And a journey begins....

I have thought about starting a blog to help business and individuals muddle through some of the complexities of  finance, accounting and taxes.  So here it is, not sure where it will lead or if anyone will even "follow"; but I do hope that it provides some help and assistance for all those who do find it.

For those of you that do not know me, I am a CPA/MBA type who has spent twenty years in accounting/finance departments of various companies.  I have worked in public accounting where I specialized in small businesses-preparing taxes, and financial statements.

When I worked with small businesses, one of the common traits of the businesses was  the owners/managers were so deep in the operational side of the business they were unable to keep up with the finances of the company let alone what we call "corporate governance."    One key aspect of business that seems to evade these small owners is the importance of cash (aka working capital).  There's an old financial adage "profit is nice, but cash is king."  I had many conversations with business owners saying showing a loss is not bad as long as you have cash.

The three aspects of cash flow in a business is cash from customers (accounts receivable); cash to vendors (accounts payable) and inventory.  These three items make up your cash conversion cycle-it is these three items that will make or break a company depending on how they are managed.  The cash conversion cycle is simply saying how long does it take to convert purchases to cash from a customer;  the longer the cycle the more cash is needed from other sources to support the business.  So if you have customers paying you in 60 days, you are paying vendors in 30 days and you hold 30 days of inventory-your cash conversion cycle is 60 days (60-30+30).  There would be a funding need for 60 days of  operational cash (either lines of credits, or loans from the owner to the business).

You can improve on the cash conversion cycle via quicker collections from customers, not holding as much inventory, or paying your vendors slower.  I will cover these topics in upcoming blog posting.

If you have made it this far, thank you.  I hope that it has given some insight and I hope to provide useful information in upcoming posts.  Please feel free to ask any questions you may have.