Case Study: How We Increased Client’s Bank Balance by $24,485 a Month
Mandy Marketing LLC is a fast growing marketing agency located in Massachusetts. The company is in business for only two years but is on the way to reach $850K in gross sales by the end of 2020. It has two founders and 4-5 contractors who work variable hours depending on how many projects are ongoing. The founders are on payroll, contractors are paid on 1099.
Although the business was growing rapidly, it was facing the same challenge millions of other small businesses are facing – cash flow. Mandy Marketing LLC never seemed to have enough cash at hand. It was a struggle to pay vendors and spend on marketing, advertising and technology. The founders had a hard time paying themselves too. They could not understand where the money was going. How was it that the company had great sales and still had no cash in the bank!
The founders of Mandy Marketing LLC reached out to ISCPA to help them understand why the business had issues with cash and what they had to do to improve cash flow.
Our first step was to map out and visualize monthly cash movement, i.e. when cash was coming in and when and where it was going out. The issue was that Mandy Marketing LLC did not have reliable bookkeeping reports that showed inflows and outflows of cash. We helped create reports that were reliable, understandable and timely.
Once the reports were created, we were able to identify opportunities for expense reduction, which resulted in net cash flow increase of $1,567/month!
Once we had a clear understanding of monthly cash movement, we noticed that there was a consistent imbalance between cash inflows and outflows due to the structure and timing of client invoicing and vendor payments. We recommended changes to invoicing policies and vendor payments. Once these changes were implemented, the company’s month-end net cash increased by $22,918!
Something I wanted to point out, we increased Mandy Marketing net cash without adding a single dollar to gross sales! Many businesses can resolve cash flow issues by examining current cash movements.
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