Cogent Strategies provides consulting, but not in the way that many other firms do. We are focused on providing tangible financial results by working hands on, right beside the existing management team. Companies are in a variety of stages of development. The answers are not cookie cutter and the challenges are real, particularly in today’s economic environment. We take a holistic approach with our clients.

Every business needs “working capital”. What is it and how much do you need? Just as important how do you manage it and is one form better than another? Working capital is total current assets (cash, receivables, inventory, prepaid expenses and the like) less total current liabilities (accounts payable, accrued expenses, current portion of long term debt, etc.). It can be measured in dollars, working capital, or as a ratio, current ratio (total current assets/total current liabilities). Both working capital and current ratio are used to measure the businesses ability to pay its current obligations.

Cash has always been king in business, but never more so than in an economy like we are experiencing today. How much cash you need to keep on hand varies with the industry and size of the business, but for the sake of discussion let’s say that you have a business with $5 million in annual sales and you want to have as a minimum a cash reserve of one month’s sales. That means that you want to keep an average of $420,000 as a cash balance.

Everyone will agree that an effective consulting engagement is one that concludes with both parties in agreement that requirements were met exactly – with on time and on plan deliverables. What’s so hard about that? Well, when the engagement is contemplated in an environment of financial constraints, the respective parties bring differing viewpoints that are not joined. In the end, some don’t do what they could or should and others are unsatisfied with outcomes.

The Working Capital Line of Credit is an essential tool in supporting business growth, which is what we think about when qualifying for the bank commitment. Leverage improves business returns when times are good, but represents a risk that must be managed very carefully when times are not so flush. Too often business owners are surprised when they find that credit limits have been exceeded or covenants have been breached - requiring precipitous action that is likely to compromise customer, supplier or staff relationships. The Cash Flow Projection is the first thing that your banker will ask about if your business runs into a Line of Credit problem.
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How do you tell how well your business is performing? If your answer is 'by monitoring how much money you have in the bank' - or your 'monthly financial statements completed three weeks after month end' - these are simply not good enough. What are the Key Performance Indicators (KPIs) of your business that you can measure on a daily/weekly basis to tell you how your business is really doing?
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Unemployment has not been this high for 28 years and the amount of quality talent looking for work in the marketplace is amazingly high. As a business person you should always be looking for ways to improve your talent. We consider the skill of your management and staff to be the single most important factor of your success.
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