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36 days. A good goal for collection is some-
where between 30-45 days or fewer.
One way to reduce the number of days is
to collect a deposit with each order.
Promotional products are, by definition, cus-
tom and cannot be returned or used for other
customers. Most reasonable customers under-
stand this and will pay a deposit when asked.
Educating them and asking for the deposit is
half the battle.
Once a metric and credit policy are estab-
lished the next step is to monitor your receiv-
ables. Review this metric quarterly but also
keep an eye on the accounts receivable aging
and be sure to follow up with late payers at
least once a week.
In addition to monitoring accounts
receivable, owners should also focus on
orders in process to determine what is com-
ing down the pipeline. This will also help
with meeting event dates and ensure timely
delivery of products.
Net Income
At the end of the day, most businesses
were launched in order to make money. Even
if you started a company with a nobler goal
in mind, you won’t be able to achieve that
goal if your company isn’t profitable.
Sometimes it is easy for owners to get caught
in the daily responsibilities of running the
company and forget to keep track of the one
metric that quantifies their ultimate goal.
Net income should be tracked monthly.
The number will fluctuate and it is important
to understand why. Has the gross profit per-
centage increased or decreased? Did
you hire a new employee? Are sales trending
up or down? All of these questions and more
should be asked and answered every month.
Net income is the summary of your efforts.
Understanding how your decisions impact
this number will help you plan for the future,
and learn from mistakes and successes.
To ensure success with these metrics,
business owners should develop an annual
operating plan that defines their goals and
then set their monthly budget. Having a plan
in place will help establish a proactive rather
than reactive approach with your business.
These simple metrics can help you problem
solve, make successful decisions and quantify
the impact of past decisions. Knowledge is
power. The more you know about where your
company is financially, the better you can
plan for where it is going and what it will
take to get there.
Jamie Watson, CAS, BASI, is a
financial analyst with Certified
Marketing Consultants, Ltd., a
PPAI business services mem-
ber. She has been involved in
various aspects of finance and
accounting for more than 12
years and has provided con-
sulting services for both suppli-
er and distributor companies
for more than seven years.
Watson graduated magna cum
laude with a Bachelor of
Business Administration from
Stetson University and earned
her Masters of Accountancy
from Manchester College. She
qualified as a CPA in the state
of Indiana where she worked
for the regional accounting
firm of Alerding & Co., LLC
before joining the promotional
products industry.
JULY 2015 • PPB • 41
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