Cash Flow Tip – Business Cycle Coordination

One of the most important steps in attempting to calculate cash flow is breaking your business down into cycles.  Some examples of business cycles are:  inventory cycle, accounts payable cycle, sales cycle, and accounts receivable cycle. 

The key to smooth cash flow is to coordinate these cycles as much as possible with one another. Unfortunately for many of our clients, thorough coordination is difficult, sometimes impossible.  Inventory needs to be procured, products/services are sold, and only then are funds received from accounts receivable.  Unfortunately, overhead needs to be paid for and as well as inventory. 

The best solution is to try to negotiate with your vendors and find a payment schedule that works with your cash flow schedule.  You should also make sure you convert your sales to cash in the shortest possible time.  However, because many of your vendors and clients face the same issues you do, it is not infrequent that you will unable to put off paying invoices until people pay you.  Many of your vendors may not even be able to deliver a product or service before it is paid for.  If  this is the case in your business, you may want to look into alternative financing such as a small business loan, or a business cash advance.

Here is a more detailed article/post on Cash Flow.

Resources for Women with Small Businesses

For all those female entrepreneurs out there, here are some great resources that I found compiled on the SBA’s Office of Women’s Business Ownership site.  Some, like the library and courses, are good for all you entrepreneurs, regardless of gender.  Many of these organizations are great ways to network, in addition to the specific benefits and resources that they offer.

Here is the list from the SBA site:

Women Entrepreneurship in the 21st Century National Women’s Business Council Gateway for women-owned businesses selling to the government Association of Women’s Business Centers Business Gateway National Association of Women’s Business Owners National Association for Female Executives National Foundation of Women Business Owners SBA Library Free Online Courses SCORE Small Business Development Centers

FastUpFront is also great cash flow resource for small business owners of any gender, providing Cash Advances for Small Business Owners.

Small Business Collections – 6 Tips

The most frustrating thing about running a small business is EVERYTHING that is out of your control.  One of these things is when your customers don’t pay you.  Here are some tips on collecting that money which is owed you already, and which you need NOW.  While you are waiting for your money, if you need some extra cash, you can consider getting a business cash advance.

Set Written Payment Guidelines – Before providing goods or services, make sure that the client has signed/initialed next to your payment guidelines.  Also, outline the guidelines clearly on your invoices.  If you want to offer a trade discount – giving a 1 or 2% discount to customers who pay quickly, this will often encourage payment – minimizing your cash flow issues.

Quick Invoicing – I wrote more about this in a previous article on minimizing cash flow issues.

Incentives – There are various types of incentives which will ease speedy collection, helping to minimize cash flow issues for a small business.  An example of a “carrot” incentive is a trade discount – giving a 1 or 2% discount to customers who pay quickly.  A “stick” incentive would be to charge interest for overdue accounts.  Many companies who charge interest will waive it in the event of a good faith payment.

Reminders – Many experts advise sending out multiple reminders; however, for small businesses my rule is: One reminder, then pick up the phone.  Depending on the size of your business, you might find that two reminders makes more sense – but the personal attention of a phone call can work wonders.

Present Options – Decide which options you want to offer someone who is not paying.  Do you want to offer them an altered payment plan?  Do you want to sue?

If You Sue – Make sure you have a good paper trail.  If the amount owed is within the limit for your county, you can sue in small claims court (no lawyer).  Make sure you have taken notes on all telephone calls and that you have the contract and paperwork with you.  Before filing, let the customer know what you are planning to do, and see if you can convince them just to pay you.  If you have any questions on how to sue in small claims court, contact your county clerk’s office.  Unfortunately, winning in small claims court doesn’t always mean you will actually get the money.  More often than not, just the threat of being sued will create the impetus to pay.

Beauty / Hair Salon Financing – A necessary but near impossible loan to acquire.

Growing a hair / beauty salon business requires financing! Lenders know that these business can really struggle with varying receivables and high overhead. A successful salon needs time to develop a loyal customer base. A salon’s success is based on a local following and until that business has established it’s “regulars” overtime, revenue can be very unstable making fixed loan repayments difficult; And the bank knows this!

I recently read an article from USAToday about a successful entrepreneur in the hair beauty salon business. It’s an interesting article that shows how determination and creativity can lead to success in a big way. The business owner mentions the difficulties she had in acquiring financing for her salon. After being turned down for small business loans, she resorted to borrowing money from friends and family. Ultimately she was able to get the necessary financing which enabled her to grow her salon business into a multi million dollar enterprise.

We fund many established beauty and hair salon businesses in their early stages of development. Our funding helps them to maintain their businesses while building their customer base overtime. Our business cash advance program works well for salon’s and many other small businesses that may have trouble with the inflexible repayment options offered by the bank. Our business cash advance program offers financing based on future credit card sales with flexible repayment – meaning we take repayment when your business can afford it. In addition our cash advance is unsecured, available to businesses with bad credit and is available to any business (even high risk borrowers like beauty and hair salon businesses) as long as you process a minimum of $1000/month in credit card sales.

Plus… you won’t have to ask your friends or family 😉

Business Planning Freeware

During my morning surf, I found some directories of Business Planning Freeware and I thought I’d put links up.  I haven’t checked these programs out, so use your own judgement.  Some of them look rather old, but a formula is a formula and it looks like many of these programs could be very useful.

Many of them have all sorts of white papers and templates for new and established small businesses (and everyone in between).  Others have ratio calculators and the like.  I have only just started looking it over, but I wanted to share the directories with all of you.  One of the free-wares (eGuides from PlanWare) has info that supposedly helps with the following:

  1. Getting New Business Ideas
  2. Devising Business Strategies
  3. Developing a Strategic Business Plan
  4. Writing a Business Plan
  5. Insights into Business Planning
  6. Preparing Financial Projections
  7. Making Cashflow Forecasts
  8. Managing Working Capital

Anyway, try out these two directories for Business Finance/Planning Free-Ware, and let us know which ones you recommend:

Business Plan FreeWare directory from SoftPlatz

Business Plan FreeWare directory from FreeWare-Guide

Online Business Finance & Accounting Calculators

By using online finance/accounting calculators and other online tools, you are able to bypass hiring someone to calculate for you AND you are able to recalculate quickly and easily for various situations, projections, and ‘what if’s’.

 

Bank Rate has the following free calculators for Small Business Owners:

Calculate payments on any loan (incl. amortization schedule)
Current ratio calculator
Quick ratio calculator
Debt-to-assets ratio calculator
Return on assets calculator
Gross profit margin calculator
Operating profit percentage calculator

 

Here is what DinkyTown has to say about its Working Capital Calculator:

 

Your working capital is used to pay short-term obligations such as your accounts payable and buying inventory. If your working capital dips too low, you risk running out of cash. Even very profitable businesses can run into trouble if they lose the ability to meet their short-term obligations. The calculator assists you in determining working capital needs for the next year.

 

I hope to get a ratio list up here at some point to help people understand how, and when, the various ratios are used. 

 

Hope you enjoy your online tools. :)

Improve Cash Flow: 8 ways to Getting Receivables Sooner

Our customers come to us when they are in a cash flow crunch.  Many of them are running very successful businesses, only the timing of their payables and Receivables is simply a bit out of sync. 

Here are 8 things you can do to shorten the time between when your customer wants something, and when you get paid.

1)  Accept Credit Cards and/or PayPal (for internet businesses) – When you accept credit cards, you also qualify yourself (after a few months) for great cash flow rescue option like a business cash advance.

2)  Encourage your customers to e-mail or fax orders –  Mail takes more time.  The sooner you receive the order, the sooner you can send out an invoice and get paid.

3)  Send out a clear, organized invoice immediately – Use software, or make your own template, just make sure that you have invoices ready, so that the moment you get an order, you can send out an invoice.  Make sure that the due date and the trade discount/late fee are displayed prominently.

4)  Offer a trade discount – This is a discount (even just 1 or 2%) that you give your customers if they pay you within a certain amount of time.  Often this small incentive will encourage your customers to pay immediately. 

5)  Due Diligence – When taking on a major customer, call their other vendors to find out their payment history/patterns.  You may even want to run a business credit check.

6)  Deposit without delay – Make an arrangement with your bank to have funds available from deposited checks within 0-2 business days.  If you receive checks from customers nationwide, you could research the possible added value of a ‘drop box.’ Discuss this with your bank.

7)  If possible, request payment (in part or full) up front, prior to filling the order.  This also cuts down on time and money spent on collections.

8)  Check back here later in the week to read my post on small business collections.

Working Capital – Four Things to Plan!

Working Capital = Current Assets–Current Liabilities

Just like the human body needs calories to survive, a business needs working capital to continue operations.  Working capital is the money that is on hand for normal business operations.

If you have a solid business plan, and business is going well, then you should generally have enough income on hand to cover all your operating expenses.  When ends don’t meet, your business has to look for other sources of cash (that’s when you come to us!).  Ideally, however, your business will provide enough income so that there is working capital and enough left over for PROFITS.  That’s a great word, isn’t it?

Here are three things to remember when looking at your working capital and cash flow.

  1. Project revenues honestly and realistically.
  2. Don’t forget to include EVERYTHING in your estimate of costs.  Labor, supplies, rent, utilities, storage, salaries, and professional services/consultants are just SOME of what you need to remember.
  3. Break down and make a time estimate for your business cycles. Working capital means that it is there when you need it, make sure you will have money to cover expenses during the slow periods of your business.  Your cash flow needs to make sense.
  4. Make a list of plausible future changes that could affect your business.  This could include anything from competition to a change overhead, or payment terms on either the Receivables or Payable sides.