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FINANCE 101
August, 2015
HOW DO WE MAKE MONEY?
WE SELL GREAT IDEAS
Big Ideas
WE SELL GREAT CREATIVE
WE SELL GREAT EXECUTION & ACCOUNT SERVICE
IS THAT ALL THERE IS TO IT?
WE NEED TO GET PAID FOR THAT GREAT WORK
Bill our clients for what we do. Prepare good estimates Use our labor wisely and
efficiently. Bill clients for all legitimate
time.
Bill for all out of pocket expenses.
Bill sooner. Collect faster.
THE PROFIT & LOSS STATEMENT
WHAT OUR P&L SHOULD LOOK LIKE
Account Teams Overhead Total Agency
Revenue $ 100 $ - $ 100
Salary & Related 45 10 55
Contribution 55 (10) 45
Operating Expenses 5 15 20
Profit Before Tax $ 50 $ (25) $ 25
WHAT CAN YOU DO?
Manage your time wisely. Minimize the use of freelance. Get estimates signed, obtain POs. Bill the client for the work we do.
HOW A LITTLE ADDS UP.
Number of billable employees 100Hours given away each week 2Total hours 200Weeks per year 52Annual hours given away 10,400 Average billing rate per hour $ 100 Value of time given away $ 1,040,000
CASH FLOW
HOW DO CASH FLOW AND PROFIT DIFFER
Cash flow is money collected less money paid out.
Cash flow is measured by our bank account.
Profit is revenue less expenses.
Profit is based on accrual accounting
to match revenue and expenses.
You could show a profit but have negative cash flow.
Cash is what we use to pay our vendors and employees.
WE PAY BEFORE WE COLLECT
On average we collect from
clients in 45+ days.
On average we pay our
vendors in 30 or less days.
We pay our employees in
15 days.
ALCONE’S SECRET MONEY TREE
WHAT WE NEED TO DO
We need to bill and collect out of pocket expenses up front.
This is Omnicom policy of sequential liability
Generally you can expect that we won’t cut checks until we are paid.
We should not spend out of pocket before we have client
purchase orders.
If we start work before the PO is approved the client has
no incentive to push for it.
We can’t bill clients without a PO.
WHAT WE NEED TO DO
We need to bill for labor as quickly as possible. Often we wait to bill until after the project is complete.
We can bill everyday of the month.
We can bill 100% up front.
We should not be hesitant to ask for the money. We are not a bank and we should be paid in a timely manner.
HOW WE MAKE MONEY!
Collect the
money
Do great work
Bill the client
THE END
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