6 Ways A CFO Can Guide Your Business Through The Pandemic

CFO

While governments work to safeguard society against COVID-19, businesses must move quickly to protect critical stakeholders and their finances. The abrupt interruption created by the coronavirus pandemic resulted in a global economic collapse. Financial and operational issues happen, and it’s up to business managers and owners to overcome them. While CEOs will use their expertise to steer their firms through difficult times, they will heavily rely on the chief financial officer or CFO inputs to make business financial decisions.

A CFO is a single corporate executive officer or entity who performs the duties of a chief financial officer for a corporation. Many startups and corporations are trying to outsource services to save staffing costs including CFO. Because of this, it increased the amount of virtual CFO services hires rather than hiring a full-time in-house CFO.

Here’s how a CFO could help a company get back on its feet through the pandemic:

  • Analyze The Present Financial Situation

CFO

To get achievements, successful leaders do three things well: set priorities, work with the right people, and manage connections. To keep the business afloat, they would need to pay close attention to cash flow and raise any capital they could. 

The current scenario is difficult for many. Collecting payments from delinquent customers should be a priority to boost the company’s financial status. When working capital is low, CFOs may seek a line of credit, joint ventures, or divestitures to raise funds. They may also desire to seek debt covenant relief. Currently, real-time liquidity tracking is required.

During a crisis, transparent and proactive communication with investors and boards is critical. The first several months are crucial for increasing communication frequency and transparency, and the CFO is responsible for this.

  • Implement Cash War Room

Cash is king in uncertain times, and liquidity is vital. Also, future financial shortages aren’t just a concern, but a reality for many.

To enforce strong expenditure controls across firms, CFOs need to create a cash war room. Customer payment delays require organizations to keep track of their cash on hand, as well as any additional capital they acquire, and CFOs to understand how all those assets are being utilized. CFOs will realize when working capital isn’t sufficient anymore. Finance leaders will require reliable technologies to give actionable knowledge that drives the organization. Establishing a cash war room is a smart starting step.

  •  Improve Productivity Through Digitalization

To cope with the pandemic, many people may need to work remotely, utilizing digital collaboration tools. But the finance team’s use of technology to assist the company is not exceptional. Automated closings and real-time predictions are now possible. After the crisis, the CFO and finance team will push for enterprise-wide digitalization. Financial tools like the cash war room, rolling forecasts, and collaborative dashboards can benefit the entire firm. In future emergencies, reliable reporting, informed decision-making, and company continuity are important.

CFOs undoubtedly have a lot on their plates. Modern software can solve many of the CFO’s greatest difficulties. Enterprise resource planning or ERP systems, for example, include modules for financial management, production, procurement, supply chain management, warehouse, and fulfillment. In addition, reliable, robust data combined with real-time speed and strong analytic tools assist CFOs and their teams offer the correct information at the right time for sound decisions.

CFOs will manage creative company strategies. Giving the right people the proper technology and data to manage risks, achieve compliance, and drive their enterprises to innovative growth is their biggest challenge.

  • Succeed In The ‘Next Normal’

A CFO must plan for a transformation mindset when allocating corporate resources if they want their business to prosper following a devastating economic crisis.

The CFO’s team should assess the company’s investment portfolio and focus on each business unit’s maximum potential.

During the previous economic crisis, resilient corporations divested 1.5x more than non-resilient companies. During a recession, profitable organizations can benefit from mergers and acquisitions. This may improve a company’s investment in mergers and acquisitions or M&A.

Remote working has become popular and productive for many firms since the COVID-19 outbreak. After the crisis, most companies should continue the practice. When the pandemic problem is over, CFOs should check the financial implications of a digital workforce. The CFO team can help the entire company and its subsidiaries scale financial predictions and collaborative dashboards.

  • Reassess Investment And Strengthen Balance Sheet

During a crisis, CFOs should examine goodwill impairments, reduce inventory, refinance debt, lower accounts payable and receivable terms, and so on. Balance-sheet cleaning can increase financial flexibility while keeping everyone focused on essential indicators during a tumultuous period. CFOs should help peers examine important R&D, IT, and capital allocations to improve the company’s investment portfolio. The pandemic is quite likely to have altered business units’ initial estimated returns on investments.

  • Manage Profitability

CFO

In the short term, companies are looking at their costs to flex and cut them. When the market takes up again, the challenge will be to balance cost reduction with rapid expansion. Critical resources may have been underestimated to the point that they cannot support future growth.

Finance should look at both sides of the profitability equation to avoid this error. Actions to reduce costs and generate revenue should be prioritized. Desperately seeking higher profit markets or goods, firms could shift resources. To minimize over-discounting by salespeople who are eager to make a sale at this difficult period, sales support could be focused on monitoring pricing.

Moreover, the analysis should probe the business, the operating model, the added value of activities, the sourcing model (in-house or outsourced), the demand/supply chain network setup, and so on. The CFO should aim high for a business-wide transformation. Now is the time to rebuild the fundamentals, to completely revamp the business model, and to prepare for the competition that’ll follow once we all emerge from this catastrophe.

Conclusion on Having a CFO

The CFO will keep all employees informed of the company’s crisis management plans. Effective communication dispels rumors, keeps staff focused and motivated. When planning initiatives, CFOs must evaluate both the best- and worst-case scenarios. No one knows how this global crisis will end, so they must consider all stakeholders, suppliers, customers, and employees.

 

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How To Manage Your Business Working Capital

working-capital

Manage Your Business Working Capital

Managing your business’ working capital will help you prevent cash flow problems, improve your assets’ liquidity, and increase your return of investment, among many things. Properly done, it will spur your company’s growth, leading to inevitable success.

However, business working capital management is easier said than done. There is a lot of information to take into consideration. You might not know where to start! So, to make your life easier,

Here Are Steps That Will Help You Become A Good Steward For Your Company’s Finances.

Minimize Your Inventory to Help Your Working Capital

Having your own inventory is considered as an asset by many entrepreneurs. But if you want to free up your company’s cash flow and enjoy better net working capital, you need to optimize it. That means increasing inventory turnover cycles, avoiding stockpiling and reducing slow-moving inventories altogether.

working-capital

To minimize your inventory, most high performing businesses recommend relying on pull inventory methods like drop-shipping and the just-in-time strategy. These techniques usually involve buying the products (or the materials needed to manufacture it) based on demand. In short, you have to get the goods after your customers have ordered it. This will help significantly reduce your company’s expenses, ensuring your working capital is properly utilized.

At the same time, you need to boost your business’ inventory turnover cycles or days inventory outstanding (DIO) if you want to properly manage your working capital. This means minimizing the days you hold a product before selling it to a customer. To achieve this, you need to constantly measure the turnover rates, compare it to your competitors’, and introduce techniques to minimize DIO.

Switch to Electronic Payment Systems

To effectively manage your business working capital, you need to be able to send out invoices quickly. By introducing an electronic payment system to your company, you can achieve that plus more.

Converting to electronic payables and receivables comes with numerous benefits. For instance, it gets rid of the inefficiency caused by manual processing, lost receipts, and high invoice demands. Also, electronic payment systems can be automated, allowing you to send invoices more promptly. As an added bonus, this opens opportunities for your business to get more favorable capital payment terms and other perks.

Improve Your Collection Processes

Collecting invoices is vital for maintaining your cash flow and shortening your working capital cycle. Unfortunately, this is also a process in which every business runs into snags or delays. It’s not uncommon for customers and clients to try and delay payments as they try to manage their own cash flows.

A good collection process can give your working capital cycle a significant boost. It guarantees that most, if not all, of your pending invoices get paid within the term set by the agreements with your customers. A clear collection system also ensures that invoices are assigned to the right specialist, i.e. overdue accounts must go to collectors that specialize on collecting late payments. 

Take a look at your existing collection workflow and see if there are segments that need to be improved. Try to check if there is a clear schedule of reminders and actions that should be taken as the customer’s due date approaches. Make sure everyone is on the same page with regards to collection goals, and how important the process is to the business.

Introduce New Payment Options for your Customers

If you’ve stuck to only one payment option for your clients or customers, you’re shooting yourself in the foot. In this age, digital solutions now exist for processing payments in addition to traditional check or cash payments to the bank. Your business should be leveraging these digital solutions because they have long-term benefits to offer.

working-capital

One of these advantages is convenience. Digital wallets, for instance, provide a means for both consumers and businesses to settle obligations without having to meet. Both parties just need an account at these e-wallets so they can send and receive funds with one another. Transactions are instantaneous, eliminating the usual processing time in traditional payment methods. 

Making multiple payment options available for your customers can also potentially speed up the collection process. They also reduce stress on both your collection teams and the client. With the instant receipt of funds made possible by digital wallets, for instance, customers have almost zero excuses for late payments.

Pay Lenders and Suppliers on Time to Help Your Working Capital

Paying vendors on time is another great way to efficiently handle your working capital. Not only does it ensure proper cash flow, but it also allows you to instill discipline in your business whenever it makes payments. Additionally, it makes suppliers feel more at ease with your company, thus making them more flexible when it comes to discussing prices and contract terms.

So assess your payment terms with your supplier or debtor, and check the agreed-upon window for paying for their goods and services. If the time frame seems too long, then you might want to discuss it with them so you can shorten it. Just make sure the payments you make stays within your company’s budget. Simultaneously, you can reduce potential bad debts by implementing rigorous credit control procedures in your business.

Making sure that all your payments to lenders and suppliers are on time will also improve your credit score tremendously. A good credit score gives you access to more financing options. A positive standing will make sure that you can obtain financial assistance anytime the need arises.

Get Adequate Financial Assistance

Business loans can help you improve your business’ working capital management in several ways. For example, short-term loans can help give your company a financial boost in case its cash flow is acting up. While this is essentially a band-aid solution, it will fund your operations long enough for you to fix your current financial issues.

Or you can opt for long-term business loans to acquire fixed assets and stabilize your company’s cash flow. You can then use the recently fixed cash flow to repay the loans and any other unsettled expenditures. This will ultimately lead to better relationships with lenders, allowing you to get more flexible terms in the future.

Alternatively, you can consider talking to alternative lenders. Unlike banks, these debtors tend to offer more generous deals for their financial services. Depending on where you go, you could end up enjoying more money borrowed, less interest, and generous repayment terms. For instance, you could receive a cash advance against your pending invoices by entering into a accounts receivable factoring agreement with a lender.

Control Your Expenses Carefully

Last but not least, learn how to monitor and curb your company’s expenditures. To diligently track your business’ expenses, you need to gather as much data as you can about your historic costs. That way, you’ll be able to make a plan to reduce future expenditures.

You should also manage your business’ variable costs. You can do this by taking a look at your company’s previous variable expenses and calculating how much they contribute to the overall expenditures. Then set budgets for each of these expenses and implement it during the following months. If you’re running a large company, then you shouldn’t ignore small expenses. Despite their size, they can easily accumulate and affect your working capital.

working-capital

You might also want to think about setting up dashboards. Dashboards allow you to take a snapshot of a specific group of data with just a click of a mouse. You could take advantage of this capability to gain an overview of your business’ cash flow anytime you need to. These software solutions help you make informed decisions when it comes to managing your cash flow and working capital. 

Learn How to Manage Your Working Capital

Through proper business working capital management, you can ensure your company’s financial health, maximize its operational efficiency, and improve its profitability. An optimized working capital cycle, together with cash flow, is key to ensuring your business’ survival amidst a very competitive landscape. The tips outlined above should help in improving your working capital cycle.

 

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How Live Demos Can Increase Sales For Your Small Business

live-demos

Consumers’ preferences and behavior may have changed over time due to digitalization, but the fundamentals and basics of making your business thrive still matters. Live demos can be an essential factor in regards to your success as a small business owner.

Even though customers’ shopping experience and purchasing behavior are now mainly shaped by digital marketing, it is worth noting that physical stores are still on top of every shoppers’ preference list when it comes to flexibility and convenience. Online shopping may have taken the world by storm, but customers still rely on hands-on engagement with products found inside a store.

How Live Demos Can Increase Sales For Your Small Business

 

So with that said, we have created this guide to help you launch successful in-store demos for your small business.

 Understand your customers’ behavior with live demos 

live-demos

Research published by IBM pointed out that 71 percent of the people they surveyed often shop in micro-moments. This means that shoppers go to the store and purchase goods/services in-between errands. Basically, they are shopping “in the background” while doing other tasks.

For a small business owner, these types of insights are crucial because it tells you how a potential buyer actually ends up buying your products. On top of that, it would even give your marketing strategy some semblance and clearer direction.

Take, for example, your in-store demos strategy. If you have this type of insight and you know that your usual customers just shop in the background, then your sales pitch and demos should be short and concise. This way, you would not take up too much of their time and they would not be discouraged to come back to your store again.

So before you start writing your sales pitch script and organizing your live demos, you should at least know and understand your customers’ behavior first.

 

In-store feel to rival the digital experience

Consumers have become smarter and they are more likely to shop online these days. So in order to catch their attention and make them more curious about your store or products, then you should bring something new to the table, something that is not found on any digital site, and something that is unique only to your store.

For small businesses, doing this is not that difficult. It is common knowledge that small local stores are a sanctuary for niche and specialty products. Oftentimes, products found in local stores are so unique you cannot even find them in big grocers or outlets.

With that said, you should capitalize on your unique products and use this as your leverage every time you do live demos. Keep in mind that your customers may not know that your products are only available in your store, so you have to explicitly tell them this whenever you do your sales pitch or live demos. 

And to have that in-store feel to rival the digital experience, it is also a great idea to offer discounts, vouchers, or promos only found in your physical store. This way, customers would be more inclined to visit your store.

 

Personalized sales pitch

Keep in mind that attendees of your live demos are already at the door of your store even before the actual demo day. They would not sign up for your live demo event if they are not interested or have no clue about your product. That’s the reason why attendees are also called “potential buyers.”

They clearly know about your brand or products already. The only thing that you need to do is to convince them to spend their money to buy it.

In this situation, the best route is to try and establish a personal connection with them during the live demo. This way, you would know what they are specifically looking for in a product. Doing this allows you to highlight how your product is the exact thing they are looking for or how your product can perfectly solve their unique problem.

Given that improvisation during the actual demo day might be difficult for newcomers like you in the industry, it would not hurt to hire extra help from an event staffing agency. In fact, doing this can lighten the workload and you can even learn a thing or two from them. Once you fully get the hang of it, you can organize and prepare your own sales script for your other succeeding live demos.

 

Transform to Thrive by using live demos

live-demos

One of the reasons why some live demos often fail is because they do not adapt to their customer’s needs and preferences. Remember that following trends and understanding the changes in your customers’ behavior is one of the keys to retaining them as loyal customers.

Nowadays, live demos do not always have to be physical and face-to-face. Even small local businesses are starting to adapt to the tech-savvy generation of consumers and are now holding live demos via Zoom, Skype, Meet, and many more. On top of that, in-store experience has a whole lot of other new meanings these days as well. There are now things like in-store app navigation, in-store digital display, and many more.

So to keep up with the times, it would be in your best interest to listen to your customers’ suggestions as well as make an effort to respond and meet their recommendations.

Doing all of these does not mean pooling all your resources and hiring a full-service IT and digital team to help you. Oftentimes, you can do all of these for free if you just take the time to learn and adapt to these new changes in tech and the digital world.  

 

Conclusion

All in all, it all comes down to your research and planning process. The only way you can ever have a successful live demo is if you do your research right and plan for every possible event that may happen during the actual demo day.

Remember that a successful live demo does not have to be extravagant that it burns a hole in your pocket.

More often, a simple but well-researched and well-planned live demo is enough to do the trick. It can help you reach your target, establish a deeper connection with your customers, generate a conversation around your brand, and ultimately increase your sales.

 

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5 Tips for Negotiating with Suppliers

negotiating with suppliers

How do you handle negotiating with suppliers? Any business owner needs to have prerequisite skill requirements and one of the most important and actually the most critical, we can say, is communication skills. In leading a business and pursuing its goals and objectives, effective communication is key. Whether you are speaking or writing to colleagues, clients, or your suppliers, the art of communication needs to be applied to ensure a smooth flow of conversation, elicit adherence to your command or order, and eventually materialize your intent and desired outcomes. Fostering good business communication skills pay off with a healthy working relationship between you and your stakeholders. This the ultimate roadway to improving everyone’s productivity, efficiency, and morale.

The biggest challenge, however, in business communication is the need for negotiating. In a textbook definition, negotiations are a way to resolve disputes and it is often associated with various terminologies like settlement, bargaining, agreement, and collaboration. While these words pose a heavy and taxing connotation, they should be taken lightly and positively as any negotiation indicates a chance to turn tables and leverage the business game. A successful negotiation, especially with suppliers, can have a positive effect on your company’s financial gains or simply improve the quality of the goods and services you deliver.

Often, supplier negotiations are a little tricky and are tagged a mind game because suppliers are put at a superior level in consideration of their power over the buyer. Because of this, they might take control of your dealings by pressuring you, raising prices, lowering the quality of the products, or reduce product availability.

Luckily, you have this list of negotiating tips to ensure you can shake hands with your suppliers and close a deal that is favorable to you.

5 Easy Steps to Negotiating With Suppliers

negotiating with suppliers

Invest in rapport and positive feedback.

Like you would with a client, you must also put an effort into building a good work relationship with your suppliers. In building rapport, suppliers can be provided with the idea that it is not only their business that is of interest to you but their professional companionship as well. Any kind of relationship guarantees loyalty and this is a great way to surface that subliminally. Meet your supplier face-to-face and keep your conversation within a 60-40 rate. Sixty percent business and forty percent personal. Halfway through, throw in positive feedbacks you have heard and what impressed you just so that he knows your considerations in tapping them. Perhaps you can also express that you are interested in how they manufacture their goods so you can be invited over or their plans for development and expansion. While you are at it, you can reciprocate this with an invitation to some of your company parties or events to ensure he understands that you do not just always mean business but a genuine partnership.

Do your research and expand your options.

However, keep it to yourself. Let your research be your guide whether or not you are making a good deal out of your negotiations with your supplier. Research should always be taken to your advantage especially for your position in the conversation. It pays to know if the price is worth negotiating for or when the other suppliers will not make it hard for you. It is still business anyway. If it is a hard sell or maybe after 2 or 3 meetings with them, respectfully mention that you will also get a quote from other suppliers and make decisions based on competitive pricing. That is if you find them too stiff or tough.

Tell the supplier what is in your deal for them.

In your meetings, you might want to cite ways where both of you can benefit from the deal you are offering and you can also indicate this in your agreement. Suppliers like early payers so you can capitalize on this advantage in your offer. Tell them you can pay early, give a huge fraction of the sum for the down payment, have him offer a discount for bulk purchases, and other ways that he might find a great benefit from. In terms of delivery, maybe he can let you have the price you want if you will be the one to shoulder and arrange the pick up of goods on your own. If you can place an order early and do not require fast turnarounds, it is more likely that they will keep your business. If you can make them understand that dealing with you can be much lighter than their other partners, it will be easier for them to accept your offer.

Be straightforward about your offer.

Suppliers appreciate it when you are straightforward especially if they are always after time and money. If they value any sale, they would make it possible with your deal. After your introduction, you can tell them how much your budget is. This can help them make a plan on how they can work on it and help you. Let them know the areas where you can allow a healthy compromise.

Allow time for both of you to think it through.

Normally, suppliers would ask you about your lead time and schedule and you might want to share with them an honest and accurate timetable so they can also provide you with their projection. In your meetings with them, ensure that all the information you think they might need in making a decision is provided so that they can go back to their office and specifically tailor an offer for you. Allow them time to process everything. Of course, they do not want to say yes right away and then bail out of it. Take this time, as well, to make a backup plan in case they might turn your offer down.

Negotiating with suppliers is vital to the success of your business. Without them, you will not have anything to deliver to your clients. This is why you must let your silver tongue roll and do its magic. Be mindful of how they react to your statements and ensure each meeting warrants a negotiation. If you noticed a certain disinterest at the onset of your conversation, you might have a hard time but if it seemed like they are open to some compromise, the negotiation will be worth the try.

Here’s an article about improving your cash in your business.

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Natasha Barbeyto-Castaño is a beauty, wellness, and lifestyle writer. She took up Fashion Design and Merchandising in college and was hired as a personal shopper for a high-end department store right after graduating. Writing for the beauty and fashion sections of a society magazine and being head of content for a clothing company kept her busy before getting married and having a little boy. She learned to read at the age of 3 and wants her son to grow up sharing the same love for books. Nowadays, this organic wellness nut and attachment parenting advocate balances working from home and being a housewife. She enjoys watching psychological thrillers and foreign-language films with her husband during her free time.

 

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Achieve Your Goals, Dreams, and Aspirations Through Your Company

Achieve Your Goals

How Tough Times Added Dollars to the Bottom Line

Business Coach

Challenging times have caused most business owners to “tighten their belts.” These difficulties have caused many owners to open their minds to the idea of working with a business coach. As a result of getting help, the owners that we are working with are experiencing more money in their pockets and growing sales.

Business Owners Overcoming Obstacles

In recent weeks it has been exciting to see business owners overcome obstacles and get clarity on their business calling. It has been fun to engage their employees in pursuing the business vision in a way that benefits everyone involved and the community as well! Most of all it has been rewarding to help them discover immediate results that put money in their pocket.

Business Owner Results

Consider some of the following results:

More Business Owners Using Business Coaches

Many business owners are now searching for a business coach who can assist them in expanding their operations. We have experienced a significant increase in coaching projects. The difficult economic challenges are motivating business owners to find every advantage to increase their market share and to add dollars to their bottom line. We are recently working with service companies, small manufacturers, and professional firms.

Results for a Service Company Owner

John*, a service company owner said, “I came to the realization that I love to fix problems, but I’m not a very good manager of this business. We have been just barely getting by for years, even when economic times were good. Now I realize that we have left a huge amount of money on the table.” In the first session with John and his team we added $75,000, which is pretty good considering John has been making $40,000 per year for the last ten years!

Conclusion

We find time after time that business owners are burned out. They have “foggy thinking.” They are working too much. They are too stressed out. They are on a treadmill, and they don’t know how to get off. Then many come to us to sell their company at the worst possible time. We are bringing on average approximately 2500% return on investment for our clients. For every $1.00 spent with us, we bring $25.00 in return.

Are you ready to take advantage of difficult times? If so, give us a call.

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Call us at 1-888-504-0777,

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Enter your information below to start growing your revenues and profits today…

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Exit Strategy: Being in a Position of Strength

Exit Strategy

If you have done a good job of building a successful business, one day you should be able to sell it for a considerable sum of money. You have developed considerable “sweat equity” by working hard for your income.

It is wise to develop an “exit strategy” well in advance of your time to sell your business.  Actually, you should have an exit strategy on the first day you are in business. Private Equity Groups will not make an investment in a business until they know how they are going to exit the business.

Your Business is a “401k Plan”

Since the majority of your wealth is invested in your business, you should begin to think about your business as a “401K” plan. No matter how long you have been in business, an exit strategy is an essential part of ensuring that your long-term financial interests stay in place. This will be true even though a number of scenarios could require you to adjust the date and manner in which you exit your business.

Keep Yourself and Your Business in a Position of Strength

You want to prepare for the right reasons, the right timing and the appropriate manner in which you depart your business in the future. Keep yourself in a position of strength. Your goal is to depart your business on your terms, not the terms of someone else! Consider the following two issues:

1. You should know the value of your business.

You should know how much you want to sell your business for in the future. Your exit strategy should be anchored by what can realistically be accomplished through a business sale at a later date. We recommend that business owners get an annual evaluation of their business. In the same way that a 401k plan investor gets an annual statement with the account balance, you should know the value of your hard work, and you should focus on building that value. Knowing this value may transform how you run your business and how you approach risks. Too many business owners subject their long term financial interests to unnecessary risks because they do not clearly understand the likely future return on investment.

2. Make sure you have an exit strategy that anticipates the unexpected.

There is a strong likelihood that the timetable you have in mind for a future business sale may not come to pass right on schedule. It will likely happen sooner or later than your plan. The time spent preparing for “worst-case scenarios” will position you to save time, money, and legal problems. This time investment will help you to avoid stress, heartburn, the loss of your “401k” retirement plan. Below are some scenarios that could cause a major course correction.

Your Business Exit Strategy Should Consider Potential Scenarios

Do you have an exit strategy that addresses these potential scenarios?

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•    You become burned out, go through a divorce, or a health crisis.

•    You want something more challenging, more fun or less stressful.
•    You run short on working capital.
•    Your business needs new skills, a new approach or resources you can’t provide.
•    Your partner wants out of the business, dies or becomes disabled.
•    Your partner gets divorced and needs cash for a settlement.

The fact is that very few business people want to spend time considering these negative situations, but the reality is that these things can happen, and you want to protect your retirement plan. Wise business owners make the time to address these issues.

Conclusion

A wise saying is that “you shall know the Truth, and the Truth shall set you free.”  Spending the time now working on your business exit will help you plan for the unforeseen, and will allow you to build and protect your largest investment and asset; your “Business 401k plan.”

Questions about our small business coaching services?

Call us at 1-888-504-0777,

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Enter your information below to start growing your revenues and profits today…

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The Top Ten Ways to Improve Your Cash Flow

Improve your cash flow

If you have been in business for any length of time, not only have you heard the statement “Cash is King,” you have experienced it too. In this difficult economy the person with cash rules and the person who is out of cash will do almost anything to “serve the king.” The person with cash can buy things at a deep discount from the person who does not have cash. Understanding cash flow management is essential for a successful business. If you improve your cash flow, you likely enhance your business.

Bootstrapping in Business

In some ways “bootstrapping,” the slang word for starting and running a business with little capital can be a positive thing. It forces you to live within your means or fail. Being in a survival mode can be helpful if you maintain that mentality as your profits grow. On the other hand, being under-capitalized is the primary reason that most businesses fail. It is a major source of stress for business owners. You need to know where you are financially and have a plan for covering your obligations. Most importantly, you need to have some cash left for you!

Covering Your Monthly Business Obligations

As a business owner, you can be flooded with customers and still drown in a sea of expenses. Your business has fixed expenses that have to be covered every week and month, such as payroll, loans, rent, utilities, phone, and advertising. In addition, you probably have variable expenses which are tied to your sales activity. When your sales rise and fall, variable expenses rise and fall along with your sales. Some examples could include hourly payroll added for increased activity, or credit card fees, or cost of goods sold.

However your sales may be sporadic, or there can be a delay of when you get your money. If you own a seasonal business, going into a peak season can literally put you out of business. Usually there is a lag in cash coming in on sales, but of course, there is no lag on your fixed expenses. One of my former businesses had a revenue increase of 400% from our off-peak to our peak season. You can bet that we learned a few things about managing cash flow!

Getting Started With Improving Cash Flow

You basically need to predict two things: what your money coming in from sales this month is going to be, and what your total expenses for this month are going to be (fixed and variable). If you expect to have more money coming in than money going out, and if you deliver on that prediction, you have positive cash flow. You want to be cash-flow positive all the time, but that can be difficult when you are starting out and growing your business. You don’t want to spend too much, especially if your sales are not growing as predicted.

Here is my top ten list of ways to improve your cash flow:

1.    Implement cash flow budgeting and management.

As I mentioned earlier, you should do this monthly. If your sales are falling short of your predictions, cut back on your expenses.

2.    Promote credit card and cash payment at the time of the order.

Collect by cash or credit card upfront rather than waiting until after the product or service is rendered. If the customer asks for terms, get their credit card number as security for payment.

3.    Improve payment terms on extended projects or services.

If you cannot get paid the entire amount in advance, then collect a substantial deposit at the time of order, then additional payments during the term of the contract. Don’t deliver the final product until you have been paid in full.

4.    Make a portion of your payroll variable.

Rather than guaranteeing a salary to all of your employees, only pay them when you need them. Link payroll to sales activity. You can hire independent contractors. You can employ seasonal workers with the understanding that their work hours are reduced or eliminated when business is slow.

5.    Discounts for timely payments.

You can offer a small discount if invoices are paid within 30 days. Many businesses offer 1%- 2% discount.

6.    Negotiate extended payment cycles with vendors during peak seasons.

Go to vendors in advance when you don’t have any past due obligations, and simply explain your cash flow cycles. If your vendor is not flexible, shop around.

7.    Do a credit check on new customers.

As an alternative, you can also buy credit insurance that covers non-paying customers.

8.    Track inventory and supplies.

Identify waste and make improvements to save money.

9.    Shorten product or service cycle times.

Shorten the delivery time of the product or service and you will get paid faster.

10.    Have a back-up plan and emergency strategies.

Strategies can include having a cash reserve, having a line of credit from your bank in place(you can use accounts receivables or inventory as collateral for a line of credit), or even keeping some low-interest credit cards with zero balance. Be sure to keep the balance zero in non-emergencies!

Coaching Client Adds $176,000 in Cash Flow

We were recently working with a client that had a severe cash-flow shortage. We identified seven areas of improvement that added $176,000 to his bottom line and dramatically improve his cash flow in 30 days. Although his cash flow had been poor for ten years, we were able to solve his problem in three meetings with the owner and his staff!

Conclusion

A wise saying is “you get what you focus on.” If you will invest some time each month in cash flow management, you will make sure that you have enough cash to keep your business going in the right direction. Then you can be crowned as “The Cash King!” You will be able to grow your business. You will have less stress. You will also be able to seize some opportunities that come your way.

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