Listen: Mapping Out Cash Flow to Avoid Running Out of Money
"I'm eric. I'm Kevin join us on our journey to building a one hundred million dollar company. Back in the day when we were doing websites and custom software was all project based or by the hour. And I remember one time one of our CPA's longtime ago private, well, I say a long time ago probably about a year and a half ago. Maybe two years ago asked us. Hey house next quarter shaping up and our answer was we have no fricken idea. We have no idea how much we're going to do in revenue next quarter or next year or even next month. Frankly, because we don't know where these products are coming from. We don't know where the income coming from. We just get projects we do the work. We finished the project dies get another project. We were doing is. We were replacing one project with another, and we got really lucky for a long time where when one project ended just magically another project would appear, and we were maintaining for the most part, but we had no clue as to how to project out what was going to happen because we just didn't know where the money was going to come from. Well, fast forward, and we have switched from project in early work to one hundred percent recurring revenue we actually don't have the mechanism to Bill or even track by the hour anymore. It has to be recurring revenue everything that we do is a retainer based of work. Which is just fantastic. Now going back to the question. How are you going to do next month next quarter next year since recurring revenue and our expenses for the most part are recurring? We can actually start to project out how the finances will look in the next month. Or even the next quarter. So what we did is QuickBooks has a way of doing this. But we didn't like the way that it reported it, and we felt disconnected from the numbers as so what we did is we broke open a Google sheet, and we literally created every single expense that we expected to come up in the next month based on the bills that we know are recurring bills or the bills that were sitting on my desk, or my inbox. And then we also projected out the income that we were going to receive based on when payments typically come in to the office, and we sorted in. Chronological order all the journal entries is what they really are. Right. The positives and the negatives. And then we could chart out. How cash flow is going to change over the next month? So now at this point, we can literally project out the next month and every single month towards the end of the month. Cotonou I get together. And it used to take an hour and a half to do this doubt. Only takes about fifteen twenty minutes. But we literally right out all of those entries, and then we graph emperor checked out the low points and the high points when it comes to balances. And our counts it has been fundamentally a game changer for us to be able to project out where we're going to be the cool thing is is that we can see where the low points are. Right. So when we get low in our Bank account, we know that there's a potential risks there. Now, it's not cool that were low on a balance, but is cool that I know now three weeks from now, we're gonna have a cash crunch. And I started thinking about what I need to do to avoid that or to mitigated or to soften it three weeks in advance. I know that there's going to be a cash crunch. So we set up lines of credit we've done all these different things. We've got these tools at our disposal. Now, budgeting projecting lines of credits. To avoid running out of money. Right. And it's not that we're not profitable. We are profitable is a casual issue, but because of recurring revenue we can project it, and we can mitigate it. And we can resolve it amazing. If you're not on recurring revenue right now, I'm telling you it is the game changer that I've been searching for for all these years. And I'm so glad that we found found it. Thank"