Tag: Business Finance

Five Ways to Improve the Way You Manage Your Business Finances

Here’s a scary thought: 2013 is almost half over. Have you kept your New Year’s Resolutions for getting your financial house in order? Is it time for a tune-up? As we head into the summer, here are five ways you can improve the way you manage your business finances.

1) Manage Your Cash Flow
As the saying goes, “cash is king.” The easiest way for a business to fail is to run out of cash. You may be rolling in orders, but if your debtors are not paying you on time, it is easy to fall behind on your financial management. Stay on top of people who owe you money. The squeaky wheel gets paid first. If it’s hard for you to ask people for money, delegate the task to someone who’s great at it.

Improve your small business financing by following advice from business factoring experts
Managing your cash flow effectively will leave you with plenty of this around!

Even if you are getting paid on time, have you analyzed your “order-to-cash” cycle? Many businesses require cash outflow, say for making their products, before the money starts flowing in. If this is your business, analyze your cash flow to make sure you don’t get caught by surprise, with no financing options to fulfill your orders.

2) Buy Smarter
A smart business is one that controls costs as well as revenue. You should periodically look around for the best prices on everything, including office supplies, stationery, computer support, and even insurance. You don’t need to stick with your current suppliers if there are others who offer you a better deal, or even good credit terms. Look at volume discounts for frequently used items that are non-perishable. Take advantage of cash back rewards on your business credit card. Consider your biggest expenses and investigate whether there are ways to cut costs. Are you renting an office suite, where a co-working or a work-from-home hybrid arrangement would do?

3) Get Organized
No matter how cozy your messy house is to you, as a business owner or finance manager, it is essential for you to get your financial house in order. Not sure how to start? Choose your biggest weakness. Are you losing receipts because they’re stuffed in your drawer, coat pocket, or wallet? Start with receipt management. Tools such as Expensify help you scan receipts, create reports, and analyze your expenses. Slow to invoice your customers? Buried under tax paperwork? Block out time on your calendar and tackle your mess. There are helpful tools and support resources for all of your organization needs.

4) Modernize Your Tools
Speaking of tools, there are dozens of free or inexpensive tools available to help you improve your business finances. Wave is a free tool for invoicing, accounting, payroll, and receipt management. Freshbooks is a cloud accounting solutions for invoicing and time tracking. You can use Dropbox to store, manage, and share your files online. Need a way to keep track of your notes, ideas, and draft proposals no matter where you are or what device you are using? Try Evernote.

5) Make Your Capital Work for You
So, you are now a well-oiled machine, with orders and cash flowing in, products and services flowing out, and paperwork and expenses under control. Are you prepared to grow? In order to manage continued operations, you need to have sufficient working capital. Working capital equal to your current assets (which includes cash, accounts receivable and inventory) minus your current liabilities (accounts payable). A healthy working capital ratio is typically 2:1. With your financial house in good order and your customers delighted, you can now prepare for growth.

Photo Credit: AMagill via Photopin cc

How is Your Small Business Affected by the Sequester?

The word of the year for 2013 is “sequester” (or the more formal and ominous-sounding “sequestration”).   As you have probably learned, the sequester is the term being used for the mandatory automatic federal budget cuts that took effect as of March 1, 2013.

Westchester Business Financing
Will your private sector small business feel the cuts?

The sequester calls for $85 billion in federal spending cuts to defense and domestic programs that will occur in 2013, and $109 billion in cuts annually from 2014 to 2021.

 

Where are sequester cuts being made?

Cuts are being made to the discretionary spending within both military and domestic programs across the board. Although whole programs will not be cut, existing government contracts may not be extended, and new contracts may not be funded. This will affect directly the estimated 35% of suppliers to the US Defense Department that are bona fide small businesses. In addition to these direct suppliers, there are untold numbers of small business vendors that supply prime federal defense contractors. In some cases, these small businesses are so far down the food chain that they may not even be aware of the extent to which that their goods and services ultimately support the US Defense Department.

 

 

On the domestic side, as the number of government contracts shrinks and the scope of existing work goes down, both direct and indirect small government contractors may need to reduce headcount and operations. To make matters more difficult, the US Government will no longer extend $902 million in small business loans via the Small Business Administration (SBA), making funds tighter for small businesses.

 

Will your private sector small business feel the cuts?

Experts vary on their assessments of the impact. Some, such as Professor Stephen Fuller of George Mason University see significant impacts. A recent New York Times article quoted Fuller as saying that 1.4 million private sector jobs will be lost and that half of those will be from small businesses[1]. Other experts feel differently. In that same article, Holly Wade, senior policy analyst at the National Federation of Independent Business (NFIB), was much less pessimistic, stating that “few small businesses have contracts with the federal government, and few small businesses get loans from the S.B.A.” According to Wade, if credit is a problem for Main Street, it will be due to a downturn in the economy more than a drop in federal programs under a sequester budget.

 

A downturn in the economy cannot be treated lightly, however. Even if you don’t do business with the federal government directly or indirectly, your customers may be affected, and these effects could trickle down. People will lose jobs. Some full-time workers will become part-time. Agencies will shift to bring overhead down, and as they reduce operations, suppliers will cut staff and investment. That means pink slips, lower travel budgets, perhaps fewer conferences, and leaner service offerings. Consumers will have less money to spend and therefore, will shop less. If this is the case, it will be harder for the private sector to grow, or even to hold on to what they’ve got. Small businesses, even more than the Lockheed Martins of the world, have little leeway to maneuver to stem the pain. Do you agree? What’s your prediction? Has your business been affected by the sequestration?