May 18th, 2012
Having worked for small, mid-sized, and large businesses, I know that businesses of all sizes struggle with financial management. At the top of the list of problems is not having good analytics in place, followed closely by shaky processes in the areas of budgeting, forecasting and business planning. Sound familiar?
The people who want to “help” you fix these issues will tell you that you need to buy a new software package. The software can do scenario analysis, profit by product line, resource management, multiple currencies… are you tired yet? Are you ready to cut a purchase order?
Sure, there are times when our software is outdated, and we need to upgrade. Before you do that, take this approach. Talk and listen. Ask your team to tell you what’s influencing results. Is it competition, changes in customer preferences, an inability to execute, misapplication of resources, new regulations, or staffing?
Pay attention to what they have to say. Make sure YOU understand what’s driving results. A fancy software package is great, but unless you know what’s driving your business, the new package will give you the same old results.
Tags: Budget Process, Business Analytics, Data Analytics, Data Warehouse, Forecasting, Mid-sized businesses, Process Improvements, Revenue Growth, Small Businesses, SMB Growth
Posted in Financial Improvements | No Comments »
May 16th, 2012
There’s lots of talk about the need for businesses to do more than cut costs. For companies looking to do more than reduce headcount, cut travel, or take an ax to benefit programs, identifying and understanding how your costs support the achievement of business objectives is the better play.
To do it well, you and your team need to understand the processes within your business, key external inputs (customers, suppliers, and competitors), strategic direction, and the financial resource requirements. Taking this approach requires time, planning, and commitment. The toughest part will be balancing this initiative against the need for immediate results. Understanding the drivers for revenue, costs, and the resulting profits (or losses) will take some time.
A quick example is a business producing goods in a market where the products are becoming commodities, and the customers are even more price conscious. To reshape and transform their cost structure, the business can focus on a faster time to market for new products, talk to customers to understand which services are truly valued, and determine ways to deliver the services at a lower cost. There are more areas on which you can focus, but I think you get the point.
There will be two outcomes that you can expect to realize. The first is what everyone is accustomed to seeing – you will find costs that need to be reduced or eliminated completely. The second is determining the real cost of doing business, and freeing up the resources to support and sustain the achievement of the business for the long-term.
Tags: Cash Management, Cost Reduction, Cost Transformation, Exceeding Goals, Redeploying Assets, Return on Investment, Setting Objectives, SMB Finances, Strategy Setting
Posted in Financial Improvements | No Comments »
May 13th, 2012
For some small to mid-sized businesses, accounts payable is nothing more than paying the bills. For others, it’s a great way to manage cash flow and reduce expenses. Let’s take a look at some of the ways A/P is taking a greater role.
The easy one is managing cash through discount terms. After that, using procurement cards helps give you an idea where money is being spent, and potentially sweeter vendor terms. Along with these, add in processes for eliminating duplicate payments, manual checks, and multiple days for processing A/P. Just streamlining a few areas will SAVE thousands of dollars each year.
The last tip is separation of duties in A/P processing. The person who enters the bill should not be the same one who reviews and approves the payment. If the check amount exceeds a certain threshold, make sure it is being reviewed and approved by someone you trust and understands the business.
There’s more to A/P than paying on time. Study your A/P processing and you will uncover ways to put more money back into your account.
Tags: A/P, accounts payable, Cash Flow Management, Financing, Small Business Cash Flow, Working Capital Improvement
Posted in Financial Improvements | No Comments »
May 9th, 2012
To remain competitive over the past several years, businesses have been reducing expenses. This provided some cash for their coffers, and helped the earnings look pretty good.
With the economy showing signs of constricting yet again, what options are available to keep the earnings strong? Expenses have been cut, so where do you turn?
First, turn to your people for ideas. Bring together a diverse group of people, and look for ways to grow the top line. Next, study what’s been working well for your competitors. Borrowing an idea or two is the highest form of flattery, and keeps your business moving forward. Lastly, talk to your customers. Understand backwards and forwards what they want and need.
There are more details, and that’s where you and your team must put in the time. Identifying new growth opportunities over the next two to three years is what’s going to keep your business alive.
Tags: expense reductions, increase revenues, Innovation, Mid-sized businesses, new products, profit improvement, Small Business Growth, SMBs
Posted in Financial Improvements | No Comments »
May 7th, 2012
For many participants in the mid-market, (companies with $10M to $1B in revenue), growing the business is the only way to stay afloat. It’s how they get capital to keep the business moving forward. It’s different for the big guys and small businesses. The big guys have the big banks to take care of them.
How do mid-market businesses improve their cash position? Here are a few ways to do it:
Innovate – new products, services and process improvements are a proven way to improve your financial position.
Execution – businesses that are not only adept at planning, but at execution are more likely to be financially solvent. Execution covers everything from back office processes to delivering goods and services.
Responsiveness – nothing is more important. The ability to react effectively to both good and bad market conditions conserves and generates cash.
Customer focus – do you know your customers? What they want? Where they buy? What they say about you? What they like about your competitors? If you don’t, find out now!
Lastly, nail your cash flow management. Pay attention to slow pay customers, negotiate favorable vendor terms, and remember that inventory is a hungry monster. It eats your cash.
When you want more coaching in this area, send me an email at John@BusinessIgnitel.com, and we will get you headed in the right direction.
Tags: Cash Management, Increasing Revenue, Innovation, Process Improvements, Small Business Growth, SMB Cash Solutions, Working Capital
Posted in Financial Improvements | No Comments »
May 1st, 2012
For many small to mid-size businesses (SMBs), vendor negotiations are as much fun as dental work. Those in charge of buying often feel that they have little influence. Let’s change that mindset by avoiding a few common traps.
First, never be afraid to ask for a lower price. Some SMBs just don’t do it. Go ahead and ask. Most of the time, you will get a price reduction.
Avoid exclusivity arrangements, as they ensure higher margins for suppliers when the business grows. On top of that, be very careful with volume commitments. In a fluctuating economy, you can’t always guarantee your sales volume will be high enough to meet the commitment.
Never sign a contract with an auto-renewal clause. This limits you from having the ability to renegotiate and get better pricing. You have zero leverage!
Lastly, make sure you are negotiating with the vendor’s decision makers. You don’t want to reach a deal only to hear “Mr. Smith didn’t have the authority to extend that level of pricing.”
If you want more insight on negotiating strategies, call us at 859.420.5950. The conversation will be way more fun than dental work!
Tags: accounts payable, buying groups, contracts, small business supply chain, supplier terms, Vendor negotiations, vendor pricing
Posted in Process Improvements | No Comments »
April 27th, 2012
Everyone talks about behavioral interviewing as a key to current and future business success. To do it well, there must be introspection and analysis on the part of those involved in making the hiring decision. Specifically, what behaviors are the keys to a successful and productive career with your business?
There are core behaviors that everyone must possess. Additionally, the position and stage of the business life-cycle can dictate other requirements.
Understanding how someone behaves in pressure situations, selling an unpopular but needed idea, or dealing with a coworker with whom he or she had a disagreement are all telling signs of potential fit.
I’m not saying you should ignore technical skills needed to do the job. That should be a given. Pay as much or MORE attention to the behavioral side. It’s what separates a good hire from a bad one.
Tags: Behavioral Interviewing, HR Issues, Retaining Employees, Small Business Hiring, SMB Hiring, Team Improvement, Team Leadership
Posted in Leadership Development | No Comments »
April 23rd, 2012
If it makes you feel any better, large businesses have the same problem. Do you know what it is? Hiring the right people.
If you peel this back even more, hiring the wrong person has the potential for you to incur expenses that you don’t want. To avoid the problems and extra cost, take these steps:
1. Hire for fit
2. Ensure the candidate wants to be there
3. Look for fertile ground
4. Compare them to your best performers
To simplify it a bit more, make sure the person has the right outlook – he or she has the behaviors to be successful in your organization. This person not only has the ability to succeed (fertile ground and personality), but the candidate wants the position for the right reason, too.
Lastly, compare candidates to your best people. Do they have abilities equal to or exceeding those of your best and brightest?
Don’t hire purely on skill. Many times, you simply get burned.
Tags: Behavioral Interviewing, Employee Retention, Interviewing, job satisfaction, Jobs, Small Business Hiring
Posted in Employee Satisfaction | No Comments »
April 20th, 2012
There was good feedback on the risk management blog. A question that others wanted to know was this – “what were the other key risk areas?”
The others identified were:
- commodity costs
- technology / data security
- risk in overseas markets
- credit availability
- inflation
- natural disasters
- tax policies
There wasn’t much that was missed. Lastly, in most companies, the CFO is the person running the risk management program. It’s a big job, make it a priority.
Tags: Business Risk, CFO Responsibilities, Contingency Planning, Financial Risk, Risk, Risk Management
Posted in Strategy | No Comments »
April 19th, 2012
There was a good article in CFO.com last month. The focus was risk management, and the increased role CFOs are assuming in this area.
When polled, CFOs identified these three items as their biggest risk areas:
1. Customer demand / profitability
2. Workforce capabilities and talent management
3. Regulatory requirements
Want to know what keeps those responsible from focusing on risk management? Time and resources…surprise. Isn’t this always the reason for programs stalling or not even starting?
Make constant review and scenario analysis a regular part of your priorities. If someone isn’t analyzing customer demand and profitability, your entire team is going to have a lot more free time. The kind they don’t want.
Tags: Budgeting, CFOs, Finance leadership, Forecasting, Planning, Risk Aversion, Risk Management, strategy
Posted in Strategy | No Comments »