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Casual Articles - Five Strategies To Strengthen Your Company's Financial Management
Even though there is still cold weather in some parts of the country, winter is officially over and the spring season is here! For many, spring is the time to do a thorough cleaning to get rid of all the dust, soil and build-up that has collected over the winter months. Spring is a time you can promote the special "spring cleaning" services that your cleaning company provides, and in the process bring in more profit!Spring is a great time to remind your residential and commercial customers that you offer carpet spotting and carpet cleaning services. This is especially true if you are in an area of the country where the long winter has caused snow, sand and ice melt to be tracked in (and ground in) to a building's carpets. Hard floors may also have suffered throughout the winter months with sand and ice melt coming in off shoes and boots. Do some of your buildings have hard floors that need to be stripped and refinished? Now is the time to get everything sparkling clean, and shiny floors make a great impression.Many cleaning companies "spot clean" the inside windows, but customers often ignore windows throughout the winte
You should re-evaluate you vendors on a regular basis to make sure you are getting the best value.
4. Budget
It is fundamental, you need to plan for growth and you need to forecast for problems. You need to prepare a budget. Besides completing a budget for expected sales, you should also complete a budget for a disaster situation, like your sales are cut in half. The benefit is very straight forward; it forces you to ask yourself how you will be able to keep the company running in such a situation. It will also point to areas where you may be able to save money right away and free up cash flow. It’s like having a disaster plan; you only have to act on it when disaster strikes, but it is much easier to concentrate when you do not have a crisis at hand.
5. Develop a strong relationship with your Bank
Devote attention to building relationships with your bank. Always keep them up to date on where your company stands. If you hit a difficult patch it is much easier to get your bank on board if they understand your business. Contrary to opinion, banks do not necessarily jump ship as soon as you fall into trouble. They are willing to work with small business through tough times, and gaining their trust to do so is much easier the more confidence they have in you and your company. They way to accomplish this is to be transparent in your dealings and to give them timely financial information.
Use you bank as a resource for cash management. There are products available that can increase your cash flow, or arrangements that can be put in place to increase your interest returns. But you still need to make sure they are cost
When you need to prepare for a job interview, there are some basic precautions such as arriving 10-20 minutes early, dressing in formal attire, and observing all the rules of workplace etiquette, propriety, and politeness inherent to a working environment.There are also questions that you can expect to be asked. For instance, when I went for my first job interview, they asked me the following questions:What expectations do you have about working here? What is your favorite movie? Why? How would you describe it? What are some of your hobbies and interests? Describe yourself. What are your strengths and weaknesses? Where do you expect to be in 5 years time?These types of questions are likely to be relevant to your working environment or to the particular position you are applying for.When you prepare for a job interview, be prepared to answer the following questions:What defines you? What are you best at? What strengths do you have? What are you worst at? What don't you like doing? What are your weaknesses? Where do you see yourself progressing in the company?
The following are five strategies that will help you start to build a strong financial foundation and build value in your company.
1. Set up a financial control system
The first thing you need to start with is a control system so that there is consistency in your process and procedures. A control system is designed to prevent and detect errors in your daily activities. For example, is there is a standard way of processing your receivables, payables and inventory? If there are no standard guidelines to follow, there is probably no control system.
2. Have daily access to your account information
Make sure that you can access your account information every day; it is invaluable to managing your cash effectively. With most banks providing internet access at a reasonable cost, there is no reason not to have instant access to account information.
3. Manage your cash components
Concentrate on managing your three main cash components: accounts receivable, accounts payable and inventory.
Let’s take a look at each component:
Accounts Receivable
Make sure your credit and collection system is working efficiently. Any excess investment in accounts receivable increases the need to borrow more money to avoid a cash flow deficit. That means that if you are carrying excess receivables you are probably carrying excess debt and you have a direct cost of having to carry that extra debt in interest payments. Even if you finance the receivables through internal equity, there is still an indirect cost; the opportunity cost of using that equity elsewhere which could include expanding your inventory to increase sales, reducing debt or earning interest on cash balances.
Your accounts receivable collection period defines the relationship with the cash flow process. Every month you should be calculating your collection period and comparing with previous periods and relating those results to industry averages. Any material differences should be investigated.
Your credit policy can influence your cash flow and earnings. Longer credit terms can increase sales and earnings, but any decision to offer more liberal terms requires an estimate of the trade-off between the cost of the larger investment in accounts receivable and the bottom-line benefits of a higher sales volume. Remember that increasing your credit terms will bring in less credit worthy customers which can increase your bad debt expense. You can, however, use price increases to offset more liberal credit terms.
When you develop a receivable policy, consider the following:
- Check the financial health of customers before offering them credit. Consider obtaining cash on the first order.
- Do not make your invoice terms too generous.
- Charge interest to customers who pay late.
- Give discounts for early payment.
- If you are offering discounts, the terms should be attractive enough to encourage customers to take the discount. This can also serve as an early warning signal; if a customer doesn’t take the discount, or all of a sudden stops taking the discount, then you may want to investigate further before extending credit as it could be a sign of financial trouble.
- Do not wait longer than 30 days for a late payment before you take action; you need to minimize your company’s exposure to bad credit. Put it into dollar terms, if you have a $1,000 bad debt write-off and a 10% profit margin, you need to generate an addition $10,000 in sales just to make it back.
Inventory
First, keep in mind that because of carrying costs such as warehousing and insurance it is more expensive to carry inventory than to carry accounts receivable. That is, reducing an investment in inventory provides you a larger bottom-line benefit than a comparable reduction in accounts receivable because you are also reducing the carrying costs.
As with your receivables, it is important to complete a monthly analysis of average inventory held in days. Compare to previous months and industry averages and investigate any material difference or change.
A periodic inventory count is a fundamental requirement; any items that are overstocked should be investigated.
A sales forecast is vital, without it you lack the necessary management information for inventory control.
Your target inventory investment should equal your normal investment for core sales plus a built in safety stock (for example if a re-order is delayed you want some extra stock on hand) plus some amount for any anticipated growth in sales.
You can use the following equation to determine your economic ordering quantity: SQRT (2SO/CP) where
SQRT = square root
S = anticipated annual unit sales
O = fixed costs per order
C = annual inventory carrying cost, as a % of a products purchase price
P = unit purchase price for product
Note that the above equation attempts to minimize inventory cost by answering the question of how much and how often you should order inventory. It is not perfect; the equation does not take into account volume discounts and assumes that your demand is constant. However it is a tool that can be used to help in your decision making process.
The following are 10 questions you can use to review you inventory process:
- Do you have a sales forecast? Do you compare forecast to actual sales and adjust the next forecast accordingly?
- Do you know which items account for 80% of your sales? These items should be managed closely.
- How fast can you get inventory?
- How do you order inventory?
- How much inventory do you order? Do you order extra just to save a few extra cents?
- Do you know the cost of holding your inventory?
- Do you rely on just one or two suppliers?
- How frequently is inventory analyzed to determine obsolescence and makeup?
- Do you have a policy of determining what is obsolete inventory and how and when to get rid of it?
- Do you have an inventory reporting system to provide the necessary tracking information?
Accounts Payable
Although you want to stretch your payables as long as possible, much like you offer attractive discounts to your buyers you should also take supplier discounts as often as possible if the terms are attractive enough.
Make sure your payables are tracked on a regular basis - such as weekly - and that your payment system runs smoothly.
As with receivables and inventory, complete a monthly analysis of your accounts payable and compare to previous periods and industry averages. Any material difference or change should be investigated.
Make sure vendors understand your company in case there is a situation where you need to stretch your payables. You need a plan to deal with those situations where you may have an unexpected spike in your payables.
You should re-evaluate you vendors on a regular basis to make sure you are getting the best value.
4. Budget
It is fundamental, you need to plan for growth and you need to forecast for problems. You need to prepare a budget. Besides completing a budget for expected sales, you should also complete a budget for a disaster situation, like your sales are cut in half. The benefit is very straight forward; it forces you to ask yourself how you will be able to keep the company running in such a situation. It will also point to areas where you may be able to save money right away and free up cash flow. It’s like having a disaster plan; you only have to act on it when disaster strikes, but it is much easier to concentrate when you do not have a crisis at hand.
5. Develop a strong relationship with your Bank
Devote attention to building relationships with your bank. Always keep them up to date on where your company stands. If you hit a difficult patch it is much easier to get your bank on board if they understand your business. Contrary to opinion, banks do not necessarily jump ship as soon as you fall into trouble. They are willing to work with small business through tough times, and gaining their trust to do so is much easier the more confidence they have in you and your company. They way to accomplish this is to be transparent in your dealings and to give them timely financial information.
Use you bank as a resource for cash management. There are products available that can increase your cash flow, or arrangements that can be put in place to increase your interest returns. But you still need to make sure they are cost e
While illegal immigrants and foreign nationals protest in the streets of the United States of America and promise that this is only the beginning, we ask our selves, if you came here to work, why are you protesting on a Work Day and a the Communist Holiday; May Day in the streets of America? Additionally if you do not like it here, why did you risk your life and break the law to come here in the first place?Additionally did you know what it takes to get a permanent work VISA in Mexico? Since becoming a Mexican Citizen is virtually impossible? Well here is what is required to attain and secure a permanent work visa called a FM3. This is in addition to a US passport that would have to be shown each time one goes to work.To apply for the FM3 you will need to submit the following notarized originals (not copies) of your:1. Birth certificate for you and your spouce2. Marriage certificate.3. High school transcripts and proof of graduation.4. College transcripts for every college you attended and proof of graduation.5. Two letters of recommendation from supervisors you have worked for at least one
Your accounts receivable collection period defines the relationship with the cash flow process. Every month you should be calculating your collection period and comparing with previous periods and relating those results to industry averages. Any material differences should be investigated.
Your credit policy can influence your cash flow and earnings. Longer credit terms can increase sales and earnings, but any decision to offer more liberal terms requires an estimate of the trade-off between the cost of the larger investment in accounts receivable and the bottom-line benefits of a higher sales volume. Remember that increasing your credit terms will bring in less credit worthy customers which can increase your bad debt expense. You can, however, use price increases to offset more liberal credit terms.
When you develop a receivable policy, consider the following:
- Check the financial health of customers before offering them credit. Consider obtaining cash on the first order.
- Do not make your invoice terms too generous.
- Charge interest to customers who pay late.
- Give discounts for early payment.
- If you are offering discounts, the terms should be attractive enough to encourage customers to take the discount. This can also serve as an early warning signal; if a customer doesn’t take the discount, or all of a sudden stops taking the discount, then you may want to investigate further before extending credit as it could be a sign of financial trouble.
- Do not wait longer than 30 days for a late payment before you take action; you need to minimize your company’s exposure to bad credit. Put it into dollar terms, if you have a $1,000 bad debt write-off and a 10% profit margin, you need to generate an addition $10,000 in sales just to make it back.
Inventory
First, keep in mind that because of carrying costs such as warehousing and insurance it is more expensive to carry inventory than to carry accounts receivable. That is, reducing an investment in inventory provides you a larger bottom-line benefit than a comparable reduction in accounts receivable because you are also reducing the carrying costs.
As with your receivables, it is important to complete a monthly analysis of average inventory held in days. Compare to previous months and industry averages and investigate any material difference or change.
A periodic inventory count is a fundamental requirement; any items that are overstocked should be investigated.
A sales forecast is vital, without it you lack the necessary management information for inventory control.
Your target inventory investment should equal your normal investment for core sales plus a built in safety stock (for example if a re-order is delayed you want some extra stock on hand) plus some amount for any anticipated growth in sales.
You can use the following equation to determine your economic ordering quantity: SQRT (2SO/CP) where
SQRT = square root
S = anticipated annual unit sales
O = fixed costs per order
C = annual inventory carrying cost, as a % of a products purchase price
P = unit purchase price for product
Note that the above equation attempts to minimize inventory cost by answering the question of how much and how often you should order inventory. It is not perfect; the equation does not take into account volume discounts and assumes that your demand is constant. However it is a tool that can be used to help in your decision making process.
The following are 10 questions you can use to review you inventory process:
- Do you have a sales forecast? Do you compare forecast to actual sales and adjust the next forecast accordingly?
- Do you know which items account for 80% of your sales? These items should be managed closely.
- How fast can you get inventory?
- How do you order inventory?
- How much inventory do you order? Do you order extra just to save a few extra cents?
- Do you know the cost of holding your inventory?
- Do you rely on just one or two suppliers?
- How frequently is inventory analyzed to determine obsolescence and makeup?
- Do you have a policy of determining what is obsolete inventory and how and when to get rid of it?
- Do you have an inventory reporting system to provide the necessary tracking information?
Accounts Payable
Although you want to stretch your payables as long as possible, much like you offer attractive discounts to your buyers you should also take supplier discounts as often as possible if the terms are attractive enough.
Make sure your payables are tracked on a regular basis - such as weekly - and that your payment system runs smoothly.
As with receivables and inventory, complete a monthly analysis of your accounts payable and compare to previous periods and industry averages. Any material difference or change should be investigated.
Make sure vendors understand your company in case there is a situation where you need to stretch your payables. You need a plan to deal with those situations where you may have an unexpected spike in your payables.
You should re-evaluate you vendors on a regular basis to make sure you are getting the best value.
4. Budget
It is fundamental, you need to plan for growth and you need to forecast for problems. You need to prepare a budget. Besides completing a budget for expected sales, you should also complete a budget for a disaster situation, like your sales are cut in half. The benefit is very straight forward; it forces you to ask yourself how you will be able to keep the company running in such a situation. It will also point to areas where you may be able to save money right away and free up cash flow. It’s like having a disaster plan; you only have to act on it when disaster strikes, but it is much easier to concentrate when you do not have a crisis at hand.
5. Develop a strong relationship with your Bank
Devote attention to building relationships with your bank. Always keep them up to date on where your company stands. If you hit a difficult patch it is much easier to get your bank on board if they understand your business. Contrary to opinion, banks do not necessarily jump ship as soon as you fall into trouble. They are willing to work with small business through tough times, and gaining their trust to do so is much easier the more confidence they have in you and your company. They way to accomplish this is to be transparent in your dealings and to give them timely financial information.
Use you bank as a resource for cash management. There are products available that can increase your cash flow, or arrangements that can be put in place to increase your interest returns. But you still need to make sure they are cost
Today, in many organizations around the world, branding is treated as a cosmetic exercise only, and regarded merely as a new name, logo, stationary and possibly a new advertising campaign. But, to associate your “brand” with such superficial cosmetics is like saying that people are really only the sum of their name, face and sometimes their clothingBut branding is a thoughtful discipline that strongly belongs to the long-term strategy of an organization; brand strategy is, or should be, business strategy, and vice versa.Smart Branding is about having a clear point of view on what an organization is about and how it can deliver a thoughtful and unique experience to its customers. Then, the execution is about organizing all products, services, and corporate operations around the customer, to close the gap between the promised and the delivered brand experience.For example, Staples, an office-supply retailer in the US, aims at making the purchasing experience easy, as communicated in its trademarked slogan "that was easy." In practice, it may mean training the front-line personnel in customer service processes (e.g., how
Inventory
First, keep in mind that because of carrying costs such as warehousing and insurance it is more expensive to carry inventory than to carry accounts receivable. That is, reducing an investment in inventory provides you a larger bottom-line benefit than a comparable reduction in accounts receivable because you are also reducing the carrying costs.
As with your receivables, it is important to complete a monthly analysis of average inventory held in days. Compare to previous months and industry averages and investigate any material difference or change.
A periodic inventory count is a fundamental requirement; any items that are overstocked should be investigated.
A sales forecast is vital, without it you lack the necessary management information for inventory control.
Your target inventory investment should equal your normal investment for core sales plus a built in safety stock (for example if a re-order is delayed you want some extra stock on hand) plus some amount for any anticipated growth in sales.
You can use the following equation to determine your economic ordering quantity: SQRT (2SO/CP) where
SQRT = square root
S = anticipated annual unit sales
O = fixed costs per order
C = annual inventory carrying cost, as a % of a products purchase price
P = unit purchase price for product
Note that the above equation attempts to minimize inventory cost by answering the question of how much and how often you should order inventory. It is not perfect; the equation does not take into account volume discounts and assumes that your demand is constant. However it is a tool that can be used to help in your decision making process.
The following are 10 questions you can use to review you inventory process:
- Do you have a sales forecast? Do you compare forecast to actual sales and adjust the next forecast accordingly?
- Do you know which items account for 80% of your sales? These items should be managed closely.
- How fast can you get inventory?
- How do you order inventory?
- How much inventory do you order? Do you order extra just to save a few extra cents?
- Do you know the cost of holding your inventory?
- Do you rely on just one or two suppliers?
- How frequently is inventory analyzed to determine obsolescence and makeup?
- Do you have a policy of determining what is obsolete inventory and how and when to get rid of it?
- Do you have an inventory reporting system to provide the necessary tracking information?
Accounts Payable
Although you want to stretch your payables as long as possible, much like you offer attractive discounts to your buyers you should also take supplier discounts as often as possible if the terms are attractive enough.
Make sure your payables are tracked on a regular basis - such as weekly - and that your payment system runs smoothly.
As with receivables and inventory, complete a monthly analysis of your accounts payable and compare to previous periods and industry averages. Any material difference or change should be investigated.
Make sure vendors understand your company in case there is a situation where you need to stretch your payables. You need a plan to deal with those situations where you may have an unexpected spike in your payables.
You should re-evaluate you vendors on a regular basis to make sure you are getting the best value.
4. Budget
It is fundamental, you need to plan for growth and you need to forecast for problems. You need to prepare a budget. Besides completing a budget for expected sales, you should also complete a budget for a disaster situation, like your sales are cut in half. The benefit is very straight forward; it forces you to ask yourself how you will be able to keep the company running in such a situation. It will also point to areas where you may be able to save money right away and free up cash flow. It’s like having a disaster plan; you only have to act on it when disaster strikes, but it is much easier to concentrate when you do not have a crisis at hand.
5. Develop a strong relationship with your Bank
Devote attention to building relationships with your bank. Always keep them up to date on where your company stands. If you hit a difficult patch it is much easier to get your bank on board if they understand your business. Contrary to opinion, banks do not necessarily jump ship as soon as you fall into trouble. They are willing to work with small business through tough times, and gaining their trust to do so is much easier the more confidence they have in you and your company. They way to accomplish this is to be transparent in your dealings and to give them timely financial information.
Use you bank as a resource for cash management. There are products available that can increase your cash flow, or arrangements that can be put in place to increase your interest returns. But you still need to make sure they are cost
Before you can open for business, you must first get a license. There are several types of license that may be needed before you begin operation. Without the proper permits, you may be operating your business illegally. Most businesses need a city or county license. There may also be other requirements from the state or federal government for certain types of licenses.Most states require a special license to sell firearms. Some may even require one to sell gasoline, tobacco, and liquor. Certain professions also require special licenses. They include Real Estate Agents, Auctioneers, Appraisers and Contractors. Some businesses require a federal license, such as, manufacturing tobacco, alcohol or firearms. TV and Radio stations also must have a federal license.Most small business licenses are pretty easy to get. First start with your County Court Clerk. If you are locating in a city, the city clerk should be able to point you in the right direction. To purchase a small business license, you usually must pay a fee, which is normally a minimal charge. However, getting some licenses may be more complicated. The laws
The following are 10 questions you can use to review you inventory process:
- Do you have a sales forecast? Do you compare forecast to actual sales and adjust the next forecast accordingly?
- Do you know which items account for 80% of your sales? These items should be managed closely.
- How fast can you get inventory?
- How do you order inventory?
- How much inventory do you order? Do you order extra just to save a few extra cents?
- Do you know the cost of holding your inventory?
- Do you rely on just one or two suppliers?
- How frequently is inventory analyzed to determine obsolescence and makeup?
- Do you have a policy of determining what is obsolete inventory and how and when to get rid of it?
- Do you have an inventory reporting system to provide the necessary tracking information?
Accounts Payable
Although you want to stretch your payables as long as possible, much like you offer attractive discounts to your buyers you should also take supplier discounts as often as possible if the terms are attractive enough.
Make sure your payables are tracked on a regular basis - such as weekly - and that your payment system runs smoothly.
As with receivables and inventory, complete a monthly analysis of your accounts payable and compare to previous periods and industry averages. Any material difference or change should be investigated.
Make sure vendors understand your company in case there is a situation where you need to stretch your payables. You need a plan to deal with those situations where you may have an unexpected spike in your payables.
You should re-evaluate you vendors on a regular basis to make sure you are getting the best value.
4. Budget
It is fundamental, you need to plan for growth and you need to forecast for problems. You need to prepare a budget. Besides completing a budget for expected sales, you should also complete a budget for a disaster situation, like your sales are cut in half. The benefit is very straight forward; it forces you to ask yourself how you will be able to keep the company running in such a situation. It will also point to areas where you may be able to save money right away and free up cash flow. It’s like having a disaster plan; you only have to act on it when disaster strikes, but it is much easier to concentrate when you do not have a crisis at hand.
5. Develop a strong relationship with your Bank
Devote attention to building relationships with your bank. Always keep them up to date on where your company stands. If you hit a difficult patch it is much easier to get your bank on board if they understand your business. Contrary to opinion, banks do not necessarily jump ship as soon as you fall into trouble. They are willing to work with small business through tough times, and gaining their trust to do so is much easier the more confidence they have in you and your company. They way to accomplish this is to be transparent in your dealings and to give them timely financial information.
Use you bank as a resource for cash management. There are products available that can increase your cash flow, or arrangements that can be put in place to increase your interest returns. But you still need to make sure they are cost
I was watching the feature film A Gentleman’s Game on cable. It’s a great movie, but it was on the Golf Channel, so I had to put up with long commercial breaks . . . and I mean long commercial breaks. I wanted to watch the movie, not the commercial breaks. But, if you’ve got to watch something you don’t want to see, you may as well learn something from it.There were three hosts that made comments about the movie during the breaks. There were five theater seats in each of the two rows on the set. Two of the hosts sat in the front row with three empty seats between them and the third host sat in the second row just off center for a nice, relaxing Japanese set composition.The plot of the movie revolved around Timmy, who was a caddie for a private golf club. He loved the game and had a perfect golf swing.During a commercial break the three hosts talked about golf swings, and noted that they each knew many golfers who had the perfect swing and a seemingly perfect golf game, and yet they never won tournaments. On the other hand, they saw golfers with bad swings, who won tournaments in spite of their form. Golf is about fail
You should re-evaluate you vendors on a regular basis to make sure you are getting the best value.
4. Budget
It is fundamental, you need to plan for growth and you need to forecast for problems. You need to prepare a budget. Besides completing a budget for expected sales, you should also complete a budget for a disaster situation, like your sales are cut in half. The benefit is very straight forward; it forces you to ask yourself how you will be able to keep the company running in such a situation. It will also point to areas where you may be able to save money right away and free up cash flow. It’s like having a disaster plan; you only have to act on it when disaster strikes, but it is much easier to concentrate when you do not have a crisis at hand.
5. Develop a strong relationship with your Bank
Devote attention to building relationships with your bank. Always keep them up to date on where your company stands. If you hit a difficult patch it is much easier to get your bank on board if they understand your business. Contrary to opinion, banks do not necessarily jump ship as soon as you fall into trouble. They are willing to work with small business through tough times, and gaining their trust to do so is much easier the more confidence they have in you and your company. They way to accomplish this is to be transparent in your dealings and to give them timely financial information.
Use you bank as a resource for cash management. There are products available that can increase your cash flow, or arrangements that can be put in place to increase your interest returns. But you still need to make sure they are cost effective.
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