Presented by Gary Eisenkraft, CPA & Axium How to Boost Your Firms Cash Flow in Cash Strapped Times
“ The times they are a-changin…”  (Dylan)
Outline <ul><ul><ul><ul><li>Effective billing and collection procedures </li></ul></ul></ul></ul><ul><ul><ul><ul><li>When ...
When Do We Bill? <ul><ul><li>At least monthly.  </li></ul></ul><ul><ul><li>Some firms bill semi – monthly or upon project ...
You’ll Need Time & Project Reports <ul><ul><li>T & T = Time and Talent = $$$ </li></ul></ul>(c) Eisenkraft CPA & Consultin...
There Are No Excuses for Failing to Record Time  Contemporaneously <ul><li>Happening at the same time </li></ul><ul><li>We...
Know Your Clients’ Payment System <ul><ul><li>Relationships: </li></ul></ul><ul><ul><li>Who approves? </li></ul></ul><ul><...
Who Collects? <ul><li>Bookkeeper / Controller </li></ul><ul><li>Project Manager </li></ul><ul><li>Principal </li></ul><ul>...
What is WIP? <ul><ul><li>Unbilled  work in process. </li></ul></ul><ul><ul><li>Income   on P&L,  Asset   on balance sheet....
Aged Accounts Receivable <ul><ul><li>How fast are we getting paid? </li></ul></ul><ul><ul><li>Average Days in Accounts Rec...
<ul><ul><li>Annual Avg. A/R = </li></ul></ul><ul><ul><li>$450,000   ________________     $3,500,000 / 365 </li></ul></ul>(...
We’re Paid in An Average of: <ul><ul><li>Annual Average A/R  =   47 Days </li></ul></ul>(c) Eisenkraft CPA & Consulting Se...
How Old Should our Receivables be? <ul><ul><li>30 Days or less: Very Good </li></ul></ul><ul><ul><li>31 – 60 Days: Average...
Will Our Clients Pay? <ul><li>Dunn and Bradstreet (dnb.com) ‏ </li></ul><ul><li>References  </li></ul><ul><li>Letter of Cr...
Other Tips <ul><ul><li>Try billing in equal installments. </li></ul></ul><ul><ul><li>Bill  reimbursables   separately . </...
(c) Eisenkraft CPA & Consulting Services Break #2 - Questions?
(c) Eisenkraft CPA & Consulting Services Collection <ul><ul><li>The squeaky wheel gets the grease. </li></ul></ul><ul><ul>...
Borrowing <ul><ul><li>Use  short-term  borrowing for  current  assets. </li></ul></ul><ul><ul><li>Use  long-term  borrowin...
Lines of Credit <ul><ul><li>Can provide: </li></ul></ul><ul><ul><li>Needed cash by covering late payers. </li></ul></ul><u...
The Three C’s Collateral Capacity Character (c) Eisenkraft CPA & Consulting Services
Accounts Payable <ul><ul><li>Negotiate   discounts for prompt payment . </li></ul></ul><ul><ul><li>2%, 10 days = 30% per m...
Working Capital <ul><ul><li>WC = Current Assets – Current Liabilities </li></ul></ul><ul><ul><li>Current Assets : Those av...
How Much Working Capital Do I Need? <ul><ul><li>The ratio of Current Assets to  </li></ul></ul><ul><ul><li>Current Liabili...
Top 5 <ul><ul><li>Run your numbers frequently!  </li></ul></ul><ul><ul><li>(Weekly budgeting and cash flow, monthly histor...
About The Presenter <ul><li>Eisenkraft CPA & Consulting Services </li></ul><ul><li>271 Madison Avenue </li></ul><ul><li>Ne...
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Boost Cash Flow at Your Architecture or Engineering Firm

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Effective Cash Flow Management: Effective billing and collection procedures, when to send bills and when to pay bills, accounts receivable aging and cash requirements.

Banking Relations: How to specifically approach a lending institution, key criteria banks use to evaluate your firm, which banks are most likely to say yes and the types of financing.

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Boost Cash Flow at Your Architecture or Engineering Firm

  1. 1. Presented by Gary Eisenkraft, CPA & Axium How to Boost Your Firms Cash Flow in Cash Strapped Times
  2. 2. “ The times they are a-changin…” (Dylan)
  3. 3. Outline <ul><ul><ul><ul><li>Effective billing and collection procedures </li></ul></ul></ul></ul><ul><ul><ul><ul><li>When to send bills and when to pay bills </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Accounts receivable aging </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cash requirements </li></ul></ul></ul></ul><ul><ul><ul><ul><li>How to specifically approach lending institutions </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Key criteria banks use to evaluate you firm </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Which banks are most likely to say yes </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Types of financing </li></ul></ul></ul></ul>(c) Eisenkraft CPA & Consulting Services
  4. 4. When Do We Bill? <ul><ul><li>At least monthly. </li></ul></ul><ul><ul><li>Some firms bill semi – monthly or upon project phase completion. </li></ul></ul><ul><ul><li>Be consistent. Get your clients into the habit of paying. </li></ul></ul>(c) Eisenkraft CPA & Consulting Services
  5. 5. You’ll Need Time & Project Reports <ul><ul><li>T & T = Time and Talent = $$$ </li></ul></ul>(c) Eisenkraft CPA & Consulting Services
  6. 6. There Are No Excuses for Failing to Record Time Contemporaneously <ul><li>Happening at the same time </li></ul><ul><li>We want info on demand! </li></ul>(c) Eisenkraft CPA & Consulting Services
  7. 7. Know Your Clients’ Payment System <ul><ul><li>Relationships: </li></ul></ul><ul><ul><li>Who approves? </li></ul></ul><ul><ul><li>Who writes checks? </li></ul></ul><ul><ul><li>Who signs checks? </li></ul></ul><ul><ul><li>When Does it happen? </li></ul></ul>(c) Eisenkraft CPA & Consulting Services
  8. 8. Who Collects? <ul><li>Bookkeeper / Controller </li></ul><ul><li>Project Manager </li></ul><ul><li>Principal </li></ul><ul><li>Legal  </li></ul>(c) Eisenkraft CPA & Consulting Services
  9. 9. What is WIP? <ul><ul><li>Unbilled work in process. </li></ul></ul><ul><ul><li>Income on P&L, Asset on balance sheet. </li></ul></ul><ul><ul><li>(Should be small or you may have problems.) ‏ </li></ul></ul>(c) Eisenkraft CPA & Consulting Services
  10. 10. Aged Accounts Receivable <ul><ul><li>How fast are we getting paid? </li></ul></ul><ul><ul><li>Average Days in Accounts Receivable = </li></ul></ul><ul><ul><li>(Total of Monthly End A/R / 12) ____________________ </li></ul></ul><ul><ul><li>(Ann. Fees & Exp. /365) ‏ </li></ul></ul>(c) Eisenkraft CPA & Consulting Services
  11. 11. <ul><ul><li>Annual Avg. A/R = </li></ul></ul><ul><ul><li>$450,000 ________________ $3,500,000 / 365 </li></ul></ul>(c) Eisenkraft CPA & Consulting Services
  12. 12. We’re Paid in An Average of: <ul><ul><li>Annual Average A/R = 47 Days </li></ul></ul>(c) Eisenkraft CPA & Consulting Services
  13. 13. How Old Should our Receivables be? <ul><ul><li>30 Days or less: Very Good </li></ul></ul><ul><ul><li>31 – 60 Days: Average </li></ul></ul><ul><ul><li>More than 60 days: Trouble! </li></ul></ul><ul><ul><li>More than 90 days: Collection Doubtful </li></ul></ul>(c) Eisenkraft CPA & Consulting Services
  14. 14. Will Our Clients Pay? <ul><li>Dunn and Bradstreet (dnb.com) ‏ </li></ul><ul><li>References </li></ul><ul><li>Letter of Credit </li></ul>(c) Eisenkraft CPA & Consulting Services
  15. 15. Other Tips <ul><ul><li>Try billing in equal installments. </li></ul></ul><ul><ul><li>Bill reimbursables separately . </li></ul></ul><ul><ul><li>Write bills using clear , understandable language that reflects contract language and terms. </li></ul></ul><ul><ul><li>No surprise packages : </li></ul></ul><ul><ul><ul><li>Don't accumulate charges. </li></ul></ul></ul><ul><ul><ul><li>Discuss unusual amounts and overages ASAP before invoicing. </li></ul></ul></ul>(c) Eisenkraft CPA & Consulting Services
  16. 16. (c) Eisenkraft CPA & Consulting Services Break #2 - Questions?
  17. 17. (c) Eisenkraft CPA & Consulting Services Collection <ul><ul><li>The squeaky wheel gets the grease. </li></ul></ul><ul><ul><li>Make the uncomfortable call. </li></ul></ul><ul><ul><li>Log names, numbers and times. </li></ul></ul><ul><ul><li>When will payment arrive? </li></ul></ul><ul><ul><li>Lawyers are expensive and litigation is maddening. </li></ul></ul>
  18. 18. Borrowing <ul><ul><li>Use short-term borrowing for current assets. </li></ul></ul><ul><ul><li>Use long-term borrowing for fixed assets. </li></ul></ul><ul><ul><li>Maintain banking relationships. </li></ul></ul><ul><ul><li>Shop for rates and terms. </li></ul></ul>(c) Eisenkraft CPA & Consulting Services
  19. 19. Lines of Credit <ul><ul><li>Can provide: </li></ul></ul><ul><ul><li>Needed cash by covering late payers. </li></ul></ul><ul><ul><li>Financing in lieu of contract pre-payments . </li></ul></ul><ul><ul><li>But… </li></ul></ul><ul><ul><li>Interest adds to overhead and lowers profit. </li></ul></ul>(c) Eisenkraft CPA & Consulting Services
  20. 20. The Three C’s Collateral Capacity Character (c) Eisenkraft CPA & Consulting Services
  21. 21. Accounts Payable <ul><ul><li>Negotiate discounts for prompt payment . </li></ul></ul><ul><ul><li>2%, 10 days = 30% per month = 360% per year! </li></ul></ul>(c) Eisenkraft CPA & Consulting Services
  22. 22. Working Capital <ul><ul><li>WC = Current Assets – Current Liabilities </li></ul></ul><ul><ul><li>Current Assets : Those available to meet obligations due within one year. </li></ul></ul><ul><ul><li>Current Liabilities : Obligations to be paid within one year. </li></ul></ul>(c) Eisenkraft CPA & Consulting Services
  23. 23. How Much Working Capital Do I Need? <ul><ul><li>The ratio of Current Assets to </li></ul></ul><ul><ul><li>Current Liabilities </li></ul></ul><ul><ul><li>should be at least 1:1 </li></ul></ul><ul><ul><li>The amount of WC should also be </li></ul></ul><ul><ul><li>2 to 3 months of cash required </li></ul></ul>(c) Eisenkraft CPA & Consulting Services
  24. 24. Top 5 <ul><ul><li>Run your numbers frequently! </li></ul></ul><ul><ul><li>(Weekly budgeting and cash flow, monthly historical financials) ‏ </li></ul></ul><ul><ul><li>Bill at least monthly for all work done and expenses! </li></ul></ul><ul><ul><li>Use short-term borrowing (LOC) for receivables, work-in-process and other current cash needs, only! </li></ul></ul><ul><ul><li>Maintain at least 1:1 ratio and 2 months of working capital. </li></ul></ul><ul><ul><li>Keep good time records. </li></ul></ul>(c) Eisenkraft CPA & Consulting Services
  25. 25. About The Presenter <ul><li>Eisenkraft CPA & Consulting Services </li></ul><ul><li>271 Madison Avenue </li></ul><ul><li>New York, NY 10016 </li></ul><ul><li>(212) 689-2655 </li></ul><ul><li>www.EisenkraftCPA.com </li></ul><ul><li>[email_address] </li></ul>(c) Eisenkraft CPA & Consulting Services Gary Eisenkraft is the principal of Eisenkraft CPA & Consulting Services in New York City. His firm specializes in creative businesses, including design, architecture and marketing professionals. He is a member of the Taxation of S-Corporations and Pass-Through Entities Committee of the New York State Society of Certified Public Accountants.  Mr. Eisenkraft has spoken to various groups on topics of interest to the business and creative communities. His writing has been published in the New York Times, IDSA Innovation and Focal Point.

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