Florida CFO Group Blog

Helpful topics from Florida CFO Group's experienced CFOs

Are You Losing Money on Your Biggest Customers? Part II

Part Two of Three Parts: Factors Impacting Customer Profitability

In the second of a three-part series on how to recognize if you’re losing money on your largest customers, Florida CFO Group partners Betsy BennettMark Brown, and Jay White discuss the factors impacting customer profitability.

Is Customer profitability an issue from the start of the relationship, or does it erode over time?

Betsy: It depends. I think the whole key is that you need to have some mechanism to try and measure customer profitability, either an interactive system that works with your general ledger system or an ad hoc financial analysis that you do on a periodic basis. 

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Are You Losing Money on Your Biggest Customers?

Part One of Three Parts: Revenues vs. Profitability

In the first of a three-part series on how to recognize if you’re losing money on your largest customers, Florida CFO Group partners Betsy Bennett, Mark Brown, and Jay White discuss recognizing if you are losing money on your largest customers and the impact of chasing revenues vs. profitability.

How is it possible not to know you’re losing money on your largest customers?

Betsy: It’s very possible if you’re not tracking finances by customer. For instance, in a service business, you might not track the results of each individual customer relationship in your financial records. So, one might be costing you a disproportionate amount to support, and unless you have other mechanisms other than a general ledger, you’re not going to detect that.

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Alternative Financing

Florida CFO Group partners Dick Trueblood, Tom Walker and Dale West discuss alternative financing for small and large organizations.

Alternative Financing to Fuel Growth

Tom: You should always be looking at all of your financial options, from traditional banking to alternative financing and any combination that would maximize what your company needs for financing its operation.

Dick: It may be alternative financing, but it is not unusual financing. It is just one of the set of tools that is available to help provide a company with the sort of liquid working capital that it needs to do business. It can be quicker. It can be easier. It can be not much more expensive. And it is a great growth tool. It is not necessarily an I am in trouble tool.

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Understanding Loan Covenants

Florida CFO Group partners Dan Polen, Joe Price, and Ginger Mentzer discuss loan covenants and their potential impact on your business.

Ginger: Loan covenants are fundamental to all commercial and business loans and protect the lender by making sure that the borrower fulfills conditions or prohibits the borrower from doing certain things over the life of the loan.

Joe: Typically, they are financial covenants but they can be non-financial in that you cannot do certain things such as acquire a business or have a significant member of the management team leave.

Dan: A negative covenant restricts a company from doing something, such as selling a portion of its assets, paying management fees to related parties, taking out cash distributions or purchasing certain assets. You may be able to get around these, but you must get the lender’s permission before you do so.

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Exit Planning Strategy: Who Needs It?

Florida CFO Group partners Dawn Johnson, Mark Brown and Harold Hale discuss the importance of having an exit strategy for your business.

Exit Planning Strategy: Who Needs It?

Harold: An exit strategy is planning for a transition of ownership. It is a way or means of either entrepreneurs or investors to basically reap the benefits of what they created.

Dawn: It’s also known as a cash-out. When an entrepreneur realizes that their business is going to grow, they may start to think about how and when to cash out.

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