Monday, May 21, 2007

Trail Mix, Pigs and Cash Flow

Trail mix, pigs and cash flow. Who would have guessed that this combination would be on the front page of today's Wall Street Journal (subscription required).

The basic story is one that CFOs of all size companies and industries have to deal with everyday. How does a company control its cost of goods sold so that the rising prices of raw materials and labor don't shrink gross margins?

In the case of trail mix, pigs and cash flow, hog farmers are facing a significant increase in the cost of feed due to the rising price of corn resulting from the explosive growth in demand for ethanol. Protecting profit margins without diminishing the quality of its end product has resulted in hog farmers feeding their livestock by adding items like trail mix, tater tots, popcorn, pretzels and licorice to its feed.

The CFO must be able to accurately track and report costs, quickly gauge trends and forecast the impact of those trends on cash flow. The minute the CFO falls behind in this challenge, a company increases the chance it will become less bankworthy and unable to attract the most cost effective bank loans and other sources of capital.

Is your cash flow suffering and making it difficult for your business to attract financing? Read "Matchmaking for Business Loans" and give me a call.

Related Tags:

No comments: