business coaches - overview of profit guard
DESCRIPTION
Profit Guard is a Quickbooks add-on, which helps you help business owners improve the profitability and cash flow, by focusing on the right financial questions. The service calculates 14 financial ratios over time and uses the 200+ data points, as well as industry information, to generate different reports that show the information to the owner or manager 7 different ways. These reports are designed so that people who experience MEGO (My Eyes Glaze Over) when confronted with financial statements can get the same information that financial advisors, business coaches and accounts can read into the numbers. Profit Guard pulls data on peers from a database of 900,000 private companies. Relative to their best performing peers, most companies discover significant operating inefficiencies. Every business, with more than $2.0M in revenues, has found at least $50,000 in previously unknown inefficiencies.TRANSCRIPT
Accounting for the Right-Brained Business Owner
Elizabeth Pearce
ProfitGuard4.Biz
415-595-4784 [email protected]
Business Coaches Using Profit Guard as a
Consulting Tool
This deck is an overview of a Profit Guard report
Accountants and Business Coaches are encouraged to download it to access the
accompanying text
More information is available at
http://profitguard4.biz/
2
Profit Guard –12 Page Monthly Report
Left vs. Right Brain Functions
Creative Solutions
Innovation
Intuition
Risk Taking
Images
Holistic Thought
Most Business Owners 3
Analysis
Logic
Numbers
Science
Accounting
Linear Thought
Accountant/Bookkeeper
Profit Guard – 12 Page Monthly Report
• Every new client has found $50K or more
• Supplements Traditional Financial Statements
– In Plain English
– Financial Roadmap “The Plumbing”
– Key Ratios and Benchmarks
– Graphs Trends for Each Ratio
– Sensitivity Analysis
– Cash Needs with Growth
• Cash Conversion Cycle4
Profit Guard Report Generation
5
The Next Slide is the RoadmapPrepare yourself: For the left-brained, the next slide is a disturbing image. But for the right-brained business owner this is helpful “road map” of where cash can get trapped in the business - a picture of the financial plumbing of the firm.
Right-brain people will go to the red boxes – this is where the company’s accounting ratios are the farthest from the goals. These red boxes are where management changes will have the largest impact on cash from the business.
Think of this as a flow chart. There is cause and effect. The arrows from each box move in the direction of effect. The actionable solution may be upstream, going against the arrows. This is the cause of the colored box – and a place to start actions to improve the situation. 6
$359,028 (1)
© 2013 Business Resources Services, Inc.
$161,806 (2)
$57,547 (5)
$107,500 (4)
Footnotes(1) $359,028 Cash Impact because of too much Inventory.
(2) $161,806 Cash Impact because of too much Customer Credit.
(5) $57,547 Profit Impact over the time period if the goal was met.
$196,528 (3)
(6) $5,000 Profit Impact on 2% Payable Discounts.
Areas to review as a result of Scorecard
Powered By:
<25%
25% to <50%
(3) $196,528 Cash Impact that could be saved with longer payment terms.
(4) $107,500 Profit Impact over the time period if the goal was met.
$5,000 (6)
≥50%
Distance From Goal Impact
Cash
Profit
http://www.brs-seattle.com/ProfitGuard/
RoadMap.pdf
Hello Telephone Co. 7/31/12
Period EndingTHE PROFIT ROAD MAP
Poor PricingPoor BuyingBookkeeper
Errors
Low
Productivity
LOW GROSS
MARGIN
LOW NET
PROFIT
High
Borrowing
High
Liabilities
High
Interest
Low Retained
Earnings
No Cash Discounts
on Payables
Low SalesPoor Expense
Control
LOW
CASH
High Current
Liabilities
High Hidden
Costs
Too Much
Inventory
High A/R
Too Much
Customer Credit
Low A/R
Not Enough
Customer Credit
Not Enough
InventoryPoor
Inventory
Control
Shrinkage
Payable
Aging
The Next Slide is More Comfortable
These are the ratios that drive Profit Guard, and the basis of the prior chart
• Financial Stability – Ratios from the Balance Sheet that determine financial health and ability to pay vendors, bankers and creditors.
• Profitability - Gross and Net Margins Ratios
• Asset Efficiency – Turnover (Sale/Total Assets), ROE & ROA, Inventory, A/R and A/P expressed as “Days of Sales”
A key drivers for Profit Guard is the Cash Conversion Cycle.
The Scorecard also shows the peer group information.
Most owners need a consultant to help set goals, which need to be reviewed and adjusted each month.
8
Tw
o (
2)
Mo
nth
s A
go
Las
t M
on
th
Cu
rren
t
Mo
nth
5/31/12 6/30/12 7/31/12Top
10%
Top
25%
50%
AVG
Current Assets 1,543,042
Current Liabilities 604,320
Cash + Accts. Rcv. 863,777
Current Liabilities 604,320
Total Liabilities 1,219,538
Net Worth 1,032,595
Gross Profit 50,000
Sales 350,000
Net Profit Before Tax -34,797
Sales 350,000
Sales 350,000 X 12
Total Assets 2,369,396
Net Profit Before Tax -34,797 X 12
Total Assets 2,369,396
Net Profit Before Tax -34,797 X 12
Net Worth 1,036,462
Cost of Goods Sold 300,000 X 12
Inventory 650,000
365 365
Inventory Turnover 5.5
Sales 350,000 X 12
Accounts Receivable 850,000
365 365
Accts. Rec. Turnover 4.9
Cost of Goods Sold 300,000 X 12
Accounts Payable 250,000
365 365
Accts. Payable Turnover 14.4
© 2013 Business Resources Services, Inc.
Calculations
For Current
Month
Note: NA designates the Metric is
not of value in this company
Greater than 50% from Goal
Powered By:
Act
ual
Annual
ized
2.5
1.6
29.9%
2.7%
1.9
5%
12%
5.4
Hello Telephone Co.
Period Ending 07/31/2012
Tre
nd Your
Goal
Industry Standard
5.0 4.9▼
Inventory Turnover
2.9
8.1 12.2 24.3
2.4 1.2 0.8
10.4% 6.5% 3.4%
14.2% 11.2% 8.3%
35.0%
5.6
▼
12.2 7.9 5.9
65
5.2 5.5
BALANCE SHEET RATIOS: Stability (Staying Power)
INCOME STATEMENT RATIOS: Profitability (Earning Power)
ASSET MANAGEMENT RATIOS: Overall Efficiency Ratios
9
Accounts Receivable
Turn-Days 79 73 74▲
60
1.5 0.8
2.0 1.2 0.9
0.8 1.0 1.5
45.0%
3029 25▼
45 45 30 1514
Average Payment
Period-Days 32
12.7 14.4▲13
Accounts Payable
Turnover 11.3 8.1
81
12.2
1223
46 62
15.9 7.9 5.9
46 62
10
11Accounts Receivable
Turnover 4.6
71 66Inventory Turn-Days
6.1
3068
4.5
30
12.2▲
8 Return on Investment39.2%
2.7% -18.5%▼
10%
5.8% -40.4%▼
15%
7 Return on Assets18.0%
1.9 1.9▼
2.06 Sales to Assets
2.0
1.4% -9.9%▼
7% 6.5% 5.0% 3.0%5 Net Margin
8.8%
26.7% 14.3%▼4 Gross Margin
35.0%
1.1 1.2▲
0.8
45% 28.0%
1.3
2.6
3 Debt-to-Worth1.2
1.5 1.4▼
2.0
Better than Goal
≤ 25% away from Goal
Greater than 25% from Goal
2 Quick1.7
2.6 2.6▼
2.91 Current
THE SCORECARD
http://www.brs-
seattle.com/ProfitGuard/InconclusiveData.pdf
Historic InformationCash vs. Earnings
Trends
Asset Management & Cash Conversion
10
Issue Profit
Receivables
Inventory
Payables
Payable Discounts $5,000
Gross Margin $107,500
Net Margin $57,547
Total $170,047
=
=
=
=
**Note: 1% improvement in margin would mean an increase in profits of
$3,750 to Hello Telephone Co. based on the last 3 months average.
© 2013 Business Resources Services, Inc.
1% Margin Sensitivity**
Metric Impact
1-Day Sensitivity*
Inventory Turn-Days
Accounts Receivable Turn-Days
Average Payable Payment Period
Margin Metrics (Month)
* Note: A 1 day of improvement in these metrics would increase the Cash
of Hello Telephone Co. by the amount shown based on the last 3 months
average.
$3,750 per 1%
Cash Conversion Metrics
Powered By:
Hello Telephone Co.
$196,528
Cash Required Cash Lost
$359,028
$161,806
Cash and Profit Impact
$717,361
Period ending 07-31-2012
Margin (Gross or Net)
$9,278 per day
$12,500 per day
$9,278 per day
Sensitivity Analysis
http://www.brs-seattle.com/ProfitGuard/Ass
essment.pdf
PROFIT MASTERY
ASSESSMENT
Cash Conversion Cycle
12
Benchmark Data
Industry data, NAICS code based
Approximately 1,200 Industries
Over 900,000 private companies in Fintel database
After the First Few Meetings
• Profit Guard also has a number of useful planning tools.
• Ongoing consulting opportunity
• Help the owner anticipate changes in the business
• Help an owner become more bankable
13
Planning ToolsChanges in Fixed Costs
Variable Cost Shifts
Borrowing NeedsWith Anticipated Growth
Efficiency Adjustments
14
sales
VC
FC
NP
FC Text
Breakeven in Sales
FC
(200,000)$
(175,000)$
Current Break-Even Sales = $1,757,494 Current FC = $1,213,025
This chart shows the change in net profit resulting
from selected % decrease in your variable cost.
For every $1 FC increase, $3.23 sales increase is needed for same Net Profit.
This chart reflects the amount of sales increase that will be needed for various changes in the fixed cost
levels in your company.
Every 1% VC decrease will result in $30,818 of an annual Net Profit increase, correspondingly, every 1% VC
increase will result in $30,818 of an annual Net Profit decrease.
Powered By:
Current Contribution Margin = 31.0%
© 2013 Business Resource Services, Inc.
-$800
-$600
-$400
-$200
$0
$200
$400
$600
$800
Sa
les R
eq
uir
ed
Th
ou
san
ds
Fixed Costs (FC) Change Thousands
Sales Required to Support Fixed Costs Changes
-$600
-$400
-$200
$0
$200
$400
$600
-16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16%
Net
Pro
fit
Ch
an
ge
Th
ou
san
ds
Percent Variable Cost (VC) Change
Net Profit Impact with Variable Cost % Change
http://www.brs-seattle.com/ProfitGuard
/BreakEven.pdf
BREAK-EVEN
ANALYSISHello Telephone Co
$60K
$195K
-$400K
-125K
Fixed Cost Example
Business Coaches, Bookkeepers,Consulting CFOs, Accountants
• Another tool for consultative relationships
–Additional billable time each month
–A Balance Sheet management tool
– Educational tool for accounting-phobic
• Profit Guard as Referral Source
16
THANK YOU!
17
Profit Guard retails for $199.99/month
Use promotion code EP-dcgejxnfor a risk-free 30-day trial
and price discount