Revenue is Vanity, Profit is Sanity, Cash Flow is King
Michael Boggs Simple Numbers Senior Consultant
1 What you will learn:
. How to implement cash flow story in your business
One page The 3 big The Business The 4 Cash flow financial Cash Flow Power of value chapters quality scorecard Measures one indicator
. How banks or investors review your business
. Monthly management meeting
www.cashflowstory.com 2 8 keys to business success:
. Two heads are better than one . Everyone has the right to be heard in a non-threatening way . The truth will be told . Our word is our bond . The needs of the customer come first . There will be no surprises – put the uncomfortable issues on the table . Promote teamwork and leadership . Be proactive corporate citizens
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www.cashflowstory.com 3 William's Plumbing Products . William's Plumbing Products was founded in 2001
. William's is an importer of plumbing products and distributes to building sites, major construction projects and hardware stores.
. William's believes they are doing fantastically as Revenue is growing fast and margins are being maintained.
. Like many CEO’s William does not share the numbers with his team. Marketing and Operations are only aware of Revenue and Margins.
. Current facilities are trade finance, overdraft and a long term facility secured by internal and external property
www.cashflowstory.com 4 William's Plumbing Products
Profit & Loss 2015 2016 Balance Sheet 2015 2016 Cash at bank 0 0 Revenue 35,000,000 42,000,000 Accounts receivable 6,712,330 8,630,137 Gross margin 10,500,000 13,020,000 Inventory 10,336,960 14,291,507 Overheads 6,751,140 8,401,150 Current assets 17,049,290 22,921,644 EBIT 3,748,860 4,618,850 Fixed assets 8,500,000 9,500,000 Interest 1,165,900 1,363,480 Total assets 25,549,290 32,421,644 Tax 930,280 1,172,348 Accounts payable 4,028,550 5,557,808 Net profit 1,652,680 2,083,022 Short term debt 5,019,740 7,279,813 Current liabilities 9,048,290 12,837,621 Long term debt 9,000,000 10,000,000 Total liabilities 18,048,290 22,837,621 Share capital 2,001,000 2,001,000 Retained earnings 5,500,000 7,583,022 Total liabs & equity 25,549,290 32,421,644
5 William's Plumbing Products
. On a scale of 1 to 10 how would you rate William's Plumbing Products financial performance? . On a Scale of 1 to 10 how do you think the Bank rates William's Plumbing Products financial performance? . What is William's Net Cash Flow for 2016?
www.cashflowstory.com 6 Net Cash Flow
• On the 1st of January 2016 I have $10,000 in the bank.
• On the 31st of December 2016 I have $1,000 in the bank.
My Net Cash Flow is -$9,000
Why can’t we apply this logic to our company even if it has multiple bank accounts?
www.cashflowstory.com 7 Knowing the score?
www.cashflowstory.com 8 No Surprises
. Ask yourself do you and your management team know your Cash Flow? . If so, do you know your Quality of Cash Flow ?
www.cashflowstory.com 9 Cash Flow Quality
Growth
Cash Flow Wastage
Management
Gains
www.cashflowstory.com 10 Financial Visibility
Cash Flow is impacted by Marketing, Operations & Finance
Marketing – Price, Volume, Overheads, Receivables
Operations – Purchasing, Inventory/WIP, Utilization, Overheads
Finance – Receivables, Payables, Overheads
Your Team needs to understand how they impact your Cash Flow
www.cashflowstory.com 11 Your Balance Sheet in one Sentence
www.cashflowstory.com 12 Your Balance Sheet in one Sentence Last Year
www.cashflowstory.com 13 TheThe 4 fourChapters chapters
Chapter 1 - Profitability
Chapter 2 - Working Capital
Chapter 3 - Other Capital
Chapter 4 - Funding
www.cashflowstory.com 14 Reconciliation of Cash using the 4 Chapters
+ Cash Flow -Cash Flow
Chapter1 -Profit 2,083,022 Chapter 2 - Working Capital -4,343,095 Chapter 3 - Other Capital -1,000,000 Total 2,083,022 -5,343,095
The business needed $3,260,073 of borrowings to fund the gap
www.cashflowstory.com 15 The roleThe four of chapters Finance Storyteller
www.cashflowstory.com 16 The Funnel Analogy
Sustainable Competitive Advantage
Marketing
Operations
Innovation
HR
Finance
www.cashflowstory.com 17 Sustainable Competitive Advantage
Sustainable Competitive Advantage H Your SCA IMPORTANCETOCUSTOMERS L H
DIFFERENTIATION FROM COMPETITORS
www.cashflowstory.com 18 Sustainable Competitive Advantage
Strategic Element Example
Who is the Core Customer giving superior “John”. Purchasing manager in a large plumbing profits? retailer. 1. Same day delivery Brand Promise that your core 2. No back orders customers value above all else. 3. We’ll never keep you waiting
One-Phrase Strategy is our statement to align ‘yes/no’ decisions for every team No waiting! member. Differentiating Activities our core processes to deliver the promise that our competitors won’t or can’t do without great effort or expense. Process 1 Stock forecasting Process 2 Warehouses in key locations in serviced markets Process 3 80:20 rule for stock range Core Customer
www.cashflowstory.com 20 How does finance measure your SCA?
The four chapters
Chapter 1 - Profitability
Chapter 2 - Working Capital
Chapter 3 - Other Capital
Chapter 4 - Funding
www.cashflowstory.com 21 Is William’s strategy working?
The four chapters
Chapter 1 - Profitability
Chapter 2 - Working Capital
Chapter 3 - Other Capital
Chapter 4 - Funding
www.cashflowstory.com 22 Why do youThe go four intochapters business?
William like so many CEO’s is Profit focused
Is Chapter 1 a sufficient indicator of performance??
Is Cash Flow an indicator of performance??
We need a performance measure that covers all 4 chapters
www.cashflowstory.com 23 Why do youThe go four intochapters business?
In the 1920’s the DuPont Corporation created the Return on Capital concept that is now being used globally as a measure of business performance.
The measure is great because it says that Profitability management and Balance Sheet performance are equally important.
www.cashflowstory.com 24 DuPont concept of Return on Capital
= 17.19%
www.cashflowstory.com 25 The ROCE Equation:
ROCE is a brilliant measure as it combines Chapter 1, 2 & 3 into one number
As management it is critical that over time we ensure that our EBIT is growing at a faster rate than our investment in our Net Operating Assets.
www.cashflowstory.com 26 4 ChapterThe four Management chapters
Your Profitability and Balance Sheet management are equally important
William has outperformed all his Chapter 1 Profitability metrics but he has Cash Flow problems.
William has a lazy Balance Sheet due to his poor Chapter 2 Working Capital Management.
www.cashflowstory.com 27 ChapterThe 2 Improvementsfour chapters
William’s Accounts Receivables increased by over $1.9 million in 2016 and average collections increased from 70 to 75 days
The industry average is 60 days
What strategies could William implement to reduce his Receivables without impacting negatively on Profitability?
www.cashflowstory.com 28 Improving Returns by understanding your Customers
Most companies operate under the 80/20 rule.
Accounts 80% 20% for of revenues of customers
www.cashflowstory.com 29 Improving Returns by understanding your Customers
They want They don’t want a relationship a relationship
We want a relationship 1 2
We don’t want a relationship 3 4
www.cashflowstory.com 30 What do we do with 3 & 4s?
They want They don’t want a relationship a relationship
We want a relationship 1 2
We don’t want a relationship 3? 4?
www.cashflowstory.com 31 What do we do with 3 & 4s?
They want They don’t want a relationship a relationship
We want a relationship 1 2
We don’t want Increase Price a relationship Enforce strict terms
www.cashflowstory.com 32 What do we do with 1 & 2s?
The goal is to identify your blind spots with your 1 and 2 clients and lock them into your business.
- Ask these key clients for a wish list (i.e. what do we need to do to at least 1 be equal with your best supplier?)
- Provide these clients with your wish list (i.e. what we want from them) - Document a supply chain agreement. 2
www.cashflowstory.com 33 Optimizing Growth
KEY POINTS
. Clear understanding of what the business is doing . Which quadrant is the business in now, where is it heading and why? . What are the opportunities for the business? . What will the outcomes be for the business . There are options and the answer is ‘it depends’ . This provides a powerful partnership tool
www.cashflowstory.com 34 Optimizing Growth
Your Growth Strategy
EBIT Efficient Expanding
NOA
Contracting Inefficient
www.cashflowstory.com 35 DuPont concept of Return on Capital The four chapters
Is 17.19% a good return
www.cashflowstory.com 36 Your Balance Sheet in one Sentence
Cost of Capital Return on Capital
www.cashflowstory.com 37 What is William’s Cost of Capital?
• The Capital Asset Pricing Model was invented in the 1950’s and is a means to calculate the Cost of Capital of a business • Cost of Capital combines the Rate of Return required by shareholders with that required by lenders • The cost of Debt and Equity are proportioned at the businesses projected Debt to Capital ratio giving a Weighted Average Cost of Capital (WACC) Cost of Capital
Cost of Debt Is the after tax rate at which the business can borrow on a new long term loan
Cost of Equity This is harder to calculate objectively It is based upon the rate at which shareholders are compensated after taking the risk of the business into account Cost of Capital Cost of equity is calculated as follows: Risk free rate + (Risk index x Market premium) Rf + (Beta x Premium)
The risk free rate is the rate at which we can invest at minimum risk, usually government bond rate.
The Beta is the risk of your business relative to the market
The market premium is the amount above the risk free rate that the Stock Exchange returns ( Approx 6% in Western economies) William’s Return The four chapters William needs to ensure that his return is above his cost of capital or else he is destroying value
www.cashflowstory.com 41 Attaining Equity Funding
M - Management O - Opportunity V - Valuation E - Exit R - Return Is your company a MOVER? Attaining Debt Funding P - People A - Amount R - Repayment S - Security E - Expediency R - Remuneration S - Services The roleThe four of chapters Finance Storyteller
www.cashflowstory.com 44 The Financial Health Check
Business Perspective Bank Perspective
Chapter 1 Debt Service Profitability Capability
Chapter 2 Financial performance Working Capital & risk monitoring Transparency Chapter 3 Other Capital Chapter 4 Funding $
www.cashflowstory.com 45 Chapter 1 – Profitability key elements
• Revenue Growth % • Gross Margin % • EBIT % • EBITDA • Interest paid • Tax • Net Profit after Tax % • Dividends paid
www.cashflowstory.com 46 Chapter 1 - Profitability Trends
Profitability Trends
Gross Margin % EBIT % Net Profit %
www.cashflowstory.com 47 Chapter 1 – Overheads
Revenue v Overheads Growth
www.cashflowstory.com 48 Chapter 1 – Profitability Management
• Do you know the Gross Margin for each product or service? • Do you know the Cash Flow for each product or service? • Do you know the Gross Margin for each Customer? • Do you know the Cash Flow for each Customer?
www.cashflowstory.com 49 Chapter 2 – Working Capital Key Elements
• Trade Debtors days • Inventory days • WIP days • Trade Creditors days • Overall change in each element of Chapter 2 • Working Capital % • Working Capital per $1
www.cashflowstory.com 50 Chapter 2 - Trends
Working Capital Days
Payable Days Inventory Days Receivable Days
www.cashflowstory.com 51 Chapter 2 - Working Capital
Working Capital Timeline at 31-12-2016
185 Working Capital Days
165 Working Capital Days
www.cashflowstory.com 52 Relationship between Chapter 1 and 2
Chapter 1 Chapter 2 Revenue Trade Debtors less Cost of Sales Inventory Trade Creditors
There is a direct relationship between the elements of Chapter 1 and Chapter 2
www.cashflowstory.com 53 Relationship between Chapter 1 and 2 - Service Industry
Chapter 1 Chapter 2 Revenue Trade Debtors less Work in Process Direct Costs Trade Creditors
There is a direct relationship between the elements of Chapter 1 and Chapter 2
www.cashflowstory.com 54 Marginal Cash Flow
The additional cash that will be generated or used up if we sell $1 more of our product or services.
Note: this should be a year to date measure
www.cashflowstory.com 55 Marginal Cash Flow for the next $1 of sales
Gross margin 13,020/42,000 Less Debtors 8,630 Inventory/WIP 14,291 Creditors (5,557)
Working Capital 17,364/42,000
www.cashflowstory.com 56 Marginal Cash Flow for the next $1 of sales
Gross margin 31.00 cents Less Debtors 20.55 Inventory/WIP 34.03 Creditors (13.23)
Working Capital 41.34 cents
Cash outflow (10.34) cents
www.cashflowstory.com 57 Chapter 2 - Working Capital
Gross Margin vs Working Capital
31-12-2012 31-12-2013 31-12-2014 31-12-2015
Your Gap
31-12-2012 31-12-2013 31-12-2014 31-12-2015
www.cashflowstory.com 58 Marginal Cash Flow – By Division
Branch GM% AR Days WIP Days WC% GM%-WC% Rank Melbourne Economics 48 60 15 18 30 1 Sydney Planning 50 82 24 26 24 2 Consumer Research 48 90 12 25 23 3 Melbourne Planning 50 76 30 27 23 3 Melbourne Design 31 30 23 11 20 5 Sydney Design 46 66 45 28 18 6 International Property 58 132 42 45 13 7 Perth Planning 29 59 22 18 11 8 Brisbane Planning 45 106 38 37 8 9 Valuation 46 78 72 39 7 10 Perth Design 30 56 44 24 6 11 Sydney Social Policy 37 67 80 37 0 12 Brisbane Property 25 67 42 26 -1 13 Sydney Property 29 104 21 31 -2 14 Telco 16 78 20 23 -7 15 Sydney Heritage 12 37 58 21 -9 16 Brisbane Design 47 163 91 67 -20 17 www.cashflowstory.com 59 Chapter 3 – Other Capital
• Chapter 3 is the rest of the Balance Sheet and are mostly items that management has little say over • But Chapter 3 is important in understanding your business from a longer term perspective • William needs to ensure he has no underutilized assets that are clogging up his Balance Sheet • If you have non-core assets such a land and buildings that have a low yield, look at your return excluding these assets
www.cashflowstory.com 60 DuPont concept of Return on Capital
= 17.19%
www.cashflowstory.com 61 Chapter 4 - Funding
Did Chapter 1, 2, 3 generate or require funding?
What is the source of the funding?
Debt or Equity?
Is your Equity funding from Retaining Profits or Capital Injections?
www.cashflowstory.com 62 William’s Chapter 4 - Funding 2015 2016 Change Net Debt 14.0 17.3 3.3 Equity 7.5 9.6 2.1
Total Funding 21.5 26.9 5.4
www.cashflowstory.com 63 Your Big 3 Cash Flow Measures
Marginal Cash Flow
Operating Cash Flow
Net Cash Flow
www.cashflowstory.com 64 Marginal Cash Flow for the next $1 of sales
Gross Margin 31.00 cents Less Debtors 20.55 Inventory/WIP 34.03 Creditors (13.23)
Working Capital 41.34 cents
Cash Outflow (10.34) cents
www.cashflowstory.com 65 Operating Cash Flow
Profit vs Cash Flow
Note: this should be a monthly measure and is mission critical for your Bank
www.cashflowstory.com 66 Banks and Investors focus on Debt Service Capacity
Operating Cash Flow 276,904 Less Tax 1,173,498 Net Cash After Operations (896,594)
William has -$896,594 after paying his tax. He has no cash to pay his interest of $1,363,480. William has breached his Capacity to Repay
www.cashflowstory.com 67 Net Cash Flow Opening Net Debt Cash 0 Short Term Debt 5,019,740 Long Term Debt 9,000,000
14,019,740 Closing Net Debt Cash 0 Short Term Debt 7,279,813 Long Term Debt 10,000,000
17,279,813
Net Cash Flow -3,260,073
www.cashflowstory.com 68 No Surprises
. Ask yourself do you and your management team know your Cash Flow? . If so, do you know your Quality of Cash Flow ?
www.cashflowstory.com 69 Cash Flow Quality
Growth
Cash Flow Wastage
Management
Gains
www.cashflowstory.com 70 Cash Flow Quality
Profitability Ideal Profile G A B
Sales 100
GM % 30 >30 28-30 <28
OH % 20 <20 20-22 <22
EBIT % 10 >10 8-10 <8
Working Capital Debtors Days 60 <60 60-70 >70 Inv/WIP Days 90 <90 90-100 >100 Creditors Days 60 45-60 60-70 <45>70 Working Capital % 22 <22 22-25 >25
www.cashflowstory.com 71 William's Numbers
Profitability Ideal Profile G A B
Sales 100
GM % 30 31
OH % 20 20
EBIT % 10 11
Working Capital Debtors Days 60 75 Inv/WIP Days 90 180 Creditors Days 60 (70) Working Capital % 22 41
www.cashflowstory.com 72 The Power of One - Sensitivity
Your 7 levers to improve Profit, Cash Flow and Business Value:
Price % Volume % COGS/Direct Costs % Overheads % Accounts Receivable Inventory/WIP Accounts Payable
www.cashflowstory.com 73 The Power of One
74 The Power of One – William's strategy
75 The Power of One The Power of One is the Code of your Business It will improve Profit, Cash Flow and Value
www.cashflowstory.com 76 Valuation
As a CEO you are always looking to optimize the value of your business
Management tend to overvalue their Businesses
The simplest and most common way to value a business is on an EBITDA Multiple
www.cashflowstory.com 77 Your Business Value Indicator
www.cashflowstory.com 78 Power of One Value Uplift
Price up 2% Volume down 3% Accounts Receivable down 5 days Inventory down 10 days
www.cashflowstory.com 79 Power of One Value Uplift
www.cashflowstory.com 80 Predicting the future Before you can predict the future you need to understand your current 4 Chapter Drivers William's Numbers
Profitability Historical Drivers Projection
Revenue Growth % 20 5
GM % 31 31 OH % 20 20 EBIT % 11 11
Working Capital Debtors Days 75 65 Inv/WIP Days 180 160 Creditors Days 70 65 Working Capital % 41 Other Capital Investment 1,000,000 NIl
www.cashflowstory.com 82 William's Projected Profit
www.cashflowstory.com 83 William's Projected Working Capital
www.cashflowstory.com 84 William's Projected Funding
www.cashflowstory.com 85 Business Planning You must use a 3 way Budget – ie P & L, Balance Sheet and Cash Flow
Your Budget needs to make sense! Last Year This Year Comments • Does it balance? Revenue $17,564,890 $19,145,730 2 new clients Revenue Growth 8% 9% Does align with your plan? • Gross Profit % 52% 53% • Does it show the bank what Operating Exp % 45% 43% Cheaper Rent EBIT % 7% 10% you need of them? Acc Rec (Days) 43 Days 43 Days No change • Do the basic ratios relate Inventory (Days) 120 Days 100 Days Stock elimination with the past? Acc Pay (Days) 30 Days 32 Days Net Cash Movt +$900,000 +$1,200,000
RONA 18% 24% Target 25%
ST Debt Balance $2,000,000 $1,500,000
LT Debt Balance $6,000,000 $5,500,000
Interest Cover 3.4x 6.1x Strong Improve
www.cashflowstory.com 86 Next Steps 1. Ensure the senior staff understand all the concepts in “Cash Flow Story” – The Four Chapters, The Big Three Cash Flow numbers - Please review the training video at www.cashflowstory.com/resources. 2. Create a monthly or quarterly financial scorecard using the four chapters. Set monthly or quarterly targets. Ensure these targets are communicated to all key Staff 3. Have a monthly/quarterly management meeting. (The template provided can be the basis of the meeting) 4. Set a “theme” in the business on a quarterly basis so that your company can celebrate success 4 times a year. Ensure that the critical numbers are communicated and understood 5. On a quarterly basis calculate the Power of One of your company and discuss at the management meeting. (Cash Flow Story can calculate the number) 6. The Power of One will help drive change management in the business 7. Ensure that your company has a 12 months rolling budget. (Cash Flow Story can assist is the high level budgeting process) 8. Ensure that you understand the way the bank is viewing your business
www.cashflowstory.com 87 Jan-Dec 2017 Annual Dashboard
Align the organisation behind the number one priority to make the most significant impact this year. GOALS 2017 Mar 17 Budget Actual Comment On Budget YTD YTD LYTD Track #1 customer Trade Revenue $44m $8.1m $9.0 $7.8 Co. withheld order $13.6m $2.5m $2.8 $2.38m GM Margin % holding 31% 31% 31% 30.5% $4.8m $0.970m $0.990m $0.600m EBIT 11% 12% 11% 7.7% Cash CRITICAL4 NUMBER months 1 month Measure 1 month 0 months Good OKMain focus Bad Current Cover Focus on cash flow not Working Capital % of 25% 35% 40% 50% revenueRev/FTE $250k $220kRev $250k $210k PRIORITIES Comment Who WWW On Track Priority 1 – Reduce stock days by 25 Delete non-core Rob Yes days: $1.4m SKU’s Priority 2 – Reduce debtor days by 5 Recruit new clerk Mary Yes days: $190k Priority 3 – Ensure quarterly reporting Rectified Natha Yes to BankCopyright © 2015, R Kininmonth & Pearl Financial Services. All rights reserved. n www.pearlfinancialservices.com Priority 4 – Open/Acquire QLD operation Speak w/ Spiro Ann Yes Q1 Jan-Mar 2017 Quarterly REVIEW
Did you achieve your Goals & Priorities this quarter? Are you making progress against your Critical Number? GOALS Q1 Q1 Actual Q1 LY Comment On Budget Track
Revenue $10m $8.1m $12.0m $1.9m gap $2.5m GM $3.1m 31% $3.72 31% Margin holding 31% $0.810m $1.560m EBIT $1.1m 11% $290k gap 10% 13% Cash Main focus – cash tied up in 0 months 0 month 2 months CoverCRITICAL NUMBER Measurestock Good OK Bad Current THEME $293k Rev/FTE $220k 176 $250k 170 Behind in reducing staff overhead “Working capital150 Working Capital % of 25% 35% 40% 50% excellence”PRIORITIESRev Comment Who WWW Achieve d Priority 1 – Identify 20% SKU’s & SOH$ To reduce working Con Yes to delete cap Priority 2 – Discuss extra 30 day terms Hongleong is Mary Yes all suppliers possible Priority 3 – Redeploy “C” Players Complying with Mary Yes Copyright © 2015, R Kininmonth & Pearl Financial Services. All rights reserved. www.pearlfinancialservices.com legals Priority 4 – Establish advisory board & process Completed with David Yes Q2 Apr-Jun 2017 Quarterly PLAN
Align the organisation behind the number one priority to make the most significant impact this quarter.
GOALS YTD Q2 Q2 LY Comment Actual Budget $1.9m gap - sell existing Revenue $8.1m $10m $10.0m stock $2.5m GM $3.1m 31% $3.1m 31% Hold 31% $0.810m EBIT $1.2m 12% $1.3m 13% 10% CashCRITICAL Cover NUMBER 0 monthMeasure 1 months 2 Goodmonths OKMain Bad focus Current THEME $250k Rev/FTE $220k 176 $293k 150 “Working capital Working Capital % of 17025% 35% 40% 50% excellence”PRIORITIESRev Comment Who WWW On Track Priority 1 – Reduce SKU’s from 6000 to Delete non-core Con Yes 5000 SKU’s Priority 2 – Hongleong terms from 60 to Visit in May Mary Yes 90 days Priority 3 – Implement trade finance Negotiate by June Natha Yes Copyright © 2015, R Kininmonth & Pearl Financial Services. All rights reserved. with Bank www.pearlfinancialservices.com n Priority 4 – Sales campaign clear $1.0m slow Setting date with Con Yes Quarterly KPI Dashboard
Keep the organisation in harmony by measuring and balancing the performance drivers of the business. PEOPLE (Reputation Drivers) GOALS Target Result Comment On Track Revenue/FTE $200,000 $170,000 % A players 80% 55% NPS 50% 45% Net new clients 50 52 % profitability 5% 5% growth PROCESS (Productivity Drivers) GOALS Target Result Comment On Track DIFOT 98% 99.4% # core customers 100 75 % revenue from CC 80% 75% Day financials 7 5 closed MonthsCopyright avail. © cash 2015, R Kininmonth 3 & Pearl Financial 3 Services. All rights reserved. www.pearlfinancialservices.com Labour Efficiency Ratio
10% profitability is your new break even and only add labour when you reach 15%.
Copyright © 2015, R Kininmonth & Pearl Financial Services. All rights reserved. 27 www.pearlfinancialservices.com Team Talent Review
Do you have the right people on the bus? How many of your team do you need to challenge, train or redeploy? B Players A Players High 50% 35% #85 #60
CORE VALUES 5% 10% #9 #17
Low C Players B/C Players
Low PRODUCTIVITY High
Copyright © 2015, R Kininmonth & Pearl Financial Services. All rights reserved. www.pearlfinancialservices.com Talent Training
Review of training initiatives to be performed regularly to ensure we continue build and improve our team skills
Training Initiative Who to do When offered Training Review results Gazelles Growth Management On-line courses Each manager watch Institute 3 courses & implement 1 idea/qtr New AAA pipe range Sales team Apr Daily huddle Each team May LER training CFO Jun
Copyright © 2015, R Kininmonth & Pearl Financial Services. All rights reserved. www.pearlfinancialservices.com 25 Team Culture – Actions to Live By
Actions undertaken to reinforce team culture (core values, purpose) and promote Employer of Choice for the team
Initiative Staff Attendance Who Date Review Weekend away with Senior Management Bill Jan Done partners Weekly core values awards All Bill Mar Done
Implement “TinyPulse” All participate Mary Apr Job Scorecards Stage 1 – all managers Mary Jun
Copyright © 2015, R Kininmonth & Pearl Financial Services. All rights reserved. www.pearlfinancialservices.com Stay in Touch! Thank you!
Go to www.cashflowstory.com/resources to watch a summary of this talk
www.cashflowstory.com 96 Definitions
Chapter 1 - Profitability Revenue Growth % (Current Revenue – Prior Revenue)/Prior Revenue) % Gross Margin % (Gross Margin/Revenue) % Overheads % (Overheads/Revenue) % EBIT % (Earnings Before Interest & Tax/Revenue) % EBITDA EBIT + Depreciation and Amortization Net Profit % (Net Profit after Tax/Revenue) %
www.cashflowstory.com 97 Definitions
Chapter 2 – Working Capital Accounts Receivable Days (Accounts Receivable/Revenue) x 365 *** Inventory Days (Inventory/Cost of Goods) x 365 *** WIP Days (WIP/Revenue) x 365 *** Accounts Payable Days (Accounts Payable/Cost of Goods) x 365 *** Working Capital $ Accounts Receivable + Inventory/WIP – Accounts Payable Working Capital % (Working Capital $/Revenue) x 100 *** Marginal Cash Flow (Gross Margin % - Working Capital %)
*** This calculation needs to be annualized if you are not reviewing a full year.
www.cashflowstory.com 98 Definitions
Chapter 3 – Other Capital Operating Assets All Assets excluding Cash Operating Liabilities All Liabilities excluding Short & Long Term Debt Net Operating Assets Operating Assets – Operating Liabilities Net Operating Assets Is also Equity + Net Debt Net Asset Turnover (Net Operating Assets/Revenue) *** Return on Capital Employed % (EBIT/Net Operating Assets) x 100 ***
*** This calculation needs to be annualized if you are not reviewing a full year.
www.cashflowstory.com 99 Definitions
Chapter 4 - Funding Marginal Cash Flow (Gross Margin % - Working Capital %) Operating Cash Flow EBITDA – Change in Working Capital Net Debt Short Term + Long Term Debt - Cash Net Cash Flow Change in Net Debt
www.cashflowstory.com 100