How MyCFO overhauls and revitalizes your budgeting process!

Successful businesses create annual budgets and regularly monitor performance. Here are a few examples of how MyCFO assists clients with budgeting – and how we can help you!

Recent engagement: Essential planning

A budget is a plan to control finances, ensure funding of current and future commitments, and allow management to make confident financial decisions. Every year, many companies ask MyCFO to help prepare their budgets. The basic needs for these clients usually include most or all of the following:

  • Communication with all levels of management
  • Allocate resources to growth and development
  • Manage cash flow more effectively
  • Monitor performance
  • Effective expense management
  • Maximize return-on-investment

On a fundamental level, MyCFO typically does the following with each client: review prior performance, set goals, calculate income and expenses, and establish goals for profitability and key financial benchmarks.

We typically provide sophisticated assistance with cash flow management advice, and systems to generate key financial data for management to regularly monitor.

In the process, we may also assist in setting up bookkeeping systems, accounting department training, and bank loan negotiations. We then set up systems to monitor the budget vs. actual results during the year, and consult with the client in making adjustments along the way.

Recent engagement: High growth requires cash!

If your business is encountering any of the following you will need additional budgeting assistance from MyCFO:

  • Under-performance in overall profitability
  • Facilities expansion
  • Adding a new division
  • Changes in product lines
  • Revenue “gaps,” requiring a revised line of credit

In this recent engagement, our client was adding a new division (with additional salespeople and related costs), thereby anticipating a 30% sales increase. Management’s rough budgeting showed a rosy picture with a substantial increase in profits. However, they asked MyCFO to analyze and verify the projections, so that the company could be assured of its predicted success.

After MyCFO’s analysis, the actual picture was much different. While their projected expenses were accurate, there were actually going to be major issues in the company’s ability to meet payroll and cover ongoing operating costs. In fact, our projections showed that during the initial period of high growth, it would run out of money within 90 days, maxing-out the line of credit!

This situation was due to cash flow timing issues. Instead of having extra cash in the bank and paying off their line of credit, which was what their initial budget showed, the company would instead need to double their line of credit.

Of course, management was shocked – but happy that the situation could be remedied. MyCFO worked with the company to prepare new projections (balance sheet, income statement and cash flow), then helped negotiate with the bank to successfully increase the credit line.

The key takeaway from this example is that 9 times out of 10, growth requires cash! Your company can still increase its profitability, it is simply that rapid growth generally needs additional outside financing.

Recent engagement: Maximize profitability

Many companies have a standard chart of accounts in alphabetical order (e.g., accounts receivable, building, equipment, etc.). In this engagement, the privately-held, medium size business had an overall budget covering several different departments. Ownership felt that the company was under-performing in terms of profitability, and MyCFO’s analysis of industry comparable financial data confirmed this belief. The goal was to at least raise the company to the same level of performance as other companies in the industry, which would result in a roughly 20% increase in net profit before taxes.

MyCFO’s key solution was to establish per-department budgets, folding into an overall company-wide budget. This allowed every department to be responsible for its own budget, allowing each to manage their tailored levels of income and expenses. This process also provided opportunities for all levels of employees to become engaged and provide input on strengths/weaknesses, cost-cutting and performance improvement. At monthly company-wide meetings, each department could be reviewed for performance and everyone understood the priorities of the business. A healthy competitive environment developed and everyone benefited as the company became more profitable, through a performance bonus system that MyCFO helped design.

The company met its profitability goals and is working on even greater success in the second year of the new system.

The clock is ticking …

2022 is fast approaching – are your ready to make the most money possible? The professionals at MyCFO can offer invaluable expertise in the budgeting process. Contact us today for a free initial consultation!