Archive for category: CFEB

If we don’t get paid, we go out of business. So with more debtors delaying payment in these tough times, taking action to collect money should be a top priority for small companies.

Few small businesses can afford to turn customers away, but being timid about stretched credit terms puts your own company in danger. If you’re not being paid on time it’s harder to find money to settle your own outstanding debts.

You didn’t start your business to provide a free credit service to suppliers. But how can you collect money owed, and at the same time, avoid bad feelings developing from previously reliable customers who are falling behind?

Try these simple in-house strategies:

1. Review payment terms
Re-assess your payment terms for the current market conditions. It could be time to offer additional payment options, such as PayPal, debit card, or to accept additional credit cards (with an appropriate added fee). Consider putting new clients on tighter payment terms on a trial basis with a review to follow, include a small discount for on-time payment if you can afford it.

2. Avoid firm tactics with regular customers
Your regular, normally reliable, clients deserve different treatment in debt recovery. Perhaps they came on board years ago with a handshake and now seem like ‘family’? Try co-operation and communication, rather than a heavy hand. A phone call from the director will strengthen relationships between valued but dawdling customers and is a chance to personally explain the impact of late payments on your own cycle and survival. Be ready with options for part-payment or a suitable suspension of supply. Be concerned, but stay firm enough to get the account settled.

3. Credit-check all new clients
It’s worth the fee to do a background check on new clients, despite the temptation to automatically take on anyone new when business is slow. The cost of your staff’s time chasing money and the potential price of debt collection later is not worth the risk. Besides, a reference check should be accepted as ‘company policy’ by new customers.

4. Focus recovery ‘power’ in the right hands
Avoid the trap of turning your sales people or service staff into debt collectors. Mixing messages about employee roles will do more harm than good in the long term. Give the job of bad debt follow-up to one person, along with a set of clear guidelines for action and your full support.

5. Set terms at the sale
The best time to get the message through about payment terms is when you close the sale. Outlining credit expectations early sets the right tone and foundations for later accounts follow-up if necessary. Make it a prominent part of the contract when customers place orders.

6. Empower your invoice
Instead of a monthly run, consider sending invoices as soon as a service has been carried out or when a product is supplied. Print the actual due date on the invoice, rather than a “within 30 days” instruction. These simple changes will speed payment, improve cash flow and identify problem accounts sooner.

7. Calculate average debt age
You run regular reports to check debt ‘age’, but how do you use the results? To measure average payments against your target terms, divide your accounts receivable by annual sales on credit (not cash sales) and multiply by 365. This shows how efficiently you are managing debts overall, compared with your goal, of say a 30- day payment cycle. A result of ‘55’ for example, will show you are averaging 25 days over your target.

8. Set a collection policy
The chance of recovering payment reduces the older a debt becomes. Establish firm rules for follow-up, such as: a phone call at 7 days overdue; a letter at 14; another call at 21 days; stop supply at 30; write a letter to your collection agency at 60 days. In line with this schedule, set suitable options at certain stages, depending on your relationship with the customer, like part-payment, an instalment plan and whether further purchases are allowed (and their value) if accounts remain overdue.

9. Collect information
Securing thorough information about a new account avoids obstacles to debt recovery. Collect as many telephone numbers and alternative contact names as you can and ensure all forms are signed. If possible, visit the customer’s premises. A personal visit gives a valuable impression of their circumstances that a phone call can’t reveal.

10. Be fearless and survive
Remember, uncollected income is just the most obvious impact on your cash flow. Prevention measures will save you the hidden wasted costs of time spent chasing payment. Don’t hesitate to ask firmly for due payment because you fear losing customers. Non-paying clients are not worth having.

Article courtesy of RAN ONE: http://www.ranone.com/features/news.asp?ID=4346

While there’s no escape from preparing the financial information for a business plan, a step by step approach will help make the task less onerous.

Similar to the overall business plan itself, the financial information should be divided into specific sections to ensure focus and relevance.

It should reflect short-term and long term strategies, be realistic and supported by sound research where applicable.

The data should cover areas such as the current financial position of the operation; forecast cash flow, profit and loss, and balance sheet; break even analysis; sources of finance; capital requirements; timing and stages of finance; and fixed asset requirements.

Much guidance can be gleaned from the numerous books and software packages that are available, together with professionals, such as your RAN ONE accountant, who specialize in the field.

However, you can’t escape from doing some of the hard yards yourself.

The more involved you are in the process (of gathering and presenting the financial information), the more ownership and control you have of the operation, says Richelle Moran, small business development specialist.

The financial section of a business plan all comes down to dollars and cents, according to a spokesperson from the Faculty of Business and Economics at Monash University in Melbourne, Australia.

“It is all about cash flow … one of the biggest problems for business is running out of cash,” he added.

To make a start, you need to do some “brainstorming” to identify the key financial information relevant to your operation and list these as sub-sections.

The next step is to gather the information, including tangible evidence to support projections, under the appropriate sub-headings.

At this stage, putting pen to paper and organizing the information in point form is advised.

This provides a basic framework from which to flesh out the information in more depth.

Moran warns that you have to be realistic in your projections and note that it is often safe practice to err on the conservative side.

According to Moran it is common for businesses to overestimate income and to underestimate expenses.

“It sounds obvious but it is not that obvious when you are doing it,” Moran said.

Pickett recommends a hard-nosed and independent “reality and credibility check” by an experienced person, such as your RAN ONE accountant, who stands outside the business and is not emotionally involved to objectively review the projections

“Listen carefully to their feedback without being defensive or trying to ‘sell’ or convince them that the projections are achievable,” Pickett says.

He noted that sudden increases in sales or other revenue projections relative to historical levels may be based on unrealistic assumptions or expectations.

Business should ruthlessly apply the 80/20 rule in which they focus on accurately forecasting the few “big ticket” items (the 20 percent) that usually account for most of the revenue and most of the costs (the 80 percent).

It is also important to distinguish clearly between financial profit and loss projections and cash flow projections.

The profit and loss statement is necessary to ensure your business is making acceptable profits; the cash flow statement shows whether or not cash is available to cover the timing differences between paying expenses and being paid for goods and services provided.

Another tip from Pickett is to clearly identify what, and for how long, additional funding will be required.

Also, it is good practice to have two sets of projections covering both the bearish and bullish ends of the spectrum.

While it is motivating to set challenging hurdles to achieve, it is also important to recognize the potential minimums.

Pickett says it is important to ensure that your team members responsible for achieving projections are committed and have been involved in the planning process in some way.

Devising simple performance measures can help provide early indicators of future trends and outcomes. These can include the number of quotations made or the value of forward orders.

As part of your financial blueprint, you also need to have some form of contingency plan for any unexpected event that may impact adversely on your operations.

Equally important is a plan for where to obtain emergency cash.

Moran cites the increasing cost of insurance premiums as an area often overlooked when gathering financial information.

“In such volatile times as these, it is important to get quotes for what it is going to cost for insurance for the next 12 months,” Moran says.

“It is no good just adding 10 percent to the previous year’s premiums.”

One of the problems facing some small to medium sized businesses is that they do not have the resources to employ the financial expertise required.

Some owners try to be jacks of all trades but are masters of none.

Money spent on professional assistance should be viewed as an investment in the future.

A sign of a good business plan, and that includes the financial information section, is one that is dog-eared and full of scribbled notes.

It proves it is used regularly and reviewed.

Article courtesy of RAN ONE: http://www.ranone.com/press_room/news.asp?ID=3868

One way or another, business is all about selling. We have to sell to our customers, to our banks and other sources of funds, and even just when we’re meeting people for the first time in a social situation. ‘Selling’ really means just being yourself in a way that’s interesting to your audience.

That’s why to make the right kind of impression on others when selling something you can’t just commit a sales pitch to memory and deliver it; you have to sell yourself by being yourself. You have to open up to people and let them see who you really are so they know they can trust you.

Think about the last time you encountered a ‘real’ salesperson. You sensed they were simply delivering a pitch and trying to sell you something rather than trying to get to know about you and find out what you really wanted. The impression made by somebody trying to sell something rather than trying to satisfy the needs of a customer is generally a negative one.

Now think about a salesperson you’ve met whom you really liked – someone who left you with a positive impression, even if they did manage to part you from your money. Chances are pretty good that they didn’t just try to sell you something, but rather that they spent at least the first part of your time together getting to know you. And when you’d completed the transaction you walked away feeling you’d got to know them as well.

What had really happened during your conversation? During that time they’d sold themselves to you before they’d tried to sell you anything else. They got to know you well enough to discover what it was you were after and then matched up your needs with what they had to sell.

This isn’t to say that you don’t have to keep business in mind when you’re trying to sell something. Customers expect you to know about your products and to know about the industry you work in. They often come to you for your knowledge as much as they do for a product or service; especially if they’re unsure about exactly what it is they need to solve a problem.

But subconsciously, what they really want to do is to learn something about you and to feel that you want to learn something about them. They want to connect on a personal level and make the occasion one in which they’ve met a new acquaintance, even if the ultimate result is that they buy something from you. People don’t want to deal with strangers and will always prefer to purchase something from least someone they feel they know.

How can you become this special kind of person when you’re trying to sell something? It’s not difficult and it will be something you enjoy doing; just remember these four things:

Get your knowledge up-to-date

Remember that people come to you for knowledge and information they don’t possess. It’s up to you to prepare yourself for their questions by learning all you can about your products and how they relate to people’s needs. Anticipate what it is that customers will want to know and be ready with the answers. This will enable you to be a lot more helpful and reassuring.

Create an outline of the sale

This is not as hard as it sounds. Most selling situations go in a fairly similar, and therefore predictable way. They always begin with a greeting and an introduction, then move on to questions and answers, finally ending with a close and hopefully a sale.

Customers are on your territory and probably expect you to control the situation to some degree, so even before you greet a customer have in mind how you want the sale to go. It will make both of you more comfortable if there’s a structure to your conversation.

Get to know the other person first

Make the first part of every conversation about them, and not about you or what you’re selling. Make a point of finding out some personal details, starting with their names and what sort of work they do.

The most important thing to find out is just what they want from you. It may well be just advice at first, or possibly information about your product. Before you give a definitive answer probe for a bit more information about their needs; if they ask a question it’s an indication that they are aware of a need and hope you’ll be able to satisfy it.

Relax and let things happen

You’ve prepared for this conversation, you’ve researched your knowledge base, you’ve outlined how things will go, you’ve got to know the other person – now just relax and let the sale take place. Take the lead but don’t push, and be confident that you’ve got something this customer wants. If not, you’ll both know it and no harm done.

And most important of all, be yourself. Don’t try to become someone who’s the perfect salesperson or has ‘personality plus’. They want to meet someone who’s genuine and sincere – someone who’s just like them but with more knowledge about something they need. That’s you!

Article courtesy of RAN ONE: http://www.ranone.com/features/news.asp?ID=4154

When someone makes a purchase they buy more than just a product or service. At the time the product or service is probably the most important element, but they also buy a range of benefits that can over the long-term become their reason for being satisfied or dissatisfied with their purchase and with your business.

These are called ‘added’ benefits because you add them to the products or services that you sell. They can make a big difference in how customers see your business and be an important differentiator between you and your competitors.

Make a list of the added benefits you provide. These can include:

– A product guarantee or warranty that reassures customers
– The service given by the sales team during a purchase
– The availability of your backup service – 24 hours, 7 days?
– The speed with which your company fills customers’ orders
– The follow-up from your business after the purchase
– How your location suits customers – is it convenient?
– Their perceptions of your business – stable, efficient, friendly?
– The quality of your product offerings – all your products and services
– Manufacturing locally – appeals to their sense of patriotism
– Your premises – attractive, clean, bright?

Some added benefits cost you nothing or very little. The way your sales team treats customers is a function of staff selection and training, and that doesn’t add much to your total wages costs. Others, such as the condition of your premises can be as costly as you want to make them.

It’s up to you as the manager to determine how far you’re willing to go to deliver the best package of added benefits with everything you sell.

Once you’ve listed your own added benefits, list the added benefits provided by your competitors. If they’re more successful than you at selling the same or very similar products the reasons could well be their added benefits package.

Conduct some simple research using groups of your own customers, and those of your biggest competitors if possible. Let customers tell you how they value the benefits you add, and how your benefits compare with your competitors’. Ask them for their suggestions as to what additional benefits you could provide to increase your sales.

Incorporate their comments with your own perceptions and analyze every added benefit that you and your competitors provide. Note why these benefits are attractive to customers and whether each is expensive or inexpensive to provide.

Are there some that are impossible for you to match (for example, location)? Which are you now providing but capable of improving? Which are you not now providing but could provide with minimal additional expenses?

Remember, you’re trying to put together the best package of benefits and probably won’t be able to match the competition in every category.

Now be creative and devise some new added benefits that aren’t on your lists. These can be time-related – offer a free inspection or service in twelve months, financial benefits – a guaranteed trade-in value on the old one when repurchasing, or an add-on such as ‘spend $30 more and get $100 worth of genuine accessories’. Add some benefits nobody else is offering and stand out from the competition.

Once you’ve worked out the full contents of your added benefits package you have to find a way to communicate them to your existing and potential customers. Start by educating every member of your team – not just salespeople but everyone in your business. Give each person a list of your added benefits so anyone receiving an enquiry is familiar with all of them.

Summarize these benefits for customers. You could put them into your monthly invoices, display them on the walls of your office, use them in your advertisements, or include them on the calendars you give away at Christmas. Just be sure your customers know what else comes with every purchase they make.

By putting together a really attractive package of added benefits and making sure everybody knows about them you’ll be able to increase sales at the expense of your competitors.

Article courtesy of RAN ONE: http://www.ranone.com/features/news.asp?ID=3963