Replace Quick Fix Ideas with a More Realistic Approach to Improve Cash Flow

A poor economy often serves as a wake-up call to the critical importance of cash flow management for cash-strapped small businesses. As a business owner, you should not expect a quick fix when you never seem to have enough cash on hand, but instead, look for deeper, systemic remedies.

Cash flow problems are symptoms of underlying business issues. If you don’t have a marketing plan, sales will suffer. If you don’t have good credit-granting practices, you’ll end up with slow paying customers. If you don’t use vendor credit wisely, you’ll run out of needed goods for production. Solving the specific business problems will cause the cash flow problems to evaporate.

A systemic approach might include the following specific steps for a business with cash flow problems:

  1. All customers are not created equal. Some are more valuable from a cash flow perspective. Meeting the needs of those most valuable customers through focused services or products has a positive effect on cash flow.
  2. Vigorously reduce unnecessary or bloated expenses like bottled water, coffee supplies, subscriptions you don’t read, products you don’t need or don’t need right now.
  3. Develop a highly focused marketing message aimed at attracting and retaining your best customers (this also works to repel the customers you don’t want.)
  4. Tighten up collections practices. A sale isn’t a sale until the money is in the bank.
  5. Get a firm grip on financial reality by developing disciplines like budgets and forecasts.

By taking a systemic approach, you can build a stronger business that is better able to withstand the rigors of harsh economic realities.

For additional guidance on conquering cash flow problems, download the free report Why Am I Always Broke? 7 Cash Boosting Secrets Every Business Owner Should Know at www.CashFlowRollerCoaster.com.

A Financial Trail of Tears

No LimitsA local headline reads “Woman Pleads Guilty to Ramada Theft.” The woman referred to in the headline embezzled $80,000 from a hotel where she worked. The article goes on to say that at the time of her arrest for this crime she was also wanted by the police in Escondido, California, for embezzling $100,000 from the Pop Warner Football League. AND she was wanted by the San Diego Sheriff’s Department for embezzling $45,000 from another former employer.

In a newspaper article, we see “just the facts, ma’am.” But, let me take you behind the scenes. I have seen so many cases like this in my long career of Cash Flow Wizardry: large companies, small companies, churches, athletic booster clubs, and piggy banks. No one is immune from the threat of embezzlement. Behind the scenes, it’s always the same story: access without controls.

“We trust Mary. She’s practically a member of the family.”

“Joe handles all our finances. I never have to think about it.”

“I don’t understand all that stuff so I just hand it all over to my accountant.”

When we abdicate responsibility for anything, we place ourselves at the mercy of others. Sure, it might seem like a good idea at the time. Mary or Joe might make you feel totally comfortable with their competency and trustworthiness. They take a huge weight off your shoulders. You can focus on other things. That is exactly why embezzlements happen over and over and over again. Once you place your trust in someone and never give it another thought, con artists and embezzlers have free reign.

What does the loss of $45,000 or $80,000 or $100,000 do to a small business or a nonprofit? What would it do to your business? The losses go far beyond the initial financial losses. It cuts a swath of devastation through a business that can last for a lifetime. Once you are a victim of a swindler, you will never fully trust anyone again.

Every single one of the embezzlement cases I have seen or read about have at the core a lack of internal controls. Every. Single. One. So, it would follow that the best way to avoid your business becoming a headline would be to immediately establish some controls. What do I mean by internal controls? It’s all about checks and balances.

Let’s examine a typical scenario. Pay attention. There will be a quiz at the end. “Mary is our bookkeeper. She’s terrific! She handles all the finances so I can get out there and make the money. She writes the checks, signs them with a signature stamp, receives the money, deposits it in the bank, and reconciles the bank statement. She has a company credit card, keys to the building, and often comes in on weekends to work. She is so dedicated she won’t ever take a vacation!” Quiz Question: “How many ways can Mary steal from you?”

Now, let me add another wrinkle to the tale. Mary is innocent. It’s your maintenance guy who’s actually stealing from you. Mary will get fired because it looks like she’s the culprit. She’ll finally forgive you after years of therapy in jail.

How can you protect yourself and your innocent employees? Here are some suggestions:

  1. Never, ever abdicate your financial responsibilities. You can’t hand them off to someone else. Think about Bernie Madoff. This is exactly what happened to all his victims. You can have someone do tasks, but you always have to follow up.
  2. Be familiar enough with accounting so that you can look at numbers on your financial statements (Profit and Loss, Balance Sheet) and understand what they mean. Does anything seem “off?”
  3. Be familiar enough with your accounting system (e.g. QuickBooks) to be able to “poke around” to get information.
  4. Look at your bank and credit card statements when they come in. Look at your online banking accounts regularly.
  5. Check on your Accounts Payable report to see if there are unknown vendors listed. Ask questions.
  6. Check on your Accounts Receivable reports regularly. Are there customers who usually pay on time but now are showing as way overdue?
  7. If you have a business that gets paid in cash, do you have a system for checking how much comes in and whether it actually makes it to the bank deposit?
  8. How do you keep track of your inventory, tools, and other shiny trinkets?

By establishing a company culture of verification and vigilance, you will send the message to everyone that you are “on the ball.” It’s much harder for a con artist to steal from you if you’re keeping an eye on things. Embezzlers are looking for opportunities. When you remove those opportunities, you protect yourself from a Financial Trail of Tears.

If you’re ready to be “in the know when it comes to dough,” get the self-study course From Chaos to Control, a complete real world financial education in a box.

Follow the Bouncing Paycheck

A Facebook friend recently posted that her husband’s paycheck had bounced … again. The responses from other employee-types were what I would expect them to be:

“That’s so unfair! What is his boss thinking?”

“He apparently thinks it’s a good way to run his business.”

“Guy can’t even keep a checkbook!”

And so on.

My thinking was, of course, much different. My first thought was: I need to send that business owner one of my business cards. He clearly needs The Cash Flow Wizard. My second thought was: They (the employees) really don’t get it. They have no idea of all the stars that have to align for a business owner to make payroll every week. They have no idea of how close to the edge so many business owners are financially. So many business owners are one missed payroll away from disaster.

Now, I am not saying business owners should tell employees how close their businesses are to financial disaster. I don’t think we should, as one friend says, “spook the herd.” In fact, it isn’t the employees’ concern at all. They are trading time for money. That’s the deal. They shouldn’t be worried about making payroll. That’s the business owner’s job.

As business owners, we are where the buck inevitably stops. It doesn’t matter that a customer didn’t send a check when promised. It doesn’t matter that health insurance went up again. It doesn’t matter that we haven’t taken a paycheck since Bill Clinton was President. For the employee, all that matters is this: They traded their time and now they expect their money. Period. End of discussion.

I see so many business owners who don’t have the first idea how to manage money in their businesses. They operate without good financial practices because they don’t know what good financial practices look like. They take the “fly by the seat of your pants” approach to money management, often thinking it’s just the way life is in the rough and tumble world of small business. The result is bounced paychecks, late payments on loans and credit cards, bank fees for nonsufficient funds, and high levels of financial stress.

I’d like to sit down with each and every business owner and show them a better way. The path to financial sanity and stability. Unfortunately, there is just one of me and my wizardry doesn’t include cloning myself. Instead, I created a self-study course to help all those small business owners who are “pantsing it” financially. It’s called “From Chaos to Control.” Or you can call it “Cash Flow Wizard in a Box.” Whatever you call it, just know that there is help available when you’re ready to stop living on the edge of financial disaster.

Wasting Away Again – A Tale of Misspent Youth

It was the summer of 1984; I was a sweet young thing still in college in Machias, Maine, (go to the end of nowhere and turn left). I met a handsome stranger who breezed in from Florida to spend the summer with friends. He was blond and tanned from hours of surfing in the Florida sun.

A surfer on the coast of Maine is an unusual find. Any of you who have jumped into the ocean off the coast of Maine know why. The water is really freaking cold. Plus there’s the whole jagged rock thing.

Anyway, the stranger fell in with our group of friends bringing an exotic breath of air from far off places. One sweet, starry, summer night with the peepers and crickets providing accompaniment, the stranger initiated me into the hidden pleasures of …

Being a Parrothead

I had you going there for a minute didn’t I? “So what in the world is a Parrothead?” I can hear some of you asking. A Parrothead is a follower of the great bard, Jimmy Buffett. He of Margaritaville fame. Fins to the left, fins to the right, white sport coat and a pink crustacean, son of a son of a sailor. And of course, a few songs I can’t sing in polite company. But enough about me, let’s talk about Jimmy.

Many know Jimmy Buffett as a partying troubadour, but look behind the loud shirts and the flip flops and you’ll see something else: a very, very smart businessman. Jimmy is the head of a sundrenched, toes-in-the-sand empire. To illustrate, visit his official website margaritaville.com. You’ll find a paradise for Parrotheads. Jimmy understands the value of a brand.

MaragaritavillejpgNot only is Jimmy a singer/songwriter, he’s also an author and a merchandiser. Just slip into your Jimmy Buffett T-shirt, shorts, and flip flops. Sit back in your Jimmy Buffett Adirondack chair. Hit the play button on your Jimmy Buffett CD player. Reach into your Jimmy Buffett Cooler and pull out a Jimmy Buffet Landshark Lager. Hey, I couldn’t even make this stuff up if I tried!

How about a Jimmy Buffett golf club bag, golf club covers, golf balls, and spiffy little palm tree golf tees? Got that, too.

Are you more into eating than golfing? Good news, Jimmy’s got a food line, too. Available at Costco and BJ’s. Or how about a Margaritaville cat collar? Or a T-shirt for your Chihuahua?

I can only surmise that some business consultant must have locked himself in a room with Jimmy and delivered the atomic wedgie of all atomic wedgies to convince a lifetime, chronic nonconformist to go commercial. Either that or being a troubadour just doesn’t pay like it used to. I mean, a troubadour’s kids have to eat and someday there’ll be the Home for Aged Troubadours to contend with.

Now, I am in no way advocating drunken revelries (hey, even Jimmy will tell you it gets old real quick), and I’m certainly not encouraging anyone to sell out to “The Man,” however, there is a very important business and cash flow lesson to take away from all this.

Jimmy Buffett took a signature song, Margaritaville, and turned it into an empire. He took a loyal band of followers and turned them into Parrotheads. The Margaritaville brand has tremendous power and appeal to Parrotheads. He’s taken this troubadour gig and turned it into a business that makes money for him when he’s sitting on the beach. That’s pretty darned smart for a guy who never outgrew his aspiration to be a pirate when he grew up. Perhaps he’s discovered a modern day Pirate’s Dream.

The lesson for all business owners is to develop a loyal band of followers and give them more of what they want. It is, indeed, the Treasure Map that leads to riches. Sail on over to www.CashFlowRollerCoaster.com and grab some financial treasures from the Cash Flow Wizard’s treasure chest. Then, it’s yo ho ho and a bottle of cash, Matey.

And the Banker Said, “WOW!”

CelebrationThe life of a Cash Flow Wizard is fraught with peril. When I first start working with a business in serious financial trouble, for the first few months, no one knows if the business will survive. Even I’m not sure sometimes. I look for signs and indicators and data to tell me if there is a viable business under all that mess of trouble. Once I answer that question, I know we can pull through. And I say “we” because “I” don’t save businesses. It takes a team. Business owners, employees, vendors, bankers, accountants, and the Cash Flow Wizard all play a vital role in a business turnaround.

One business I was working with had a terrible relationship with the bank that held all their loans. The business was regularly late on loan payments, bouncing numerous checks, and had financial statements that were nonsensical. It was enough to make a banker toss and turn all night. In fact, the banking relationship was so strained the loan committee was considering cancelling the company’s loans and demanding payment in full.

These were bleak, hungry times for the business owners who, as business owners do, had everything invested in the business. A business failure meant not only bankruptcy for the business but very likely personal bankruptcy for the owners. Small business ownership is a high-stakes game.

The very air within the walls of this beleaguered business reeked of stress sweat and desperation. The business owners were standing at the edge with one foot already dangling over the precipice. One business consultant had already recommended bankruptcy. Bleakness. Hopelessness. Despair.

Flash forward three years.

I’m climbing a mountain with my iPhone in my backpack keeping track of my time and miles. I hear the little “ding” signifying a new email. Then, another little “ding.” When I get to the top of the mountain, I pull the phone out and check my messages. My client’s bankers have sent emails in response to the third quarter results I emailed earlier in the day. One read, “Congratulations! Keep it up!” The other said, “WOW!” I confess to doing a little Cash Flow Wizard jig on the top of that mountain. We’d come a long way to get there.

So, what made the difference, you ask? For my part, it was providing that steady hand on the financial tiller that every business needs. They call it Wizardry but it’s really just solid financial practices. The rest of the story of the turnaround belongs to the business owners who never said “Uncle,” the employees who did the magic they do every day, the bankers who hung in there, the vendors who valued their relationships and worked hard to help their customers, the tax accountant who went the extra mile to help, and the loyal band of customers that every business needs. You can call it magic, but its just good business.

Looking for your own Cash Flow miracle? How about a conversation with the Cash Flow Wizard? Let’s build a Dream Team!

Accountants: Teach Your Clients Well

Question mark over pile of moneyRecently, I spoke with a Certified Public Accountant about a mutual client. This CPA prepares the client’s tax return. I was helping the client overcome some serious cash flow problems. The CPA told me that he wants the client to use QuickBooks mostly as a checkbook and he, the CPA, will “take care of the rest.” Although I have a high level of respect for CPAs and the accounting profession as a whole, on this topic we definitely disagree.

Using QuickBooks as a checkbook means the business owner understands only the barest fundamentals of the financial side of running a business: deposits (money in) and checks (money out). The main reason businesses end up with cash flow problems is because of a lack of understanding and knowledge of finances on the part of the owner(s).

To my way of thinking, an accountant who doesn’t educate his or her clients is no different from a doctor who doesn’t educate his or her patients. Can you imagine a doctor who diagnoses a patient with diabetes and then says eat whatever you want and I’ll treat you when you eat yourself into a coma?

So many of the CPAs I have worked with seem to be on automatic pilot when it comes to educating their clients. It’s easier to clean up the messes, do the taxes, and take the check. This is a great disservice to the small business clients that are the bread and butter of not just the CPA firms but also the national economy.

Think about these statistics from the Small Business Administration:

There are over 27 million small businesses in the United States.

  • Those businesses generate most of the nation’s new jobs.
  • They employ more than half of the nation’s private sector jobs.
  • Most innovations spring from small businesses (think Jobs and Wozniak of Apple fame.)

With such a huge impact on the nation’s economy and on individual communities, it seems that having an educated small business owner is in the best interest of all involved. So why sell them short when it comes to understanding finances? Here are the top two reasons I hear from accounting professionals:

  • It’s much easier to just clean up behind a business owner than it is to try to educate him or her.
  • Business owners don’t want to pay for financial education.

Let’s debunk that first myth right away. It’s easier to change a toddler’s diaper than it is to potty train one. It’s easier to let the kids eat candy for breakfast. It’s easier to pass Jimmy on to the next grade than it is to teach him. Where does that mentality stop?

Now on to the second reason. Business owners don’t want to pay for financial education. As someone who has taught financial concepts to hundreds of business owners and future business owners, I can tell you the smart ones are willing to pay for good financial education. And I can also tell you that I’ve helped scores of business owners deal with cash flow issues and the only way out of that quagmire is through education. And they accept it willingly. The most common comment I get from business owners is “why didn’t anyone ever tell me that before?”

There is a two-fold responsibility here. First and foremost, business owners need to realize that a solid understanding and application of sound financial management is needed to create a successful business. And secondly, accountants and bankers need to learn to communicate more clearly the vital financial knowledge that can so vastly improve their clients’ success rates. Putting the two pieces together creates a strong partnership that leads to success for all involved.

Ready to get a better understanding of your finances? Get a complete small business financial education in a box.

The Economy is a Convenient Scapegoat for Small Business Woes

ScapegoatMain Street Vacancies on the Rise reads the headline in my hometown paper. One business closing, one business shutting down for the winter, empty buildings on Main Street. It’s a common tale these days. That darned economy is taking all the fun out of small business ownership.

The florist shop closes, citing competition from the new supermarket and people having to choose between gas money or flower money. The lobster restaurant shuts down for the winter claiming that the townspeople aren’t supporting them. They can only rely on the summer people.

The news isn’t all bad though, there on my favorite American Main Street. An existing supermarket is holding its own against the newcomer. A new art gallery has opened. A gift shop is expanding. The new movie theater and pub is holding its own. A beauty shop is adding booths. The Maine-owned discount store doubled its space and increased its offerings.

As an entrepreneur, the question that comes to my mind is always the same. Why? Why is one business closing while another expands? Why is one business able to compete while another is not? Why is one business supported by the locals and another is not?

In fact, asking why may be a business owner’s most important job function. Keep asking the question and you’re bound to get answers and more questions. What could the florist shop have done differently? Why is the gift shop able to expand? What are the owners of the new art gallery doing to draw in business? What can I do in my business to win over the locals, the summer people, other business owners? What other markets can I tap into to sell my product or service?

It’s easy to blame all small business woes on the economy but the truth of the matter is that many small businesses were struggling during the boom times. The economic doldrums may offer the final coup de grace, but the fatal problems were already there.

This is not a time for business-as-usual, particularly if business-as-usual wasn’t working to begin with. Weak businesses will fail in a bad economy. Strong businesses will seize opportunities, look for unfilled niches, and employ good marketing tactics to survive the tough economy.

Looking for street smart financial strategies to overcome cash flow woes? Learn the secrets of The Cash Flow Wizard: http://cashflowrollercoaster.com/cash-flow-roller-coaster-book/.

Cash Flow Wizard’s Tips for Negotiating

Every ten years or so I am compelled to stroll on to the dangerous grounds of car dealerships. I’d rather never put my feet on that pavement because I know I will encounter people who try to separate me from the contents of my wallet. Then, I have all that trouble convincing them that my money is just that, MINE. IF they are going to get some of it, they’re going to have to work for it, just as I did.

Now, when your favorite Cash Flow Wizard strolls on to that pavement, I’m quite sure my demeanor sets the salespeople at ease. They’re thinking: middle-aged woman, arrives alone, very nice and friendly. Easy sale. We’ll appeal to her concern for safety; we’ll tell her she looks HOT in that car; we’ll get her a car in whatever pretty color she wants; we’ll make financing easy for her. Apply a little pressure. Presto! We have a sale.

That’s when the fun begins. For me, anyway. Don’t let my mild-mannered ways fool you. I’m a tough-minded negotiator. Before I ever set foot on the dealer’s pavement, I have already done my research. I know exactly what I want. I know exactly what I’m willing to finance. I know exactly what I’m willing to make as a downpayment. I don’t care what color the vehicle is as long as it’s not black or gray. I’m not swayed by emotion. I’m all business. The rest is up to the sales people. How much do they want my money?

The goal of a salesperson is to get the sale at the highest possible price the customer will allow. My goal is to get the purchase at the lowest possible price the seller will allow. If the item is scarce, the price is higher. If the item is plentiful and competition exists, the price is lower. In case you didn’t notice — it’s a buyer’s market. Lots of inventory, lots of competition. That’s fantastic for business owners in the market to buy, but not good for selling products and services.

Because of a tough selling market we have to really understand what our customers value and what our competitors are doing. If I, the customer, am standing on a car lot looking at a vehicle and I know I can drive an hour to stand on another lot where they have an identical vehicle, I, the customer, will be very aware that the seller should work hard to get my business. The old “I have another customer who is interested” kind of tactics no longer are effective.

The rough sales climate is good news for business owners who are purchasing goods or services. Because margins are tight on the sales side, we have to spend carefully and get the lowest prices possible on the purchasing side. In a buyer’s market, this is easier to do.

Here are some tips for negotiating a good deal:

  1. Do your research. Who sells what you want? Are there ten suppliers or one? What are your must-haves and your nice-to-haves? The more you know the more power you have.
  2. Set rock solid will-not parameters. For example, with my car purchase, I have a will-not-finance-more-than-$ parameter.
  3. Determine what constitutes a good deal or good price for your situation. If you’re buying materials for a job, what impact will spending 1% more on materials have on your profit picture?
  4. Hold firm to what you want. 
  5. Walk away if you don’t get what you want.
  6. Wait. The salespeople will come to you with a counteroffer or meet your price.

My other favorite tactic when dealing with car salespeople is to turn their tactics around on them. I say, “Here’s where you are, here’s where I am. Are you going to let $x stand in the way of selling me a car and getting your commission?” If you’re going to spend money, spend it well. It’s the Cash Flow Wizard way.

Want to become a Cash Flow Wizard like me? Get the Cash Flow Wizard in a Box. Get yours today because I have another business owner just waiting to buy it. You don’t want to miss out!

It’s the Great Pumpkin Plan!

pumpkinHere in my neck of the woods, Maine, we have our first frost warning for tonight. That means pulling out all the tarps to cover up the tender tomato and pepper plants so the frost doesn’t kill them. Now, I insist we still have plenty of summer left, but the temperatures and the earlier darkness at the end of the day tell a different tale.

As my sister and I spread and anchored tarps, I was checking out our pumpkin crop. During the height of the summer, the pumpkin vines looked like they were well on their way to taking full control of the free world. Alas, a powdery mildew attacked and our valiant vines died back considerably. The pumpkins are still going strong, and I think we’ll have some good pumpkins for eating and carving.

Looking at those pumpkins, I remembered reading a business book not long ago. It’s called The Pumpkin Plan by Mike Michalowicz. I’m always on the lookout for resources for my clients (and for my own businesses) so I thought I’d give this one a try. Although I think Michalowicz is likely “one brick shy” and I’m not a fan of his potty humor, I actually enjoyed his book. Here’s why:

His strategy is based on a simple premise. When you’re growing pumpkins, you have to weed out the weaker, smaller ones so the big, champion pumpkins have room and resources to grow. That one concept has so many different applications in a business.

Products that take up far too much time and money can be weeded out to allow profitable products in growth markets to flourish.

Employees who take up space and time without contributing to the company’s success should be retrained or relocated to a desk in your competitor’s business.
Superstar performers should be nurtured and rewarded. Don’t let them die on the vine from sheer neglect.

Businesses that are weak should be given more of what they need to succeed or tossed on the compost heap.

Systems should be put in place to yield the desired results: one giant champion pumpkin versus many small performers — the only difference is how you support them and nurture them.

A Dollar Down and a Dollar a Week

There I was driving down a country road on my way to a client’s office. I was in a Kumbaya kind of mood so I was listening to some folk music, singing along to all the old favorites: Dylan singing Blowing in the Wind, Baez singing Amazing Grace. Ah, the sweet, sweet sounds of the Peace and Love generation.

Then a song caught my ear. It was a bouncy, happy song, and I found myself singing along. “Just a dollar down and a dollar a week, you can have everything you seek for a dollar down and a dollar a week.” It’s a tale of woe. A misguided couple who lives life beyond their means, sucked in by the promise of easy credit.

So long Kumbaya Mood, hello, stern Cash Flow Wizard. I reached into the back seat and pulled out my wizard hat and proceeded to lecture the windshield about the hazards of this approach to managing finances. I see this approach all the time in my line of work. Business owners taking a “fly by the seat of your pants” approach to money management. “I’ll buy it now and hope I have the money to pay for it when the time comes.” It’s a recipe for disaster taken from the cookbook of Financial Insanity. Add to the batter all those business owners who put every one of their financial eggs in a risky basket called business ownership. Second mortgage on the house, personal credit cards bumping at the credit limit, savings exhausted, retirement accounts emptied. It’s enough to keep the Cash Flow Wizard up at night worrying about all this craziness.

The simple, hard fact is this: Without a solid financial plan your business will always struggle and risk imploding (or exploding.) The sooner you understand that the sooner you can start to build a better business. And it is totally possible to do that. Look at successful businesses. You will see a solid plan in place for how to make money and manage money. It’s all about having a plan and having the discipline and flexibility to carry that plan through.

The change starts with you answering some simple questions. What do you want your results to be? Are you there yet? If not, what can you do to get there? Please don’t take the “dollar down and a dollar a week” approach to financial management. It keeps you AND me up at night worrying. The Cash Flow Wizard needs her beauty sleep.

If you’re ready to change the way you manage your finances and you want to inject some of the Cash Flow Wizard’s financial sanity into your business, get a copy of my course From Chaos to Control. We’ll both sleep better…and then maybe I can get that song out of my head. “Just a dollar down…and a dollar a week…you can have everything you seek, for a dollar down and a dollar a week…just a dollar down…”