Chronic Cash Flow Problems

Cash Flow Problems

Have you considered that your chronic cash flow problems may be a result of a malfunctioning budget process?  You may suspect foul play, but most of the time it comes down to two issues: 1) not properly planning the activities of the year with a well-thought out budget and 2) not monitoring actual results in comparison with the  budget. In our experience, this is usually the root of the cash flow problems.

Cash flow problems can result from money that is owed to your organization (receivables) that is not paid timely or expenses that are laid out ahead of the matching revenue (such as with an upcoming conference). But these situations are usually clear to see, easy to prepare for, and usually short-lived. When an organization has chronic cash flow problems, the root may be the lack of proper planning and monitoring.

When you take time to carefully plan the revenue and expenses that your  organization will incur in the next year, you are considering realistic scenarios, setting goals, and planning for the largest expense you are likely to have – personnel.   If the numbers do not fit, as in having an unplanned deficit, you need to make difficult decisions before the year begins. This sets you in a position of control. When you monitor the planned activity to the actual results (through budget to actual comparisons) you are controlling the situation further by making decisions during the year based on the results of the budget-to-actual.  

Financial results tend to come in “waves”.  The results of a poor financial decision made today may not be felt immediately. Chronic cash flow problems usually result from lack of proper planning and lack of control over the results.  The wave effect continues until the root cause is addressed. To understand the effects of these waves, we recommend that you create and monitor a cash flow budget for the year. This cash flow budget is created from the organization’s annual budget.

We’ve had clients whose planning drilled down to each grant.  Upon close inspection, the grants were being overspent, and those expenses were eating into the admin budget.  In other cases, grants were being underspent, leaving money on the table. In most cases, the biggest expense was personnel, so controlling the amount of time that employees spend on the grant made a great impact on the fulfillment of the budget and therefore, the organization’s cash flow.

Preventing cash flow problems requires a multi-step approach:

  1. Create a well-thought-out budget for the fiscal year.
  2. Create a cash flow projection based on that budget.
  3. Monitor both the budget and the cash flow projection.  
  4. Anticipate and mitigate cash flow dips.
  5. With this information, make timely, well informed decisions that will maintain financial health.

When a new client comes to talk to us about controlling their cash flow situation and we discuss their budgeting process, we always get a nod of agreement that the planning piece has been missing.  Get ahead of this problem by implementing the ideas above.

News Release: Accomplished Local CPA Will Instruct Class at Prestigious National Conference

Maribel Torres will instruct Dissecting the Non-Profit Vertical for Client Accounting Services at the AICPA and CPA.com’s 2014 Digital CPA Conference

Chevy Chase, MD—December 2, 2014—The CEO/Director of Client Accounting Services of Lumix CPAs and Advisors, Maribel Torres, will be teaching a class on client accounting services at the Digital CPA Conference, December 8-10, 2014. The event is hosted by CPA.com and the American Institute of CPAs, the world’s largest member organization representing the accounting profession. Ms. Torres is a member of the Advisory Board for CPA.com and the AICPA’s Digital CPA Conference.

Ms. Torres, the founder of Lumix CPAs and Advisors, is an expert in nonprofit accounting. When asked about instructing a class at the Digital CPA Conference, she replied, “I’m eager to empower CPAs and nonprofits for the digital age. One of Lumix’s core values is to be on the cutting edge of technology—this is part of our brand. We want to help other accounting professionals move forward, and this class will help us achieve that.”

The class is focused on how a firm can achieve a sustainable profit margin within the nonprofit vertical market. In addition, Ms. Torres will be a panelist on the final plenary session of the conference, “Bringing it all Together.” Panelists will “share their strategies and ideas for continuing the evolution of their career and their organization…” Tom Hood, CEO of the Maryland Association of CPAs, will be joining her on the panel.

The Digital CPA Conference will feature the best and brightest minds in the digital accounting industry. With three information-packed education tracks, attendees can learn the technical, business and leadership strategies needed to operate a digital firm, achieve higher engagement with staff and clients and develop a sound, structured plan to ensure success.

About Lumix CPAs and Advisors

Lumix CPAs and Advisors focuses on accounting digitalization, client accounting services, financial statement preparation, taxes and CFO advisory services. The firm has been recognized by the American Institute of Certified Public Accountants (AICPA) as being a leader in the CPA field. The firm predicates its success on award-winning client services.

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In Search for Balance & Purpose, Part II

So your books are balanced.  In fact, you have supported the major balances in your balance sheet and have traced the activity in your statement of revenues and expenses.  The reports are ready to be published.  Now what?  What is the purpose of these historical reports?

In my first article, I presented my opinion on balance and argued that it is simply a part of a larger process that leads to well-presented reports and financial statements.  In this article, I discuss the purpose and objective of these financial statements.

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In Search for Balance & Purpose, Part I

We are constantly looking for balance in our lives.  Balancing work and family is a popular concern, as is balancing our investments or even balancing our diets.  Can anyone ever claim to have successfully achieved balance in these areas of their lives?  Once we achieve it, can we maintain it? And then, how do we use it?

What about purpose?  Is there a purpose to everything we do, and can we successfully argue that our true purpose is ever-changing?  In this first article of a two-part series, I will give you my opinion on the value of balance in accounting, and in the second article, I will explore the higher purpose of accounting.

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Board Responsibilities and Liabilities

I recently attended the BoardSource Leadership Forum called Governance by Design as an exhibitor.  The classes were created to provide information to CEOs and Board members. I attended with two objectives in mind: My objective as an exhibitor was to meet potential clients. My objective as the treasurer for a non-profit organization was to learn from the classes.

I have attended many other non-profit leadership classes and found that there are a few central themes in regards to becoming or serving as a board member—understanding the responsibilities and risksof being a board member.  Many individuals are asked to join a non-profit board as a favor to a friend, while others look for organizations to lend a hand for a cause they want to support or possibly as a requirement of their job. In this blog, I’ll discuss why board members of non-profit organizations should know their responsibilities and risks before they accept a position. This will allow them to swiftly adjust to their board position and serve the organization accordingly.

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Learn It Here, Apply It Anywhere

When I accepted the job offer from Lumix coming out of college, I was a bit nervous to change industries—my internships were related to politics, media, and outreach. Simply put, none of the outlets I worked at were CPA firms. I quickly realized the skills I would learn here are transferable and that a successful CPA firm has more than just accounting knowledge to offer. To any readers wondering if an industry change could benefit your career and make you a better professional: It absolutely can. If you are willing to adapt and your employer is willing to cultivate talent, dividends will show. I promise.

In a previous blog post, I discussed my development of professional skills while at Lumix. I will use these sharpened skills to improve every endeavor I embark upon. These aren’t skills to put on a resume; rather, they are skills you use togrow and facilitate goal achievement, both personal and professional.

This blog post is about my transferable skills, or skills I could seamlessly apply to another industry. Specifically, what are the most significant and tangible skills I’ve learned here so far?

Needless to say, a growing CPA firm like Lumix would give any young professional the opportunity to learn a collection of applicable skills. As long as you’re willing to learn, the environment and people will make you a better individual, holistically and on paper. These three vital skills I’m developing at Lumix will be applicable to any career:

Taking Care of Clients: Any company can mention on its homepage that clients come first, but in my short time here, I’ve noticed that Lumix’s treatment of clients is based on service, not just support. The client is the director, top-billed actor, and the supporting cast—they run the show, and Lumix helps them succeed every step of the way. I’ve learned how our firm supports clients by providing innovative solutions, adjusting to their deadlines, and staying two steps ahead of problems. Our team moves one way and one way only—toward the clients’ goals.

Being a part of Lumix’s client service is akin to a rookie quarterback learning from Peyton Manning. I know how the best take care of business, so when it’s my turn to step up and take charge, I’ll know exactly what to do.

Learning New Technology: The running joke between our company president and me is that I, a millennial, am fully cognizant of emerging fashion trends, and new cultural shifts. While my youthfulness keeps me connected to pop culture, I still have much to learn about new technology in the workplace. Lumix thrives off the cloud accounting model, which makes client work secure and efficient. When I began my work at Lumix, I had no idea that major accounting work could be performed on the cloud.

Six months later, I am learning how to use Intacct, Expensify, and Bill.com. These apps have expanded my palate for new technology. These apps also help me realize (and appreciate) the fact that even a millennial needs to learn and keep up with new technology in 2014.

Developing a Program: When I started at Lumix, the team did not have a new media program. During my first three months on the job, I quickly learned how to set up the program within a chain of command. We formed detailed workflows, visuals, calendars, and checklists to make sure our social media, blogging, and newsletter tasks are completed and the loop is closed. More importantly, a clear and stratified new media program allows team members to quickly identify where things go wrong; organization makes sure mistakes aren’t made twice.

Now, we are forming a vlogging operation and hope to be among the first CPA firms to further embrace the digital landscape. Vlogging will add another layer to our operation without complicating things. After setting up the new media program at Lumix, adding layers to different facets of my life is no longer challenging. Managing student loans, jiu-jitsu practice, and leisurely writing are no longer time restraints; they’re simply layers I add to my daily ventures.

To observers, a digital CPA firm may be an unlikely outlet to teach its team members transferable skills. From the inside, I’ve learned that many of my tasks cultivate holistic and transferable skills. This had made me a better professional, and just as important, a better student of life.


Jason Patel is the digital media and administrative assistant at Lumix CPAs and Advisors. He is a graduate of the George Washington University and currently studies political management. He is a Brazilian jiu-jitsu player, outdoorsman, and aspiring entrepreneur. You can add him on Facebook, follow him on Twitter, or view his profile on LinkedIn.    

Little Fish in a Big Pond: Controlling Your Nerves at a Networking Event

Networking at a big event can be a daunting task, depending on who you ask. For the new guy, it can be quite the obstacle.

Imagine my surprise when my supervisor told me that I, the new digital media assistant, would be attending the CEO Updates/Leading Authorities Association Leadership Awards with our firm’s senior management. Not only was the event’s guest list replete with accomplished professionals, but our firm was also taking its heavy hitters to the venue. I was a little fish in a big pond in a big ocean.

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Sharpen Your Thinking by Jumping Out of an Airplane

When your work team needs you at a crucial juncture, will you be the one to step up? When an opportunity comes calling, will you be in the position to seize the chance?

How do you put yourself in a position to succeed?

Answer: Invest in yourself to sharpen your thinking.

It’s tough out there. The globalized job market has young professionals competing against international competition, and rapidly changing technology has us constantly adapting to the next industry change. Getting better isn’t just a choice; it’s a necessity.

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Dashboard Reports Rotation

Only ten minutes into my call with the board’s treasurer and we had already brought up six different financial reports we could prepare and present at the next board meeting.  Each presented the organization’s achievements and shortfalls from a different perspective, and all presented information important for the board’s awareness and discussion.  But honestly, six reports, in addition to the regular financial statements presented at each meeting is, in my opinion, number saturation.  Particularly because many board members do not enjoy hearing about metrics, financial results, and other numerical values.

In my previous article “4 Fiscally-Responsible Changes You Can Make as a Board Treasurer,” I proposed that at each board meeting the treasurer should present a full set of financial statements and no more than two dashboard reports.  In this article, I propose that the organization prepare five different dashboards and a treasurer’s three-point report and rotate the dashboards at each meeting.  Here are the dashboard reports I have recently recommended to my clients:

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Bill.com- More Pros & Cons of Part 2 – Specifics

Bill.com is a cloud-based accounting application our firm has been using for several years. In Part 1, I covered some general pros and cons of bill.com. This blog post will delve into some of the specifics, especially with regards to the accounts payable (AP) and accounts receivable (AR) functionality of Bill.com. Like the first, keep an eye out for the insider notes! 

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