Financiario’s Post

How does a business deal turn into cash? Let's look at the typical deal flow. It's the Deal vs. Revenue vs. Cash Showdown... CLOSED DEAL A closed deal is a successful sales transaction in which a customer has committed to a purchase offered by the company. At this stage, the terms and conditions of the sale have been agreed upon, and the customer is legally bound to pay for the product or service. Financial Statement Impact The closed deals have not yet directly impacted the financial statements. They represent the potential future revenue for the company. However, closed deals are essential in forecasting and projecting future revenues. Five ways to optimize deal flow 1. Marketing campaigns 2. Referral programs 3. Partnerships and alliances 4. Networking and events 5. Lead nurturing Closed deal to revenue At closing the deal, revenue is not immediately recognized on the financial statements. Revenue recognition follows accounting principles, which dictate when and how revenue should be recorded. REVENUE Revenue is the total amount a company earns from its core business activities over a specific period, such as a month, quarter, or year. It is generated from the sales of goods or services and is a key metric that reflects a company's top-line performance. Financial Statement Impact Revenue is a crucial figure that directly impacts the income statement. However, in many cases, the counterpost to revenue is receivables, signaling that the customer hasn't paid yet. Five ways to optimize revenue 1. Value-based selling 2. Pricing strategies 3. Sales incentives and training 4. Customer retention 5. Sales analytics Revenue to cash Revenue represents the total amount earned from sales but does not necessarily reflect the actual cash received. The revenue recognized may include sales made on credit, where the customer is given a period to pay the amount owed. CASH Cash flow is the net amount of cash and cash equivalents that flow in and out of a company. It represents the cash generated from operating, investing, and financing activities. Cash flow is a critical measure of a company's financial health. Financial Statement Impact: Cash flow impacts the cash flow statement. It shows how a company generates and uses cash during the reporting period. Positive cash flow indicates a healthy financial situation. Negative cash flow may signal potential liquidity issues. Five ways to optimize cash flow 1. Accelerate collections 2. Manage inventory efficiently 3. Negotiate favorable terms 4. Discount for early payments 5. Offer subscription services What are you doing to optimize this value chain flow? ————— 📺 FinanceMaster on YouTube: https://bit.ly/4bSBut6 📢 Join our WhatsApp channel: https://bit.ly/3WWGOrc 👩🏫 Our LinkedIn Learning course: https://bit.ly/4a5fB9l 📻 FinanceMaster Podcast: https://bit.ly/3NLSt73 📄 FinanceMaster resources: https://lnkd.in/eC_zuCU4

How does a business deal turn into cash? Let's look at the typical deal flow. It's the Deal vs. Revenue vs. Cash Showdown... CLOSED DEAL A closed deal is a successful sales transaction in which a customer has committed to a purchase offered by the company. At this stage, the terms and conditions of the sale have been agreed upon, and the customer is legally bound to pay for the product or service. Financial Statement Impact The closed deals have not yet directly impacted the financial statements. They represent the potential future revenue for the company. However, closed deals are essential in forecasting and projecting future revenues. Five ways to optimize deal flow 1. Marketing campaigns 2. Referral programs 3. Partnerships and alliances 4. Networking and events 5. Lead nurturing Closed deal to revenue At closing the deal, revenue is not immediately recognized on the financial statements. Revenue recognition follows accounting principles, which dictate when and how revenue should be recorded. REVENUE Revenue is the total amount a company earns from its core business activities over a specific period, such as a month, quarter, or year. It is generated from the sales of goods or services and is a key metric that reflects a company's top-line performance. Financial Statement Impact Revenue is a crucial figure that directly impacts the income statement. However, in many cases, the counterpost to revenue is receivables, signaling that the customer hasn't paid yet. Five ways to optimize revenue 1. Value-based selling 2. Pricing strategies 3. Sales incentives and training 4. Customer retention 5. Sales analytics Revenue to cash Revenue represents the total amount earned from sales but does not necessarily reflect the actual cash received. The revenue recognized may include sales made on credit, where the customer is given a period to pay the amount owed. CASH Cash flow is the net amount of cash and cash equivalents that flow in and out of a company. It represents the cash generated from operating, investing, and financing activities. Cash flow is a critical measure of a company's financial health. Financial Statement Impact: Cash flow impacts the cash flow statement. It shows how a company generates and uses cash during the reporting period. Positive cash flow indicates a healthy financial situation. Negative cash flow may signal potential liquidity issues. Five ways to optimize cash flow 1. Accelerate collections 2. Manage inventory efficiently 3. Negotiate favorable terms 4. Discount for early payments 5. Offer subscription services What are you doing to optimize this value chain flow? ————— 📺 FinanceMaster on YouTube: https://bit.ly/4bSBut6 📢 Join our WhatsApp channel: https://bit.ly/3WWGOrc 👩🏫 Our LinkedIn Learning course: https://bit.ly/4a5fB9l 📻 FinanceMaster Podcast: https://bit.ly/3NLSt73 📄 FinanceMaster resources: https://lnkd.in/eC_zuCU4

What is Profit? Profit is the most important number, simply the end result of deducting costs from sales. PROFIT = SALES – COSTS But that’s so simple & doesn’t help us much. We need to understand sales & costs in more detail. Let’s use a more useful equations: Sales SALES = CUSTOMERS x AMOUNT SPENT x FREQUENCY of SPENDING Sales are not just one number, as you can see from the formula above. Profit is: PROFIT = SALES (Customers x Amount Spent x Frequency of Spending) – VARIABLE COSTS – FIXED COSTS, Or PROFIT = SALES – VARIABLE COSTS – FIXED COSTS Is this FAMILIAR? This how your annual accounts look, and you probably see them set out like this: Sales £100,000 Less: Direct costs £40,000 Gross profit £60,000 Less: Fixed costs £35,000 Net profit £25,000 They can help with managing costs, but are not very useful for making critical business decisions, growing, & managing a business, because the first month’s performance is at best a year old. Your costs? Costs are made up of FIXED COSTS & VARIABLE COSTS. To really understand your numbers it’s important to differentiate between the two, because their impact on your business model is very different. Variable costs – sometimes referred to as Direct Costs or Cost of Goods Sold – change in proportion to changes in sales. Examples: material costs and direct labour. Fixed costs, as the name suggests, don’t change (at least, not in the short term). For example, premises costs & are often referred to as operating costs. More about costs Variable & fixed costs so be careful. Variable costs typically rise or fall in tandem with sales. Fixed costs are usually fixed in the short term but do vary over the longer term & sometimes referred to as stepped costs. Think of it like this: If you manufacture widgets & your sales increase by 10%, your direct costs (typically the cost of raw materials & direct labour) also increase by 10%. Your fixed costs (e.g. premises) probably won’t change with such a small change in sales, but often include your costs and the cost of your sales team. But, if your sales increase by a larger amount, say 50%, your direct costs would increase by 50%. Some fixed costs such as premises costs may not change. But to generate that increase in sales of 50% the cost of your staff is likely to rise, maybe by as much as 50%, or more, other costs like insurance, packaging & stationery will also increase. I hope you can see these costs don’t vary directly with sales, increasing in steps. Conclusion A good knowledge of costs & how they behave relative to sales is crucial to understanding your business & managing profit. The problems is Variable & Fixed costs are often incorrectly classified in the accounts, if this happens your monthly reports are not fit for purpose: You can’t even calculate your Break-Even accurately. For more help, PM or email me: josef@MrBlueski.co.uk

LTV doesn't matter if you're going out of business The often overlooked metric that really matters: Customer Acquisition Cost Recovery There's a common misconception that LTV (Lifetime Value) is the be-all and end-all metric. While LTV is undoubtedly important, it's not the whole story. Whoever tells you that LTV is what matters the most is either lying or can't do the math. The real game-changer is how quickly you can recover the cost you've incurred to acquire a customer. This metric, often overlooked, is the true determinant of your business's long-term viability and growth potential. Let's consider two hypothetical companies, Company A and Company B, both operating in the same market with similar LTV figures and a CAC of $500 per customer. Company A has a payback period of 6 months, meaning they recover their $500 CAC within the first 6 months of the customer's subscription. This rapid payback period means that Company A can reinvest the profits from existing customers to acquire new ones, fueling growth and maintaining a healthy cash flow. On the other hand, Company B has a much longer payback period of 18 months. Despite having the same CAC as Company A, Company B's slow payback rate means they have to wait much longer to see a return on their acquisition investment, potentially leading to cash flow issues and limiting their ability to scale. The lesson here is clear: a high LTV is meaningless if you can't sustain the business long enough to realize that potential value. Focusing on rapid CAC recovery ensures you have the necessary cash flow to fuel growth, adapt to market changes, and weather any storms that may arise. In today's competitive environment, businesses that focus on quick Customer Acquisition Cost (CAC) recovery gain considerable advantages. These include increased agility, intelligent investments, and the ability to outpace competitors. So, the next time someone tries to sell you on the importance of LTV alone, remember: it's the speed of CAC recovery that truly matters for long-term success.

💡 How does a business deal turn into cash? Let's look at the typical deal flow. It's the Deal vs. Revenue vs. Cash Showdown... ➡ CLOSED DEAL A closed deal is a successful sales transaction in which a customer has committed to a purchase offered by the company. At this stage, the terms and conditions of the sale have been agreed upon, and the customer is legally bound to pay for the product or service. Financial Statement Impact The closed deals have not yet directly impacted the financial statements. They represent the potential future revenue for the company. However, closed deals are essential in forecasting and projecting future revenues. Five ways to optimize deal flow 1. Marketing campaigns 2. Referral programs 3. Partnerships and alliances 4. Networking and events 5. Lead nurturing ➡ Closed deal to revenue At closing the deal, revenue is not immediately recognized on the financial statements. Revenue recognition follows accounting principles, which dictate when and how revenue should be recorded. ➡ REVENUE Revenue is the total amount a company earns from its core business activities over a specific period, such as a month, quarter, or year. It is generated from the sales of goods or services and is a key metric that reflects a company's top-line performance. Financial Statement Impact Revenue is a crucial figure that directly impacts the income statement. However, in many cases, the counterpost to revenue is receivables, signaling that the customer hasn't paid yet. Five ways to optimize revenue 1. Value-based selling 2. Pricing strategies 3. Sales incentives and training 4. Customer retention 5. Sales analytics ➡ Revenue to cash Revenue represents the total amount earned from sales but does not necessarily reflect the actual cash received. The revenue recognized may include sales made on credit, where the customer is given a period to pay the amount owed. ➡ CASH Cash flow is the net amount of cash and cash equivalents that flow in and out of a company. It represents the cash generated from operating, investing, and financing activities. Cash flow is a critical measure of a company's financial health. Financial Statement Impact: Cash flow impacts the cash flow statement. It shows how a company generates and uses cash during the reporting period. Positive cash flow indicates a healthy financial situation. Negative cash flow may signal potential liquidity issues. Five ways to optimize cash flow 1. Accelerate collections 2. Manage inventory efficiently 3. Negotiate favorable terms 4. Discount for early payments 5. Offer subscription services

Mastering Return on Sales (ROS) for Business Growth! Uncover the power of Return on Sales (ROS) in assessing operational efficiency and profitability. Learn how this pivotal ratio guides informed decisions and influences sustainable growth. 💼💰 #ReturnOnSales #BusinessGrowth #FinancialHealth #OperationalEfficiency

Learn how accurate rebate calculation can boost your business margins. Discover key steps and solutions for managing rebate programs effectively.

Are you confident your business plan will drive growth next year? As you prepare for the year ahead, you know the stakes are high. Tracking metrics like market share, ROI, customer satisfaction, and sales growth is essential — but do you know which one will make the biggest impact on your business? The right focus can mean the difference between staying ahead or falling behind. Now’s the time to reassess and take action. Read our guide or message us to explore how you can use key metrics to ensure long-term success. What's the most crucial metric for your business? Share your thoughts below! https://lnkd.in/gNAby3KW #SuperStaff #BeSuper #Businessplanning #Businessplan #BPO #Outsourcing

10 Tips To Double Your Profits Without Increasing Sales

Contribution Margin measures the efficiency of revenue to cover variable operating expenses. And while it's a useful metric for building a profitable business, it can also lead you astray. In your quest for high CM, you may decide that certain customers are not worth pursuing because they generate a low CM%. But that effectively moves your variable expenses UP because your per-unit economies decrease. Fewer customers because they do not meet an arbitrary CM threshold also increases the per unit cost of fixed expenses like warehouses, offices, and labor leading to slashing those costs to be profitable or raising prices substantially to improve operational efficiency. The best way to go about operational efficiency is not at a macro level but at a customer segment level. Low volume, less frequent, slow velocity revenue customers still provide unit economies of scale. And there is ALWAYS a lot more of them than there are high-velocity buyers. You need both if you intend on growing. The best way to look at that is the marginal return on profits for each customer segment and look at incremental unit and markup strategies to make small incremental improvements. A 5% improvement in a customer base of 100,000 consumers can be the same or better than a 10% improvement in a base of 1,000 consumers. Mind your markups, monitor contribution margin at a segment level, and roll up from there. It will keep you from making decisions that could actually increase your costs while pursuing revenue efficiency.