How do you stay competitive when your sales are stagnant or dropping?

Cutting costs decreases the cost of goods sold - giving you a bigger profit margin.

Increase your marketing efforts. Most of your competitors are slashing the marketing budget and decreasing their exposure - this is your chance to outshine them and gain new clients and customers. Take a look at your website and make sure it's optimized for organic searches (SEO).

Expand your PR campaign to including pitching stories to local newspapers about how your product can help people save money. If you're doing the PR yourself - this is free.

Improve your product to make it more attractive to customers. Have the product development and marketing teams determine which improvements will make the most impact in the marketplace and to the bottom line.

Don't shoot yourself in the foot.

• Don't decrease your customer service to the point where customers can feel it.
• Don't put off equipment maintenance (repairs are more expensive by far).
• Don't decrease the quality of your product.
  

We hope you've found this series to be helpful. If you'd like to share tips of your own, please send us a comment.

Labels: Budgeting, Cash Flow, Finance Tips

The financial crisis has many of us taking a long hard look at how we conduct business. We're looking for ways to cut costs, conserve cash and credit, and still run a profitable business.

Over the next few installments we'll discuss the financial crisis and ways you can strengthen your business. If you have comments, suggestions, or just want to add your two cents, please feel free to chime in.

If you haven't already seen this article by Michael Lewis (author of Liar's Poker) on how we got here, it's definitely worth a read.
http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom?page=0

Labels: Budgeting, Cash Flow, Finance Tips

Electronic payments have been the fundamental element that has enabled ecommerce, and in recent years this technology has grown by leaps and bounds. More and more transactions are being done without checks and without paper invoices. No matter what business you’re in, you can cash in on this trend to cut down on costs. What do you need to know about electronic payments?

One of the key points for a company based on sales is that electronic payments can cut down on “float”, or DSO (Days Sales Outstanding) If you charge for goods or services electronically, the time before you receive payment is cut down significantly, thereby improving your cash flow.
http://www.cfo.com/article.cfm/3010979/1/c_3046602?f=search

Many companies can offer electronic payment solutions. So if you haven’t built up the infrastructure to be able to accept e-payments on your own, you can start offering the option. These solutions range from PayPal to more complex payment transfer methods. However, expect to pay a small fee per transaction if you outsource your payment method.
http://businessfinancemag.com/article/electronic-payments-gain-ground-0201

Encouraging vendors to also use electronic payments can also help your bottom line. This may involve offering an incentive, like earlier payments, in order to convince vendors to include an e-invoice option. However, the paperwork saved by being able to pay bills online will more than make up for any small incentive.
http://www.accountspayable360.com/news/news/1617706-1.html

Labels: Cash Flow, Finance Tips

One of the biggest ways companies can improve cash flow as well as the bottom line is to cut costs. Yet cutting costs without impeding growth can be a delicate balancing act. In order to navigate the tight-rope here are our top 5 tips for effective cost cutting:

Engage employees -
http://findarticles.com/p/articles/mi_m3495/is_11_48/ai_111170582
If you keep a dialog open, employees are on the front lines and can point to some of the best cost cutting measures.

Focus on variable costs -
http://www.morebusiness.com/running_your_business/profitability/Controlling-Costs.brc
Make a list of which costs absolutely must stay so that you don't end up cutting something you need, which could cost you more in the long run.

Don't cut valued perks -
http://www.fastcompany.com/blog/heath-row/cost-cutting-gone-wrong
While taking away those unnecessary perks may seem like good decision-making, it can adversely affect morale and decrease productivity.

Utilize free ad mediums -
http://www.atouchofbusiness.com/business-topics/cost-control/advertising-rates-00013.html
Advertising is an important way to attract new business and it doesn't have to cost an arm and a leg. Look into opportunities for free advertising in order to complement your current ad campaigns, but make sure they don't compromise the integrity of your brand or appear in places you find questionable.

Value Experience and Talent -
http://startup.partnerup.com/2008/09/15/cost-cutting-mistakes/
Cutting out costly employees might seem like a quick way to fix the budget, but this often entails spending time on choosing and training new hires that don't have the same experience and talent.

Labels: Budgeting, Cash Flow, expense management, Finance Tips

Internal audits are a key part of keeping a business healthy by managing risks and rewards. They involve analyzing business practices and offering solutions for smoother processes. While this can be a vital part of running a profitable business, it can also be a burden to prepare for internal auditors. What can the accounts payable (AP) team do to prepare?

First, get an idea of the desired outcome of the audit (i.e. better business practices, like an online travel service implementation, or shorter purchase to pay cycles). Determine what will be required from your AP or accounting department and how much time will be needed for audit preparation. Most audits take 8 to 12 weeks (http://en.wikipedia.org/wiki/Internal_audit). Once you have a general idea of the time frame and project, set out a plan to go through the following steps:

Have all necessary documents on hand. If your company uses a Quality Management System (QMS), include information stored there as well. Not all audits are the same, so ask your auditor for guidance on which documents would be helpful. Also, having general records available and organized will help immensely. The more time you spend organizing the data beforehand, the less time you have to spend explaining and searching when the auditors arrive.

Consider potential questions. Take a look at the cash flow process so that you can answer any relevant questions. Note anywhere you have performed a self analysis or evaluation. Much of this may be in the QMS. Once you review your own process steps and requirements, you will be better able to answer questions quickly and correctly.

Finally, prepare to be unavailable for work during some of the auditing process, since time will need to be spent with the auditor. To minimize distractions, treat this time as though you were out of the office. This will make the audit process more efficient and will take less of your time than repeated interruptions.

Labels: Accounting, Cash Flow, Finance Tips, IRS

Improving the bottom line is a major goal for every company. Taking just a few steps can save money and have a big impact. Figuring out which steps to take can be a daunting task. Fortunately, we’ve done some of the legwork already. Here are some surefire ideas:

Use Open Office – Why pay hundreds of dollars in licensing fees for Microsoft Office when there’s a free alternative? Creating documents, spreadsheets, and presentations is just as easy and are completely compatible with Microsoft, at a fraction of the price. http://www.openoffice.org/

Automated Payments – Monthly bills need to be paid every month, so plan for it. Set up automated payments if possible and decide on the best day to pay. You won’t accrue late fees, you’ll have fewer checks to cut, and you can streamline the billing process.

Ask for a Deal – If you provide steady business, a vendor might be willing to offer a special price, a bundled package, or some other additional perk that offers value to your company. While you may not always get a break, always ask; you never know.

Turn Off Electronics – Just by making it a policy to turn off (and perhaps unplug) electronics at the end of each day, you can shave a surprising amount of money off the electric bill. In addition to costing money, leaving computers on at night can be a security risk.

Minimize use of cash and checks in your business - Using a purchasing or commercial card, can reduce the internal cost of processing transactions by 70%. The less time A/P staff and bookkeepers spend cutting, mailing and reconciling checks, the less it will cost your business. To better understand the difference between card products in the market, have a look at (link to our post about: Prepaid, Credit and Debit Cards). How many transactions do you do in a month? The savings would add up quickly.

Labels: Budgeting, Cash Flow, Finance Tips

There are some advantages to a credit crunch that can work for you if you capitalize on them. Take this as an opportunity to scrutinize every aspect of your business from expenses to employees to clients. Pairing down what weakens your business will strengthen it.


1) Cut costs - expenses that aren't necessary
Which costs are necessary and which are optional? Candy on the receptionists desk - optional. Electricity - necessary. Color copies - optional. Supplier contract - necessary. And so on.

From the necessary expenses, which costs can be reduced? Ask vendors for more favorable payments terms, whether extended terms or a discount for paying early - this can help your cash flow and bottom line. Decrease your electricity bill by conserving energy - turn off lights in unused rooms and when you leave for the evening and turn off computers when the user will be away for more than 30 minutes. A penny saved is a penny earned - you can do this.


2) Human resources - consider who is on board
Every team has its weak link. Maybe your business has someone on the team who isn't adding to the bottom line or the strength of the company. This could be someone who just doesn't pull their weight, or someone who lowers the morale of those around them. In either case - now is the time to change.

The downturn in the economy means that there are a lot of great people looking for work right now. Begin the recruiting process and find someone that will fit in with your corporate culture and add to the bottom line.


3) Costly clients - are they worth it
You know who they are. They are the clients that take up more time and resources than they pay you. They can be difficult, not pay on time, and suck the energy right out of you and your team. If you don't see your relationship improving in the next 6-12 months - fire them. If something costs more than you sell it for you're losing money. You can't afford that right now. Stay focused on the goal - stay in business and make money.


4) Discounts - they don't always help
Now is also the time to shore up your business to protect you from the worst of the crunch. It can be tempting to lower prices to attract more sales, but this can eat away at your profits quickly. Consider promotions on particular items while the rest of the inventory stays at full price.


Put your business in a good position financially so that you can tough it out now and prosper later.


In a previous post we discussed shoring up business finances to make it through a down-turn, to read it click here.

Submit your questions to "Ask PEX Card" through the comments link below.

Labels: Budgeting, Cash Flow, Finance Tips

If your business is a touring company, you're constantly on the road by definition. Moving from location to location poses logistical challenges on many fronts. Papers, expense reports and receipts can get misplaced and resources aren’t always available. In this situation, cash management can be particularly tricky. Here are some ways to alleviate some of the problems:

• Use a bank with many locations so that you’re more likely to have a local branch nearby.
• Do marketing before arriving at a location in order to increase future cash intake.
• Use a finance system to allocate funds and manage travel expenses for employees.
• Put as many bills as you can to auto pay so that you're never caught with late fees if your mail doesn't reach you on time.
• Above all, create an organization system that works for you and your business. No matter what the system is, the most important part is that you know where to look for information.

Have you found more ways to manage cash flow while on the move?

Labels: Budgeting, Cash Flow

Who wouldn't want to get something today without having to pay for it until tomorrow? Float is a convenient way to get goods and services now and pay later, whether that later is within 30 days or there is a longer grace period. This can be very attractive to a company looking to increase their cash flow.

The downside of this practice are the penalties and interest that can come from waiting too long to pay off debt. Also, the process of scheduling payments at random times during the month, cutting checks, and managing invoices often is the hidden cost of float. While you may be able to pay vendors later, you’ll eat up valuable employee time trying to manage lag time before payment is due. And if you are sent more than one invoice noting the payment due, it is far too easy to accidentally double pay.

The other option is to pay now. There are definite advantages to avoiding taking on debt. You may be able to negotiate discounts with vendors if bills are always paid on time or before they're due. Paying on time can also cut down on employee hours spent managing payments and avoiding late fees. While it may mean parting with funds before you have to, paying now can put you in a good position to avoid accruing additional expenses. If you feel divided about what to do, set thresholds and pay amounts under, for example, $2,000 while floating anything above that until the due date. You will reduce the number of held payments while getting the benefit of the float.

Both paying now and floating are valid ways to handle expenses and each has advantages and disadvantages. Ultimately, the right decision for you depends upon your company’s cash flow situation.

Labels: Budgeting, Cash Flow

Cash flow is at the heart of every business and it often determines a company's success or failure. By using cash flow management tools, your business can understand and regulate the influx of funds as well as outflow of payments. And anything that helps you regulate the flow of cash into or out of the business is a cash flow management tool. The cash flow management tools that are most useful to you are dependent on what kind of business you have.

For a product-selling business, an inventory report is of vital importance. It can help you to identify trends, point out potential slow months, and figure out when would be a good time to put products on sale.

If you have large contracts, then look for a budgeting tool that can help you plan out cash usage now for a long-term project. This can help prevent cash running out in the final stages of work or having to go back to the client to renegotiate the budget or terms of payment.

A service company may want to look for a program that allows grouping expenses by account and dividing up expenses among different clients. This gives you a better idea of how much is going into each project and provides the tools necessary to determine if it is an efficient use of your resources.

In a tight economy, cash flow management is an essential practice that can be made easier with programs to organize and assess the movement of funds.

Labels: Budgeting, Cash Flow

Sooner or later, most companies will not have enough cash to cover their expenses. Sales might be down for one quarter, or more likely, your accounts receivable team is still waiting on outstanding payments from particular customers or clients. It's a common problem that can be solved with careful cash flow management.

Analyzing Cash Flow

1. Follow outbound and inbound cash closely and use that information to analyze cash gaps. Look into how these gaps occurred and when.
2. Use cash flow data to project cash flow in the coming year to be better prepared for potential slow periods.
3. Frequently compare expenses and sales to the cash flow projection in order to make adjustments in real time to avoid potential insolvency.

Cash Flow Management Tips

1. Consider which expenditures might be deferrable until cash flow increases.
2. Ask suppliers you have a good relationship with about financing options and delayed payments, so that you know your options. A simple phone call can win a 45 or 60 day net - or more - on payables..
3. Manage your Days Sales Outstanding (DSO). This can mean sending out invoices sooner and making sure there is a specific due date on the invoice to prompt action or contacting key customers to negotiate terms for faster payment
4. Be ready to take on debt. By showing a profit at tax time, you are in a better position to borrow money if needed.

Labels: Cash Flow

The troubled economy could be detrimental to any business and a close eye on cash flow can mean the difference between profit and loss. As keeper of the books, finance managers are in the prime location to evaluate expenditures and find ways to save the business money and stand out as a valuable asset to the organization. If done carefully and judiciously, cost cutting can help maximize efficiency without negative repercussions.

So how do you decide which costs are necessary and how cuts will affect the operations of the business?

Separate budget items into necessary costs and optional costs then see which of the optional costs are driving growth and sales. Optional costs that are not adding to the business are prime candidates for budget reduction. As far as the necessary costs, look for different options that can achieve the same result for a lower price, such as a less expensive telecom package. Consider long term cost cutting measures involving revamping procedures, general accounting and purchase order processing are two of the top ten places companies can reduce costs, as opposed to short term solutions that may have unexpected consequences. With some evaluation, research, and creative thinking, a surprising amount can be trimmed from the budget.

For more information and ideas on how to pare down business costs, here are a couple additional resources worth reading:
Business Finance Magazine – Top 10 Opportunities for G&A Savings
CFO.com – Keeping Cash Safe

Labels: Budgeting, Cash Flow