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

1. Leadership – 5 Keys to
Profitability
Tim McLellan
Partner, B2BCFO®
October 3, 2012
www.b2bcfo.com

2. Key Success Factors
• Timely Billing
• Cash Discounts
• Variable Compensation
• Breakeven Analysis
• Timely and Accurate Financial Statements
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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.
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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.
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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.
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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 %
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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.
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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.
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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 %
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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.
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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.
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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?
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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
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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.
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15. Questions?
Tim McLellan
tmclellan@b2bcfo.com
404-915-5539
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