Finance Roll

We have all experienced amazing shifts in the economy most of us never thought we would see. Couple that with the stress of the holidays and it can seem a little bit overwhelming to everyone, especially small business owners.

As I promised two weeks ago I will be giving you all 12 concepts that I learned at a recent business seminar put on by BBI Financial. There were some real eye opening concepts that every person can use. Even though it has taken longer than I had expected this is the first of those 12 concepts.

The first couple of sets of concepts will be focused on Dealing with the Recession we are currently experiencing. There are several things that each of us need to be doing to make sure that we take advantage of the situations we are currently facing. This list is not meant to be a comprehensive list, however the concepts we will be discussing are vitally important to the success of your company. They can also be applied to your own personal life.

1) Understand what you do- It is vital that you understand how your company generates revenue. Too often we make the mistake of forgetting how we make money. A couple of weeks ago I was visiting with a professional sales educator and he shared the following story with me. He was helping a software company try to correct the decline in their sales. As he got into the company and started evaluating what they where doing he found that they kept saying things like:

"We are developing the best software for __________ system"

"We have the greatest idea to solve _____________ problem"

"Our software is far superior to anything on the market"

Not once did they ever mention that they were selling anything. They had become so wrapped up in the idea of being software developers that they forgot the simple fact that they were a sales company. And regardless of what your product is you do not make any money unless you sell that product.

So the first thing you need to do is sit down and realize how you generate revenue. Everything has to be secondary to making revenue. After all if you are not making revenue you will find your self in the unemployment line next to all of your old employees.

2) Keep an eye on the cash leaches- We all have those little things that gradually suck money out of our companies. It's like Benjamin Franklin once said, "if you take care of the pennies the dollars will take care of themselves". It is vital for the success of your business that you make sure you are watching all of those pennies. Each company is unique but we all have a couple basic Cash Leaches:

a) Reduce Inventories- Don't fall in love with your inventories! You should only have inventory for the sales on hand. An individual shared the story with me of a tire company that kept an inventory 3X greater than any one year's sales "just in case". That is the craziest thing you can ever do. Try to figure out how you can follow JIT or Just In Time principles, having the inventory just as the client needs it or better yet have it drop shipped from your whole seller.

b) Keep an eye on A/R- One of my close friends shared with me that he had over 350k in A/R but was not able to make pay roll last month. He is literally going broke while making money. Do what ever you can do to shorten your A/R time. In some situations it may be worth it to offer a discount to make sure you have your money collected.

c) Extend your Payables- See what you can do to extend your payables out. Your goal should be to collect as fast as you can and pay as late as you can (make sure you are not incurring F/C (finance charges) or other penalties. You need to make sure your company is as liquid as possible at all times.

d) Cash is King- Finally remember that cash is king. You need to treat cash like your most valuable tool, because it is! It does not matter what opportunities come your way, if you do not have the cash on hand you will not be able to capitalize on them.

Remember that we are currently experiencing the greatest transfer of wealth America is likely to ever see. You can either be the one paying it or the one getting it. And frankly this is the one time that it is much better to Get then Give!