We are 5 months into the CoVid-19 pandemic and from what I can understand here is our current situation:
-testing only occurs if symptoms exist
-test results takes a few days to come back
-tests are extremely sensitive and have a high false positive rate
-one person testing positive today and then again in a week counts as two cases
This sounds like a really bad way to try to manage a pandemic, right? The data is barely useful and on top of that it’s late.
The solution would be a test that is say 90% accurate but fast and cheap. You’d sacrifice accuracy for speed and cost, but you’d have useful information to work with.
We had a similar situation. We collect the payment as soon as a customer places an order (our fulfillment is way to complicated to authorize and settle when each piece of an order ships). We have multiple suppliers. Some of our suppliers bill us immediately once we send them an order. Others bill us weekly for what they have shipped (but they have 5 to 10 days after we send them the order before they ship). Even FedEx bills us only when a package is delivered and not when we ship it.
What this means is that there is a significant timing difference between when we collect our money and when we pay out money to our suppliers. As far as cash flow goes this is an amazing thing. Our customers finance their own orders.
Monthly P/L statements are useless, though, in any situation where sales are more or less from month to month. For instance in January when revenue is down we’ll be paying suppliers and FedEx for December’s shipments.
I knew this was a big problem, but even if we had accurate monthly statements that would still be barely useful to make day to day decisions on ad spend. What I really needed to know was the profitably on a daily basis.
While there are too many complexities for me to know exactly all the costs on a daily basis (and even revenue since returns and cancellations happen), I could examine an order and calculate a contribution margin estimate that is going to be 95% accurate. I know about what my payroll costs on a daily basis are going to be. I know what my software costs are going to, etc. So we built a system to calculate our daily contribution margin. We take last months expenses (minus advertising) that aren’t part of the contribution margin calculation and divide by the numbers of days in the month and apply that as a our daily “other costs”. And every day we add the previous day’s ad costs (google and FB) to a spreadsheet with the other information and we know if we made money or not. Like I said it’s not an exact number, but it’s close enough and it’s recent enough to actually be useful for decision making.