In my previous life, I ran a $3 million IT services company. Determining where we were in each sales cycle, when our operations center would be backlogged before it happened, and where our cash flow would be 30, 60, and 90 days out were the kinds of things we were always striving for. For most of the time that we ran the company, these were gut checks. We could hope that we were making a good guess but we rarely had a lot to back it up.

How does a management team go about figuring this out? Knowing your past and current state, in most cases, is just not enough. It’s a start to look at a graph of these (typically created in Excel or a similar tool), but what you typically end up seeing is a graph that is kind of all over the place. If you are a small company using cash, rather than accrual, accounting it is even worse with the cyclical nature of a cash accounting system. In any case, it is very difficult to see much in the way of trends. What can you do to get around this issue and really be able to see what is happening in your business? Read the rest of this entry »