Page 195 - The UnCaptive Agent

168 THE UNCAPTIVE AGENT

Focus on Cash Flow

The first focus is cash flow, not profits. I remember the
day like it was yesterday. Our agency accountant was
on maternity leave and our CPA firm was loaning us
someone on a part-time basis to do our books. I walked
into the office early one morning and with a panicked
look on her face the temp said, “I have to speak to you
in my office.” She said, “I just reconciled the operating
account, and we are $80,000 overdrawn. Today is the
fifteenth of the month, and we sent our check for the
agency’s account current payment to the insurance
company three days ago. That check will bounce when
it hits the bank today.”
My reaction was bewilderment and fear. How could
this happen? Our agency was making a profit. We had a
year to date profit that was quite substantial. How was
it possible for us to be overdrawn, and an even bigger
question was, “How are we going to make that check
good today?” I didn’t have $80,000 personally. I wasn’t
sure whether my partner had $80,000. But I did know
that if we bounced our check that carrier, the largest
in our agency, would cancel our contract and our very
business was likely to fail. Well, the happy news that I
can report from that experience was this: we were able
to find some errors in our account current billing. We
were able to replace the check that day with one that
would clear the bank. And we survived far wiser.
The lesson I learned I have never forgotten which
is that you can’t spend profits! You can only spend cash.
We had been distributing profits from our business, but
we were really distributing our cash. We’d been relying
on our profit and loss statement to guide us instead of
our Statement of Cash Flows. So, as you build your
agency, please remember my story. Manage cash, and