money

Entrepreneurs look to outside investors to raise money to finance growth. If a business has real problems money isn’t necessarily the answer.

To listen to the episode hit the play button above.

To download the episode, right click on this link  and choose Save Target As.  Go to the folder where you want to save the recording on your device and click Save or Enter.

Make it easier to get upcoming episodes by subscribing to the show on Apple Podcasts .

Subscribing to the show will automatically download the episodes on your preferred listening device so you can listen to them when and where you want. And hey, if you like what you hear, please leave the show a great rating and review while you are there on Apple Podcasts.

Show Notes

Entrepreneurs look to outside investors to raise money to finance growth. There is a lot to consider when deciding if this is the right path for you and your business.  If a business has real problems money isn’t necessarily the answer.  In this episode we discuss what investors look for before considering whether your business is right for them. We use some case studies to illustrate how things can go wrong when a business has real problems.  We’ll discuss what you need to be ready for when taking money from investors.

Key Points

*Investors create new demands on a company and the entrepreneur especially around planning, results and reporting.

*Our case study entrepreneurs weren’t strong in the areas of finance and operations and began to struggle.

*Using the show Shark Tank to illustrate, Lisa describes some of the key weaknesses the entrepreneurs had that she gleaned from her research.

*Lisa talks about how these weaknesses contrast with elements investors look for in business owners.

*She describes key areas that investors consider when reviewing a business including the market, company valuation and the management team.

*Using examples from the case studies, we look at areas where business problems were not being addressed whether through lack of experience or simply being ignored by the entrepreneur.

*Investors such as venture capital and other professional investors create a heightened sense of urgency due to an increased focus on returns and growth.

*Entrepreneurs should expect a greater focus on the market, business management and money management once outside money is invested.

*Lisa discusses some of the dangers a company suddenly flush with money can face and some of the mistakes one case study entrepreneur made.

*She gives us a list of 5 top factors entrepreneurs need to think about and be ready for before they consider taking investor money.

Resources and Links

Book mentioned in this episode:

Think and Grow Rich,  by Napoleon Hill find it here  

Note: Links in this post may be affiliate links.  Lisa Roberts is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.

Sign Up to Get Prescription for Success!

Get all the updates and information Lisa shares from Business Rx and the Healthy Business Healthy Profits show! You’ll get information, tips and strategies on growing a healthy successful business. Don’t worry, I won’t bombard you with emails.  At most, you’ll get something from me every few weeks. You can sign up  Here

Lisa Roberts is a business operations consultant who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way. She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track.   You can find out more about her here

To learn more about getting in touch with Lisa to discuss a problem you may be having in your growing business, find out more about a Quick Care session here .

In this the 2nd part of a two part episode, Lisa will give you several tips to improve cash flow in your business from the payment or cash outflow side of your business.

To listen to the episode hit the play button.

To download the episode, right click on this link  and choose Save Target As.  Go to the folder where you want to save the recording on your device and click Save or Enter.

Make it easier to get upcoming episodes by subscribing to the show on Apple Podcasts . Subscribing to the show will automatically download the episodes on your preferred listening device so you can listen to them when and where you want. And hey, if you like what you hear, please leave the show a great rating and review while you are there on iTunes.

Show Notes

Entrepreneurs know that one of the most critical aspects to running a healthy business is to maintain a good level of cashflow.  In this the 2nd part of a two part episode, Lisa will give you several tips to improve cash flow in your business from the payment or cash outflow side of your business. She also explains how using some of these tips together can help build momentum and improve your cash over time.

Key Points

*Working with the terms your vendor offers you opportunities to improve cash including using the amount of days given as well as any early payment discounts that may be offered.

*Lisa discusses ways to negotiate with vendors to improve payments terms as well as managing payment methods to stretch out cash payments without incurring additional fees.

*Cash flow can be affected by decisions made surrounding inventory management and a few tips and stories were shared in this area.

*Lisa shares how investing in a resource in the purchasing area can help improve cash by monitoring activity and coordination in the spending area.

*Tips were shared how cash outflows can be managed in expenses like payroll and large purchases like equipment as well as the owners own pay.

*Lisa describes how she believes that the tips provided in these two episodes can help build upon one another and create an improved cash flow for a business.

Resources and Links

25 Ways to Improve Cash Flow Tip Sheet – Subscribe to Lisa’s newsletter, Prescription for Success to get the tips sheet and get information tips and strategies to run, lead and grow a healthy business.  Follow this link to sign up and get the tip sheet!

Other episodes referenced in this episode:

Learn about the money rollercoaster in the very first episode of Healthy Business Healthy Profits – What Makes a Business Healthy?

If you’d like to talk with Lisa about this or any business problem you’re having surrounding your growth then you may want to set up a Quick Care Consultation session her.  Check out more about that here

Sign Up to Get Updates

Prescription for Success

Get all the updates and information Lisa shares from Business Rx and the Healthy Business Healthy Profits show! You’ll get information, tips and strategies on growing a healthy successful business. Don’t worry, I won’t bombard you with emails.  At most, you’ll get something from me every few weeks. You can sign up  Here

Lisa Roberts is a business operations consultant who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way. She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track.   You can find out more about her here

Entrepreneurs know that one critical aspect to running a business is a good level of cash flow. Listen to hear the first 14 tips to improve your cash flow.

To listen to the episode now hit the play button above.

To download the episode to listen later, right click on this link  and choose Save Target As.  Go to the folder where you want to save the recording on your device and click Save or Enter.

Get upcoming episodes by subscribing to the show on Apple Podcasts . Subscribing to the show will automatically download the episodes on your preferred listening device so you can listen to them when and where you want.

And hey, if you like what you hear, please leave the show a great rating and review while you are there on Apple Podcasts.

Show Notes

Entrepreneurs know that one of the most critical aspects to running a healthy business is to maintain a good level of cash flow.  In this the first part of a two part episode, Lisa will give you several tips to improve cash flow in your business.  She also stresses the importance of staying on top of cash flow to run a healthy business for the long-term.

Key Points

*Entrepreneurs rely on a healthy level of cash flow to finance growth and avoid problems in their business.

*You’ll hear ways to manage and maintain the billing and collection function in your business and steps to take to set yourself up to collect on outstanding accounts.

*Lisa shares tips on ways to manage payment methods and payments terms to ensure that you are collecting your cash in a timely manner.

*Lisa and Winnie discuss the positives and negatives of changing your standard payment terms especially with long time customer and what you can do with slow or non-paying customers.

*Hear ways that you can use financing to enhance and supplement cash flow in your business.

*Lisa discusses ways to generate additional cash in your business that can streamline and enhance cash flow.

*Many of the tips shared in this episode on focus the receipt of cash side of the business like sales, receivables and payment methods.

*In Part 2, Lisa will share tips to improve cash flow on the payment side of your business. So subscribe to the show and  look out for Part 2!

Resources and Links

Other episodes referenced in this episode:

Insider Secrets for Success in a Family Business

Cost and Pricing – What You Need to Know

Have questions about cash flow in your business, set up Quick Care Consultation with Lisa to learn how some of these tips could work in your business.  Learn more here

About Lisa Roberts

Lisa Roberts is a business operations consultant who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way.  She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track.

 

Sign Up to Get Updates

Prescription for Success

Get all the updates and information Lisa shares from Business Rx and the Healthy Business Healthy Profits show! You’ll get information, tips and strategies on growing a healthy successful business. Don’t worry, I won’t bombard you with emails.  At most, you’ll get something from me every few weeks.  Sign up  Here

Lisa Roberts is a business operations consultant who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way. She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track.   You can find out more about her here

Cash collection is an important part of any business but especially one that is growing. Listen to learn tips on collecting your cash in your business.

To listen to the episode hit the play button.

To download the episode, right click on this link  and choose Save Target As.  Go to the folder where you want to save the recording on your device and click Save or Enter.

Make it easier to get upcoming episodes by subscribing to the show on iTunes . Subscribing to the show will automatically download the episodes on your preferred listening device so you can listen to them when and where you want. And hey, if you like what you hear, please leave the show a great rating and review while you are there on iTunes.

Show Notes

Cash collection is an important part of any business but especially one that is growing.  Many businesses rely on cash to fund their growth.  In this episode, we’ll talk through all the aspects of the cash collection cycle and highlight the mechanisms and processes that help entrepreneurs maintain cash flow.  We’ll also discuss areas where things can breakdown and give tips on the types of processes that can help avoid those problems.

Key Points

*The cash collection cycle can vary among different types of businesses.

*Companies that rely mainly on credit cards can avoid many of the steps in the collection process because they have credit card companies perform those steps for them.

*Accepting payment direct from customers creates additional steps that companies must take to ensure payment.

*We touch briefly on the problems small businesses face from credit card and online payment services in the areas of chargebacks and fees.

*Lisa explains internal process steps on both the collection side as well as the pre-sale approval side.

*For repeat customers, credit standing also needs to be monitored to watch for customers who fall behind in the payments and processes need to be in place to react to those situations.

*Once an order is approved and shipment takes place, processes need to document the shipment and create an invoicing package to support the billing to the customer.

*Process steps in this part of the cash collection cycle are designed to create a valid, approved transaction as well as a documented shipment to help create the invoice package.

*An invoicing package should contain all the elements of the transaction – approved order, customer credit check and documentation of shipment – invoice.

*The next steps in the cash collection cycle is the actual collection of the cash payment on the account as well as the monitoring of the Accounts Receivable Aging Schedule to make sure customers don’t fall behind in their payments.

*The final step of the cash collection cycle is the proper handling of cash and ensuring that it is deposited into the bank and properly accounted for in company books and records.

*Lisa closes the discussion with tips about segregating duties inside your company to minimize the opportunity for misappropriating cash by your employees.

*Entrepreneurs need to keep in mind that this cycle needs processes that create checks and balances to safeguard cash and to also minimize the time to collect cash.

Resources and Links

Entrepreneur Magazine article Lisa mentioned in the episode –  Think You Can’t Win Against Chargebacks? Think Again.  by Joe Keohane

Have questions about cash collection and management in your own business, get in touch with Lisa for  Quick Care Consulting Session using this link

Note: Links in this post may be affiliate links.  Lisa Roberts is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.

Sign Up to Get Updates

Prescription for Success

Get all the updates and information Lisa shares from Business Rx and the Healthy Business Healthy Profits show! You’ll get information, tips and strategies on growing a healthy successful business. Don’t worry, I won’t bombard you with emails.  At most, you’ll get something from me every few weeks. Sign up  Here

Lisa Roberts is a business operations consultant who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way. She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track.   You can find out more about her here

Achieving big growth, building a staff and reaching the point where investors are infusing money into your start-up can be exciting. You feel like you’ve hit the big league in the business world. But it also brings with it big responsibility for entrepreneurs.

I began watching the company I’m about to describe after reading some business articles about them over the last few years. I’m not going to reveal the company’s name because this post is more my opinion based on research I’ve done rather than actual first-hand knowledge.

I first caught wind of the company reading Inc. Magazine several years ago. The owner was being recognized for her success in one of their annual awards. Accolades poured in from other places like Forbes and since it was a retailer, a retail industry honor. The company also received a lot of money from outside investors and was getting acquisition interest from established companies. It sounded like this company was humming along, growing successfully and on its way to the big leagues of the business world.

Then about 2 years later another article; the company declared bankruptcy!

I found it remarkable how a high flying private company receiving accolades only a few years earlier obtaining tens of millions in investment capital could fall so quickly.

Since I am not a reporter or a big time business magazine, I don’t have the access or connections to find the true story. However, there was a lot I gleaned from various articles and also from sites like glassdoor.com.

In its demise, it looks like many of the mistakes startups make were at play in this story. Let’s take a look at some of them.

Investors’ Money Moves You Away from Your Brand

The company got money from investors like venture groups. While there is absolutely nothing wrong with raising capital that way, the pressure to deliver increases dramatically. Venture groups invest to get big returns on their money. If an owner isn’t ready for that type of pressure (in my opinion she wasn’t), then it can easily pressure you into making mistakes in your attempts deliver those returns. Later shifts by a new CEO into brick and mortar stores and higher priced brands seemed to take the company further down a bad path and away from its original brand.

Building a Business along with a Brand

Having a great brand is what propelled the company into great growth numbers. It is what attracted outside investors in the first place. Suggestions have been made that the brand became confused as the company moved away from its original niche.   It also appeared that the founder became unhappy with the actual running of the business based on some quotes in one of the articles. She eventually may have come to realize that her passion was elsewhere and she didn’t like running and managing a business at all.

Using Investment Money to Build the Business

In this case, the founder went from nothing to suddenly being recognized by business publications and then getting big money investments. That can be a shock to anyone who has never been in that position. Over a period of only 2 or 3 years over $50 million was injected into the business. When you get that kind of money it is easy to allow yourself to make decisions with it that may not be best for the business. My research showed that some decisions were made to spend money on nice to haves instead of have to haves. A swanky upscale office, nice toys and perks to name a few.

Inexperience in the Industry

One of the investments made from the infusion of capital was renting a large warehouse in another state. While I think I understand why they located it where they did for shipping logistics reasons, industry opinions in one article stated that this was an expensive way to go. It suggested that outsourcing the logistics function would have been a better strategy and more economical.

In addition, it takes a lot of effort to manage a location and its people from several states away. Based on my reading, the location wasn’t managed well and the people who worked there were very disconnected from the main office. They became frustrated and mistrusting of management.

Inexperience in Business

The founder had no experience running a business and actually bragged of never really having a real job. Based on my research, she hired people she liked and those that agreed with her. Employees with experience in the industry told of being excluded and shot down when they made suggestions for improvements. There were also many stories of favoritism and mistreatment. It all appeared to create a very toxic environment where turnover was high, people felt almost abused and quality people left quickly.

Other examples surfaced in the research as well. One example was that even though the company grew sales, they weren’t making a profit. Lawsuits based on infringement and wrongful termination also created big drain for the company from a time and money standpoint. And finally, what seemed like an inexperienced and immature HR department only made matters worse.

Learning from this Company

I find it sad that a business that was so successful could turn in just a few short years. However, I like to think that there are lessons that can be learned in any situation.

Understand What You’re Getting Into

As I stated earlier, taking outside investment isn’t a bad thing, but you need to go into it with eyes wide open. Even if that investment is from people close to you, they don’t ever want it to go to waste. If you’re accepting money from larger investors make sure you fully understand what the expectations are and be up front about your own desires and needs for your business. There are greater demands on you and the business when taking outside investment; be ready for them.

Fiscal Responsibility

Obtaining capital investments can feel invigorating since you are suddenly flush with cash but you need to spend money well because it won’t last forever. Investors have an expectation and a time frame in mind when they make an investment and want it to payoff. At some point you have to deliver and making good use of the money to further the business is the first step. Avoid spending money “like a drunken sailor” and spend it responsibly to further grow your business.

Be Humble About What You Don’t Know

I think I was the most frustrated reading what employees said about the environment and how management ran the company and treated its employees. Now I understand that sometimes sites like Glassdoor can contain comments from disgruntled employees but it was pretty overwhelming. Based on the volume of negative comments, my feeling is that there is an element of truth to it.

Being an entrepreneur isn’t easy and I’ll never say it is. However, at some point entrepreneurs need to acknowledge that they don’t know all there is to know about running a business. They eventually need subject matter experts on their team. Bring in people that complement you but also challenge you. More importantly, you need to a team that will tell you the truth and it may not always be what you want to hear.

Big League Business, Big Responsibility

As entrepreneurs we all make mistakes. Mistakes though can become more costly and can affect more than just you. Once you involve others – investors, employees and vendors – there is much more at stake with the decisions you make. Hopefully, we can all learn from some of the mistakes this company made and use the knowledge to help us grow a healthy successful business.

Key performance indicators are a great way to focus in on important areas of your business to gauge results, set goals and target improvement areas.

To listen to the episode hit the play button.

To download the episode, right click on this link  and choose Save Target As.  Go to the folder where you want to save the recording on your device and click Save or Enter.

Make it easier to listen to upcoming episodes by subscribing to the show on iTunes . Subscribing to the show will automatically download the episodes on your preferred listening device so you can listen to them when and where you want. And hey, if you like what you hear, please leave the show a great rating and review while you are there on iTunes.

Show Notes

Owners of growing businesses are so crazy busy that they rely on their gut too much and struggle with where to focus their valuable time. Determining where the business is doing well or doing poorly takes more focus and less gut. Entrepreneurs need a way to get information on business performance and get it quickly.  One way to get that information is using Key Performance Indicators or KPI’s. In today’s show we are going to focus on what KPI’s are and how you should use them in your business to help you set and measure performance goals as well as manage your business.

Key Points

*Key Performance Indicators or KPI’s can help you get a snapshot of how your business is performing in particular areas whether financially or operationally.

*KPI’s can help not only manage your business but also target areas of improvements you want to make in your business and gauge their success.

*It’s important to use KPI’s to understand your business against your industry peers and to pick the right metrics that, for your industry, defines success.

*Measures that may be important for one industry may not be as important or even irrelevant for another indusrty.

*Key factors to consider when choosing KPI’s for your business should be that they are relevant, meaningful and be able to lead to decisions and ultimately action.

*A good set of KPI’s can be used to set goals and objectives for your business to drive improvements both at the overall company level as well as the management team’s department level.

*Goals and strategies related to improvement initiatives can trickle down and create engagement for your staff.

*We discuss how the entrepreneur begins the process of identifying her own Key Performance Indicators and if she needs help doing it, the type of people and skills that can help her.

Resources and Links

Note: Links in this post may be affiliate links.  Lisa Roberts is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.

The True Measures of Success by Michael J. Mauboussin in the Harvard Business Review. Find that here

Key Performance Indicators – Information and Tip Sheet – sign up to get the tip sheet here

To contact Lisa Roberts to set up a Quick Care session to review your business and get started with your own KPI’s follow this link

Sign Up to Get Updates

Get all the updates and information Lisa shares from Business Rx and the Healthy Business Healthy Profits show! You’ll get information, tips and strategies on growing a healthy successful business. Don’t worry, I won’t bombard you with emails.  At most, you’ll get something from me every few weeks. You can sign up  Here

Lisa Roberts is a business operations consultant who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way. She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track.   You can find out more about her here

Learn why it’s important for your company’s stakeholders to understand your business model – what you do and how you make money.

To listen to the episode hit the play button.

To download the episode, right click on this link  and choose Save Target As.  Go to the folder where you want to save the recording on your device and click Save or Enter.

Make it easier to get upcoming episodes by subscribing to the show on iTunes . Subscribing to the show will automatically download the episodes on your preferred listening device so you can listen to them when and where you want. And hey, if you like what you hear, please leave the show a great rating and review while you are there on iTunes.

Show Notes

The term business model was used a lot in the days to of the so called dot com era.  It was basically a fancy way to say how a company made money.  Whatever you call it strategy, value chain or business model, it’s important that stakeholders in your business understand what you do and how you make money so that you can run a successful business.

Key Points

*Key stakeholders for your business are the owner, employees, customers, partners and suppliers all have a stake or interest in your business and how you make money and we explain why.

*Your business model has a broader reach than just you and your employees.

*Entrepreneurs need to have a clear understanding of their business model in order to communicate to all the stakeholders so that they are engaged.

*Employees must be clear on the business model so that their decisions, actions and attitudes align with your business model and the value proposition that you bring to the market.

*Suppliers and partners can bring more value to your business when they understand the key elements of your business model and we illustrate that with some examples.

*Even customers sometimes need to understand your business model and we show you why that is important to maintain loyalty and your value proposition.

*If an entrepreneur doesn’t feel his business model is clear to the key stakeholders, we discuss some steps to help get clear and work with stakeholders to understand and communicate the key elements that help make the business successful.

Resources and Links

Note: Links in this post may be affiliate links.  Lisa Roberts is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.

Link to the Books mentioned in the episode:

Hundred Percenters: Challenge Your Employees to Give It Their All, and They’ll Give You Even More by Mark Murphy http://amzn.to/2erAPDv

Hard Goals: The Secret to Getting from Where You Are to Where You Want to Be by Mark Murphy http://amzn.to/2fBf3R7

Lisa Roberts is a business operations specialist who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way. She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track.   You can learn more about her here .

Sign Up to Get Updates

Get all the updates and information Lisa shares from Business Rx and the Healthy Business Healthy Profits show! You’ll get information, tips and strategies on growing a healthy successful business. Don’t worry, I won’t bombard you with emails.  At most, you’ll get something from me every few weeks. You can sign up  Here

One of the bigger problems entrepreneurs face managing a growing company is having the amount of money you need to continue to grow and expand. It is often difficult to get the financing you need, when you need it. One of the most important things you need to pay close attention to is your liquidity and having the money you need to operate your business. A key component to measuring your ability to generate the funds and liquidity you need to operate your business in a healthy way is working capital.

Let’s take a look at working capital and look at the ways you can monitor, manage and improve it in your growing business.

Working Capital – What is It?

Working capital or the working capital ratio is a basic ratio to evaluate the short-term health of a business. It measures whether you can pay your bills, pay for assets like inventory and how long you can withstand a downturn and still meet your current obligations.

The working capital ratio is also known as the current ratio. To calculate take Current Assets divided by Current Liabilities. As an example let’s say you have current assets of $200,000 and current liabilities of $130,000.  Your working capital ratio would be 1.5 ($200,000 / $130,000).

Current Assets are things that can be turned into cash in a short period of time like accounts receivable, marketable securities, prepaid expenses, inventory, other liquid assets and of course cash.

Current Liabilities are short term obligations like accounts payable, accrued expenses and short-term debt.

What Should Your Working Capital Ratio Be?

Negative working capital is a ratio that is less than 1 and indicates that you do not have enough to meet your current obligations. A ratio over 2 suggests that you may not be investing your money well like having too much in inventory or not investing excess cash into investments that offer a better return for your business.

A good ratio would fall between 1.2 and 2.0 for most businesses and shows a good level of liquidity.

Managing the Big Three in Working Capital

There are things you can do to improve your working capital position and the most obvious is spending less than you take in. However, that’s pretty simplistic.  Of all the components of working capital, for many businesses the three biggies are Accounts Receivable, Accounts Payable and Inventory.

How can you make improvements in the Big Three to help improve your own working capital?

Accounts Receivable

When customers purchase “on account”, your business provides goods or services in exchange for a promise to pay later. While your business could avoid this by not allowing customers to buy on account, that is not always practical.  Here are 3 things you can do to manage working capital in accounts receivable:

  1. Set and consistently apply payment terms to customers that are reasonable. Keep in mind; if you have to pay your own vendors in 30 days, but you give your customers 60 days to pay, you are already 30 days behind in your cash flow position. Your goal is to set terms that allow you to convert receivables into cash as quickly as possible.
  2. Collect consistently. If a customer account is coming due, make sure you receive payment on time. Follow-up quickly on unpaid invoices. Be consistent in applying your collection policies to customers so they understand that they need to stay current in order to continue to do business with you. Remember, a sale is nothing until the cash is in your hand.
  3. Get payment sooner. You may be able to collect cash on a sale sooner by taking down- payments, progress payments, or offering small discounts for early payment.

Accounts Payable

The second item of the big three in working capital is on the liability side with payments due to vendors and suppliers in accounts payable. In this instance, your suppliers have allowed you to purchase “on account”.  Here are a few things you can do to improve working capital in accounts payable:

  1. Get the best payment terms you can and use them. Keep in mind what I mentioned under receivables, if you are collecting receivables every 30 days but you have to pay vendors in 15 days, you are behind 15 days in cash flow. Negotiate the best terms you can without incurring additional fees or charges and use the payment terms you’ve been granted. If you don’t have to pay for 30 days, then don’t pay in 10.
  2. Monitor what you spend with vendors. If you spend a large amount with one or two vendors, you may have some leverage to negotiate with them for a better price, volume discounts, shipping discounts or even longer payment terms.
  3. Consider early payment discounts. From time to time, a vendor may offer your business a discount if you pay before the normal payment term. This may make sense depending on your cash flow situation.

Inventory Management

The last item in the big three of working capital is inventory. Properly managing the amount you have in inventory can help you improve your working capital. Having too much in inventory can cost you working capital because money invested in unsold inventory isn’t making you money.  However, having too little in inventory may cost you money too – the cost of lost sales.  Here are some things you can do to manage your inventory better:

  1. Understand your inventory turnover. Inventory turns are how many times a year you sell items in inventory and have to replenish them over a period of time. Compare how your turnover rate is against your own industry and try to, at least, match the average for your industry. Carrying the right amount of inventory will help you improve working capital; having too much or too little can cost you.
  2. Maintain good inventory tracking. This involves not only tracking what you have but also what you need to replenish. In addition, having inventory clean, labeled and organized will help you avoid mistakenly ordering more of something you don’t need or getting caught with too little of an item.
  3. Understand and monitor your costs associated with inventory. Make sure that you understand and track costs associated with managing inventory. There are costs other than the cost of purchasing inventory that can add up. Here are a few to keep in mind: warehousing costs, shipping costs including expedite fees, slotting costs , obsolete inventory and losses due to theft.

It’s a good idea to have an emergency fund in your personal life and a good working capital position in your business. You will be happier and less stressed because your business will be healthier and able to withstand those dips and downturns that can sometimes set you back. Make sure that reviewing and improving your working capital is part of your monthly business management review.

It’s the age -old question business owners ask – “how can I make more money?” Some ways are obvious and some not so obvious.  Some will say, “just sell more”.  Oh sure, you may have to sell more but at the end of it all, the real money owners make is really more about profit than about sales.

Check out some of the ways you might be able to make more money in your business.

100 bill, money

    1. Sell More Stuff – Obvious right.   Find more customers, find new markets, sell more to existing customers, sell supplementary products and services are all ways to sell more stuff. In addition, don’t forget about recurring revenue streams like maintenance, warranties, subscriptions and multi-year contracts.
    2. Sell More PROFITABLE Stuff – Not as obvious. # 1 could get you more money, but it could cause you to earn less if you’re not selling profitable stuff.   Selling more stuff is great if you only want to concentrate on the Top Line (sales), but selling profitable stuff will focus you on the Bottom Line (profit) and get you more money in the long-run.
    3. Know Your Costs – Obvious now from #2. Understanding your costs, especially your direct costs will help you recognize your most profitable sales. Higher gross margins on sales contribute to covering your other costs, like selling, general and administrative costs and help contribute more money (profit).
    4. Understand Cost Drivers – This one can be a little more difficult but necessary in order to avoid being caught flat-footed. Recognizing that a cost is rising, sooner rather than later, gives you the chance to do something about it before it costs you too much money. Understanding the impacts gives you a chance to combat it whether you need to raise prices, find substitutes, change offerings or find savings elsewhere in your business. Taking action earlier will help you save money.
    5. Minimize Hidden or Risk Costs – These costs are those things that could catch you by surprise.   Costs that rise because of something no one foresaw like a drought or natural disaster; expense of a lawsuit against your business; or uninsured losses – are all things that can catch you by surprise and cost you money.
    6. Avoid Wasted Time – This may not be as obvious to a business that “has always done it this way”. Most businesses can say, “Time is money”. The way you operate, the better your processes and procedures, can translate into saving time and therefore, money.
    7. Don’t Waste Money – Sure, it’s obvious not to just throw away cash in your business, but what about not so obvious waste. Employee turnover, lost customers, not maintaining equipment, and even bad internal communications can all cost you.
    8. Find More Efficiency – Efficiencies might be obvious and not so obvious. Shortening the delivery cycle, collecting money faster, automating functions, and improving processes can all be things that bring money in faster or save your business money.
    9. Budget and Monitor Spending – People don’t like to budget but if you’re running a business or even your personal finances it is still one of the best ways to manage your money effectively. It’s not enough to set a budget and forget it; to make more money you’ll have to monitor it and adjust it to maximize the money you make.
    10. Look For Savings – Obvious, right? It will not be, if you’re not monitoring your business results and your budget. Regular monitoring gives you a shot at controlling costs. The faster you deal with out of control costs, the more you save and the more you’ll make. Also, don’t forget about your recurring costs. Just as we mentioned earlier about recurring revenues, recurring expenses can cost you money. Look at recurring costs to see if they are still necessary, maybe you can reduce them. This will have a multiple savings effect because they are recurring.
    11. Ask For Savings – Your suppliers may be a great source to make more money. Agreeing to a price break, quantity discounts, longer payments terms, payment discounts and even taking on one of your own costs such as storage, delivery or just in time inventory management are all ways they can help your business save money.
    12. Outsourcing – Farming out part of your business operation can make a lot of sense in certain cases. There are obvious examples like payroll and benefits and not so obvious ones like shipping. Always remember that what you outsource should save you money and be something that can be done easily and accurately. However, remember, outsourcing something that is core to your operation, your brand or what makes you different, is something you should avoid.
    13. Recognize “Outsiders” Input – The pros, like accountants, lawyers, insurance specialists and other advisors, that your business relies on can be a source of good ideas for making more money. If they understand your business, they can recognize savings, advise on tax strategies to save, prevent lawsuits and provide valuable insights into better ways to do business more efficiently, effectively and with less risk.
    14. Manage Your Cash – one of the worst things a business can do is spend money just because it’s there. Let’s face it, cash is the lifeblood of most businesses. If you don’t manage it, maximize it and spend it wisely and strategically, you’ll have problems.
    15. Be Legal – Lawsuits, not following regulations, not paying your taxes, mistreating employees and so on are all ways that can cost your business money. So make sure that you understand and follow the laws and regulations that affect your business.
    16. Be Fair – Whether it’s your customers, employees or vendors, honesty, integrity and fair treatment will always win the race. Maintaining a reputation of being a good honest business that treats people fairly will make you more money in the long run.
    17. Hire Well – Taking time to hire the right people will help you avoid additional costs like lost productivity, low morale, recruiting and training. One survey noted that 41% of the companies said a bad hire cost them at least $25,000. http://www.fastcompany.com/3028628/work-smart/infographic-how-much-a-bad-hire-will-actually-cost-you#1.
    18. Serve Your Customers Well – Unless you’re the only game in town, your customers are the heart of your business. Serve them well and they will stick with you, make referrals for you and help you make more money.
    19. Save and Invest – Too many of us, individuals and businesses alike, spend what we make and don’t save or invest in the future. Business is uncertain. Having a nest egg for tough times and saving for future investments in your business is a sound strategy for its long-term health. Having an emergency fund will also lessen the impact of those unexpected surprises.
    20. Pay YourselfIf you are not making enough to pay yourself, ask yourself why. If you have been paying employees and not yourself for more than a few months, maybe you need to start doing more of the work yourself. If you started your own business, one reason was to make a living- that is you need to make a living.

 Remember, the top line – sales, only answers one part of the equation.  The real money you make will be more about the bottom line – profit. So, what ways could you explore in your business to not only bring in more money, but make sure the money you bring in is profitable and makes you money.