Cash Flow is an essential factor in the ongoing health of a business. Knowing how to maintain cash flow is essential to sustaining a successful business. Today, managing Cash Flow is one of the most difficult challenges facing owners of small and medium sized businesses. While a business can survive for a short period with a drop in sales and/or profits, it cannot survive without cash.
The best way to ensure that Cash Flow remains positive, timely, and available is to have a Cash Flow Plan and Forecast. In order to stay in control, this plan needs to be measured and monitored on an ongoing basis so that you can manage the business proactively. The following drivers of cash flow should be managed on a regular basis:
· Receivables
· Suppliers
· Inventory
· Assets
· Costs
· Seasonality
· Sales Volume
· Taxes
If you are not monitoring your actual results regularly, you cannot capitalize on any opportunities that improved cash flow might offer. Keep in mind that what you can measure, you can manage and there is always room for improvement!
Monday, September 21, 2009
Wednesday, September 16, 2009
Reducing the Cost of Processing Payroll
In soft economic times, business owners are looking for new ways to trim costs. Of course there are big ticket items, such as a reduction in employees and/or their benefits. Have you thought about cutting some small ticket items that can truly add up throughout the course of the year? Here are some suggestions, for example, on how to slim the burden of producing your payroll.
1. Outsource payroll: organizing each payroll is a time consuming, therefore costly, process. With the regulations and procedures that need to be navigated and the forms and returns to be filled in to get it right, there is an element of danger added due to the possibility of making a mistake. It may be more cost effective to outsource payroll to a service provider who will carry out all processes in accordance with the latest regulations, insert this information into the correct forms and get salaries deposited into your employee’s bank accounts.
2. Use direct deposit for salaries: a good way to save money is to use direct deposit of payroll (DDP) in place of issuing paper payroll checks. There is a significant cost differential between an online transaction and the processes around preparing and issuing checks.
3. Extend the payroll period: switch from a weekly to a biweekly or monthly payroll period to reduce processing costs.
The actual cost of producing the payroll (calculating pay, producing checks or making deposits and keeping track of employee information) is itself an area where savings can be made. Always ask for expert advice if you have questions concerning the processing of your payroll.
1. Outsource payroll: organizing each payroll is a time consuming, therefore costly, process. With the regulations and procedures that need to be navigated and the forms and returns to be filled in to get it right, there is an element of danger added due to the possibility of making a mistake. It may be more cost effective to outsource payroll to a service provider who will carry out all processes in accordance with the latest regulations, insert this information into the correct forms and get salaries deposited into your employee’s bank accounts.
2. Use direct deposit for salaries: a good way to save money is to use direct deposit of payroll (DDP) in place of issuing paper payroll checks. There is a significant cost differential between an online transaction and the processes around preparing and issuing checks.
3. Extend the payroll period: switch from a weekly to a biweekly or monthly payroll period to reduce processing costs.
The actual cost of producing the payroll (calculating pay, producing checks or making deposits and keeping track of employee information) is itself an area where savings can be made. Always ask for expert advice if you have questions concerning the processing of your payroll.
Thursday, September 10, 2009
Getting on Top of Business Forecasting
The best way to remain in business in this climate is to plan; however, the days of the three to five year plans are over. Instead, focus on the next 18 to 24 months with plenty of scenario planning and stress testing.
Build Scenarios: Create a forecast for the next 18 months to 2 years. Take your business plan and then impose a series of scenarios. A business-as-usual scenario, for example, might have flat growth. Another scenario might project a 10% drop in revenue and a 20% increase in input costs. These scenarios show you the effect on the business of outside forces. They also allow you to develop contingency plans to mitigate their effect if you start to detect their impact through your monthly reports.
Develop Your Business Plan: Critical to forecasting is your business plan. It should cover market analysis, organization and management, strategic analysis, marketing and sales, products and services, the amount of funding needed, and financials. The best business plans are updated every three months.
Helpful Tools: Business owners can build a basic financial forecast model using Excel spreadsheets. It is a very structured process where you look through the historical financial statements and the balance sheet history.
Track Targets and KPIs Constantly: Analyzing your balance sheet every three months is simply not frequent enough in this climate. Make sure that your key performance indicators, such as sales targets for each week, are in place. Analyze the month end financials comparing the actuals with your budget to see where you are performing well and where there are shortfalls.
With help in creating your business forecast, contact Simons Bitzer at (317) 782-3070.
Build Scenarios: Create a forecast for the next 18 months to 2 years. Take your business plan and then impose a series of scenarios. A business-as-usual scenario, for example, might have flat growth. Another scenario might project a 10% drop in revenue and a 20% increase in input costs. These scenarios show you the effect on the business of outside forces. They also allow you to develop contingency plans to mitigate their effect if you start to detect their impact through your monthly reports.
Develop Your Business Plan: Critical to forecasting is your business plan. It should cover market analysis, organization and management, strategic analysis, marketing and sales, products and services, the amount of funding needed, and financials. The best business plans are updated every three months.
Helpful Tools: Business owners can build a basic financial forecast model using Excel spreadsheets. It is a very structured process where you look through the historical financial statements and the balance sheet history.
Track Targets and KPIs Constantly: Analyzing your balance sheet every three months is simply not frequent enough in this climate. Make sure that your key performance indicators, such as sales targets for each week, are in place. Analyze the month end financials comparing the actuals with your budget to see where you are performing well and where there are shortfalls.
With help in creating your business forecast, contact Simons Bitzer at (317) 782-3070.
Wednesday, September 2, 2009
Small Ticket Cost Cuts Add Up!
Caught in the crunch between tightening credit and increasing costs, a business owner’s mind turns to … cost cutting! Great idea, but where does one begin? Use lower quality materials to cut down inventory cost? Maybe leave out that final inspection before packaging up? Cancel the ad in the Yellow Pages? Reduce staff? Pruning the big ticket items will save on costs quickly, but at what long term consequences to the quality, reputation and awareness of your product.
There may be any number of costs lurking in your everyday activities and procedures that just do not get noticed simply because they are not large ticket items. That does not mean they cannot add up to significant spending nonetheless. Look around and see if the tips below can help drive down your costs before making drastic decisions that may come back to haunt you.
Fuel:
Organize your errands so you can take care of several on one trip.
Arrange delivery schedules, sales calls or installations according to the shortest route between them rather than zigzagging across neighborhoods.
If delivery is a courtesy rather than an integral part of your sales process, then consider cutting it out, offering it to only your best customers, scheduling it in late morning or early afternoon when traffic is lightest, or introducing a fee for it.
Utilities:
Turn off equipment that is not in use - computers, photocopiers, lights, air conditioning.
Switch to energy efficient light bulbs.
Use high efficiency rated appliances.
Install automatic light switches and put the air conditioner on a time switch.
Office supplies:
Purchase only essential supplies.
Reduce printing to essential documents and use the reverse side of paper for copying drafts and internal documents.
Recycle and use recycled paper.
Purchase locally – shipping costs from distant distributors can sometimes double costs.
Communications:
Cut back on unnecessary phone service add-on features such as music on hold.
Compare pricing on phone service providers and consider a VoIP solution.
Evaluate cell phone plans and usage.
Compare pricing website hosting service providers.
Consider next afternoon or two- or three-day service instead of express shipments.
Use email instead of postage mail when possible.
Make cost cutting a continuous improvement program:
While you may have been pushed into a cost cutting exercise by the current economic situation, it is smart to make cost review a normal and regular part of running the business. Now that you have carried out this review, ensure the process of actively searching for cost cutting opportunities stays alive and continues to increase your profitability.
Ask employees:
Do not forget to ask your employees to help develop cost saving measures. They are often the first to notice an area of spending that can be changed or improved.
There may be any number of costs lurking in your everyday activities and procedures that just do not get noticed simply because they are not large ticket items. That does not mean they cannot add up to significant spending nonetheless. Look around and see if the tips below can help drive down your costs before making drastic decisions that may come back to haunt you.
Fuel:
Organize your errands so you can take care of several on one trip.
Arrange delivery schedules, sales calls or installations according to the shortest route between them rather than zigzagging across neighborhoods.
If delivery is a courtesy rather than an integral part of your sales process, then consider cutting it out, offering it to only your best customers, scheduling it in late morning or early afternoon when traffic is lightest, or introducing a fee for it.
Utilities:
Turn off equipment that is not in use - computers, photocopiers, lights, air conditioning.
Switch to energy efficient light bulbs.
Use high efficiency rated appliances.
Install automatic light switches and put the air conditioner on a time switch.
Office supplies:
Purchase only essential supplies.
Reduce printing to essential documents and use the reverse side of paper for copying drafts and internal documents.
Recycle and use recycled paper.
Purchase locally – shipping costs from distant distributors can sometimes double costs.
Communications:
Cut back on unnecessary phone service add-on features such as music on hold.
Compare pricing on phone service providers and consider a VoIP solution.
Evaluate cell phone plans and usage.
Compare pricing website hosting service providers.
Consider next afternoon or two- or three-day service instead of express shipments.
Use email instead of postage mail when possible.
Make cost cutting a continuous improvement program:
While you may have been pushed into a cost cutting exercise by the current economic situation, it is smart to make cost review a normal and regular part of running the business. Now that you have carried out this review, ensure the process of actively searching for cost cutting opportunities stays alive and continues to increase your profitability.
Ask employees:
Do not forget to ask your employees to help develop cost saving measures. They are often the first to notice an area of spending that can be changed or improved.
Subscribe to:
Posts (Atom)
Posts
