November 30, 2004
5 Warning Signals Your Business Might Have A Cash Flow Problem
A key reason for business failure is poor cash management. If you don't pay attention to your daily cash flow, you face extinction; yet so many business people loss site of their cash flow. No matter how fantastic your company's products are, you will not survive unless you generate sufficient cash flow to sustain it. It is not the goods or services that are the end-products of your business, it is cash.
1. You are exhibiting a decrease in liquidity (you are running out of working capital).
2. You are overtrading by selling more than you are capable of dealing with financially.
3. You have excessive short-term debt.
4. You are missing discounts on your payables or you are paying them beyond the stated terms.
5. You are collecting your receivables slowly and outstanding receivables are piling up.
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Jeff Schein is a CGA and offers advisory services in the areas of business planning, business modeling, strategic planning, business analysis and financial management for new ventures and growing small businesses. Visit www.companyworkshop.com or mailto:jeff@c...
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November 23, 2004
DEBT COLLECTING: Notice of Listing
The Notice of Listing law is aimed at regulating the actions of collection agencies and their operatives. You should be familiar with it even if you are a small business owner or work in the accounts receivable department. Following the same rules as the professionals do will help protect you from lawsuits.
Every collection agency is required to send a "Notice of Listing" when they receive an account for collection. This letter is the first word the debtor gets from the agency. It informs him that a particular business has turned his debt over to a collection agency.
The Notice of listing includes a sort of "Miranda warning" which informs the debtor that this is an attempt to collect a debt and that any information obtained maybe used for that purpose. If the debt is going to be placed on the debtor's credit report, the debtor must be given 30 days to respond before that action is taken. If your Notice of Listing indicates that you are going to put the debt on the debtor's credit report you cannot send the debtor anything more for at least 30 days, during which time the debtor can dispute the debt. To do this the debtor has to send a letter stating that he disputes the bill. He does not have to give a reason.
Continue reading "DEBT COLLECTING: Notice of Listing"November 17, 2004
Building Good Business Credit After Bad Credit
Can you establish good business credit if you have bad personal credit? The answer is yes...but with a few caveats.
Business credit reports and personal credit reports are generally completely separate databases for legal reasons. However, there are some exceptions in terms of how independent that information may be:
-- If you are operating as a sole proprietor or Limited Liability Company, it is difficult to separate your personal and business credit. A corporation is a much better structure to build a completely independent business credit report.
-- Experian sells a credit score that is a combination of the business owner's personal credit history and the businesses' credit history.
In the early years of a business, the owner will almost certainly be required to personally guarantee loans. However, as you establish a strong business credit rating for your enterprise, you'll have more leverage to negotiate for a loan without your personal guarantee.
A warning: some people try to use business credit file to repeat bad credit habits. "I've seen people who ruined their own credit go out and start a business, enlist the help of people with good personal credit to be executives in the company, and get major credit cards. They didn't have a real product or service, and the objective was to just get credit. They would inevitably default on the corporate credit lines," says Erik Salmon, Director of Business Credit Services for Innovative Business Services (IBS) and an experienced business credit coach. If that's your intention in establishing a business credit rating, you're better of taking some personal finance courses to learn how to manage your money.
Continue reading "Building Good Business Credit After Bad Credit"November 16, 2004
How to Get Money Back for Your Process and Procedures
Wouldn't it be nice to get some of your money back that you have invested in developing policies, procedures and processes for your organization? Well, you can with the recently restored tax credit.
$7.6 Billion in Tax Credits are Available
In September 2004, President Bush signed the $146 billion tax cut bill restoring the recently expired business Research and Experimentation Tax Credit. The 18-month renewal of the research and experimentation tax credit, which expired June 30 2004, was the most expensive item with an expected $7.6 billion cost through 2014.
Process Improvement Qualifies
If you are spending money on ISO 9000, six-sigma, lean manufacturing, TQM, or any other initiative focused on improving your products or processes, then you could qualify. This includes software purchases, training courses, labor, and of course the purchase of any Policies, Procedures and Forms products or services.
Continue reading "How to Get Money Back for Your Process and Procedures"November 15, 2004
Why Cutting Your Prices is Like Cutting Your Own Throat
It's the oldest sales tactic in the world...
And one of the worst...
Price cutting.
Before you make your next price cut in the face of sales resistance, the question you have to ask yourself is not, "Does it work?," but rather, "Can you live with the bargain?"
Here's a pop quiz: you - in your role as salesperson - go for the close. You ask the prospect to make a commitment and they don't. What's your first response?
Well, if you are like most people in a selling situation - whether you are the hired sales guy or the CEO-your first response to people not buying-for whatever the reason-is to say, "Would you buy if... ?," and the "if" is always some variant of, "...if the price was lower?"
Continue reading "Why Cutting Your Prices is Like Cutting Your Own Throat"November5, 2004
Debt Collecting - Looking For Money
A professional debt collector often works with as many as 2,500 accounts at a time! This may seem like an overwhelming number, but with organization and strategy, coupled with an eye for distinguishing the good accounts from the bad, you can turn this into a tremendous opportunity.
You can use a computer program to separate and categorize accounts (software programs such as CUBS and Dauax are popular with collection agencies). Some computer programs let you prioritize your accounts from1 to 10, one's being your big money accounts - those you've sent the debtor out to get a loan in order to pay the debt or any other accounts involving large amounts of money where follow-up is vital. Some programs have a reminder feature, which will automatically bring accounts up on your screen when it's time to hit them again. You may be able to adapt other business accounting or tracking software to some of these uses if you don't want to invest in or have no need for the quite expensive software used by professional collectors. In any event, making creative use of computer programs can make a huge difference in your success level.
Evaluate your accounts and identify those, which have the potential for an immediate payoff. Any account where the debtor has or can obtain the money owed is one that deserves your daily attention. You'll have to make a lot of contacts in order to know which ones are the plums. Each week you have the opportunity to pluck the ripest accounts if you continue to make calls, stay in touch, remind them, apply pressure or warn them of impending action.
Continue reading "Debt Collecting - Looking For Money"November3, 2004
Five Strategies To Strengthen Your Company's Financial Management
Too many businesses wait until a crisis occurs before they start to focus on improving their financial management. Often, by that time, it can be too late. By setting aside an hour now to evaluate the strengths and weaknesses of your company's financial management activities and systems you can save a lot of time and aggravation. It can also help increase your profits, and at the end of the day that is what it is all about.
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.