.• Amount is your Overhead (non Job Cost)  e...
Breakeven Analysis• Example – Overhead Expenses are  $150,000 a month and gross margin in  20%.• $150,000/.2 = $750,000 in...
Financial Statements• Job Review Meetings held with each sales  rep twice a month to monitor job  performance.• Work in Pr...
Financial Statements• Timely and Accurate Financial Statements  are prepared by the 20th of each month.  Variances from ex...
Financial Statements• Dashboards and / or Weekly Facts reports  provide enhanced monitoring of items  such as:  –   New Or...
Next Steps• The Owner / Manager must set the tone  for a timely and accurate accounting  process.• An experienced CFO is n...
Questions?    Tim McLellantmclellan@b2bcfo.com    404-915-5539                       15
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5 Keys to Profitability - Tim Mclellan

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Tim Mclellan, a partner in B2B CFO tells you the 5 keys of profitability for any business.

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5 Keys to Profitability - Tim Mclellan

  1. 1. Leadership – 5 Keys to Profitability Tim McLellan Partner, B2BCFO® October 3, 2012 www.b2bcfo.com
  2. 2. Key Success Factors• Timely Billing• Cash Discounts• Variable Compensation• Breakeven Analysis• Timely and Accurate Financial Statements 2
  3. 3. Timely Billing• Timely Billing – Owner should be involved in monitoring billing process each month.• Review report of Unbilled Jobs on 15-20th of each month. Write it on your calendar and do it!• Run report every other day and review status until GC billing cutoff on 25th of the month. 3
  4. 4. Billing / Collection• Owner should review a copy of the Aging each week.• Aging should contain notes on expected payment dates and unresolved issues.• Make sure A/R collection is a high priority done by a competent employee. 4
  5. 5. Cash Discounts• Most Flooring Dealers make 4 – 7% in a good year. Those making the 7% are taking all cash discounts.• Cash Discounts are such a good deal, that it makes sense to borrow on your line of credit to take advantage of discounts. 5
  6. 6. Discount Math• Taking a 3% discount each month equates to a 36% annual interest rate.• Banks LOC rates generally 5-7% per year.• A 36% discount – 7% borrowing cost is a 29% savings.• Taking all discounts will improve your bottom line by 1 – 2 % 6
  7. 7. Variable Compensation• The more people that are paid based on job performance, the better. They all have skin in the game.• Even small amounts paid to project managers will improve job performance.• Everyone needs to know that it’s real money at stake. 7
  8. 8. Variable Compensation• From personal experience – the more compensation $$$ (greater %) at stake, the more chance the job will be closely monitored and change orders will be obtained timely. 8
  9. 9. Breakeven Analysis• Know the monthly Breakeven Sales amount for your business.• Amount is your Overhead (non Job Cost) expenses divided by your gross margin % 9
  10. 10. Breakeven Analysis• Example – Overhead Expenses are $150,000 a month and gross margin in 20%.• $150,000/.2 = $750,000 in sales needed to break even each month.• If the indicated sales level can’t be obtained, overhead expenses must be cut. 10
  11. 11. Financial Statements• Job Review Meetings held with each sales rep twice a month to monitor job performance.• Work in Process report is adjusted monthly by Controller and reviewed with owner by the 20th of the following month. 11
  12. 12. Financial Statements• Timely and Accurate Financial Statements are prepared by the 20th of each month. Variances from expected performance and investigated each month.• Would you ride on an airplane that had no gauges in the cockpit? 12
  13. 13. Financial Statements• Dashboards and / or Weekly Facts reports provide enhanced monitoring of items such as: – New Orders – Billings – Cash Receipts – Cash Disbursements – A/R and A/P Balances – Line of Credit Balance 13
  14. 14. Next Steps• The Owner / Manager must set the tone for a timely and accurate accounting process.• An experienced CFO is needed to help guide the Owner.• CFO position can be outsourced if in house expertise not there / or salary budget not available. 14
  15. 15. Questions? Tim McLellantmclellan@b2bcfo.com 404-915-5539 15
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