And it’s especially true in today’s economy.  For the last few months, we’ve been seeing many businesses that are profitable on paper, but nonetheless are struggling to meet payroll.  Of course, their sales may be down, but the real culprit is poor cash management!

Surviving the tough times is not only about how much money you make but also when you make it and when you spend it i.e. cash flow. Cash flow management is critical to run your business. In simplest term it means delaying the outlays of cash as long as possible and encouraging all your customers to pay you as soon as possible.

Usually a business owner delegates this task to her accountant. However, I will recommend that it is the time for you, a business owner, to pay close attention to it. The steps you take today to allocate your cash will decide what kind of business you will have six month or a year from now. So here is the golden rule to manage your cash and ease your tensions.

Never spend a penny more than the cash you have collected last week. It doesn’t matter how much you are planning to collect this week!

What will happen when you follow this rule? Let’s see:

Receivables will improve

Since you cannot pay more than what you have collected; only way to fulfill your payment obligations is to collect more. Here are few suggestions to collect more:

• Give incentives to your customers to pay quickly e.g. if your standard term is Net 30 you can give 5% discount for Net 15 payments
• Ask for deposit along with the order
• Issue invoice promptly and follow up immediately at the first sign of slowness
• Track account receivables to identify and avoid slow paying customers. Either fire slow paying customers or give them Cash-on-Deliver (COD) option
• Use collection services as needed.
• Get rid of excess inventories, inventories is not cash

Payables will slow down

Since you have tightly closed the vault, you will find creative ways to delay the cash outlays. Here are few tactics that I have seen people use successfully:

• Taking the full advantage of payment terms i.e. if payment is due in 30 day don’t pay in 15 whether you have cash or not.
• Use electronic fund transfer system to make just in time payments
• Trade credits: communicate your situation with your vendors to gain trust and trade credits.
• Renegotiate contracts

This simple rule will change the behavior of your employees and will drive them to work more diligently towards business success. In order to implement this rule successfully you have to develop a cash-flow forecast. The name may sound intimidating but in reality it is a simple worksheet that shows how much money you will get every month and how much you will spend. This simple report will help you to see what changes need to be made and when.

It is easy to spend, isn’t it? The outlay part of the cash flow is never been a problem. Keeping the money coming in on a regular, sustained basis is the tricky part of cash flow management. Following the suggestions above will make it easier to keep your cash flow flowing. You can also look at our 120 Day Sales Growth Program that is defined to increase your sales in this economy.

Where and how to get the best financing for your business - the right credit at a competitive price?

There are hundreds of financing options available in the market and it is vital that a financing instrument should meet your requirements and the stage of your business. This article simplifies your decision process.

Your main options are:

Star up (Seed Money)

• Personal Financing
  You can use your personal cash, personal credit cards or even your retirement funds. I don’t recommend this.
• Grants
  Federal and/or local grants could be the best option to incubate your idea. You can search for available grants at www.grants.gov
• Friends and Families
  Your friends and families are your first source of funding. It requires same skills and evidence to convince them to lend you money as to any outsider investor. You can use tools like http://www.virginmoneyus.com to manage your transaction.
• Outsider Investors
  Angel Investors, Venture Capitalists or Investment bankers could potentially fund your idea. Checkout http://www.fundingpost.com/ for some VC funding sources.

Short term, up to two years

• Trade Credit
  The most common form of business finance is getting a trade credit from your vendors. You can negotiate an agreed payment terms between Net 30, 60, 90 or even 120 giving you a positive cash flow.
• Overdraft
  Provided by your business bank on an annual renewable basis - note that bank can demand full repayments at their discretion.
• Invoice Financing or Factoring:
  You can get a cash advance on your invoices at a reasonable rate. Your personal and payee credit determines the rate.

Medium Term 2 - 5 Years

• Leasing
  Generally for plant, equipment, and vehicles. Ownership remains of balance sheet. It is most suitable when there is an established residual value. There are different variations to structure a lease deal including rent and buy-out at fair market value.
• Loans
  For property, equipment and vehicles. You can acquire loan from commercial banks. Federal government also offers financing for small business through Small Business Administration (SBA). SBA programs allow you to secure loans based on cash flow even if you don’t have the best credit score or collaterals. SBA has express loan program (< $100,000) that can be executed within a week. You can get up to $2M in SBA loan for working capital, business acquisition etc. and up to $10M if you are planning to buy a commercial property.

Long Term, 5+ years

You have a Varity of options including Bank loans, SBA loans, share capital, mortgage, venture capital, business angel investors etc.

Overall cost for acquire financing will depend upon the health of your business and your personal credit. A financier will ask for supporting securities (collaterals: personal property, business etc.). They may also require putting a lean on the securities as well as demand for personal guarantee.

If you would like to discuss your financing options give us a call at 1.310.645.0707.

If this is the case, why waste our precious sales time on leads that don’t give results?

Fire them.

I ask following three questions to qualify a lead and have found them very helpful in prioritizing my list:

• Am I having an open and honest communication?
• Are they willing to involve more/right people from their side?
• Are they allowing me an access to decision makers?

If I find myself answering “no” to any of these questions, I realize I am wasting my time on a sale that is not going to happen or I am talking to wrong people. I have to change my strategy or move on.

You can use the same technique to prioritize your list. This will improve your productivity many fold.

Let’s see how I, a customer, buy:

Whether I am shopping for a solution for a business problem or some personal accessory, I usually have a good idea of what I want. When I find something that closely meet my ideal solution, I buy it.

Do you do the same?  A study shows that most of us follow the same pattern.  

This pattern gives us an insight into how to win more sales. We have to know enough about our prospects’ business — what they are trying to fix, accomplish or avoid — and match our service/product with their idea of an ideal solution!

The prospects’ idea is their way of framing a solution for their problem and it has nothing to do with what you and your organization is selling. By aligning your product/service with that concept you can improve your win rates for new business and generate continued added value for existing customers in today’s tough business environment.

Please downloand our guide books here:

Step by Step Action Plan to Double Your Sales

Secret Methods to Improve Your Profits

Action Plan to Turnaround Your Business

Online Sales Training for Offline Success.