Category: CFO service

By CFOconnections

7 Ways to Help Grow Your Business Without Cash Flows Concerns

You’ve poured blood, sweat and tears into your business and it is finally paying off. But, passing on that big sale or superstar hire because your business doesn’t have the cash to see it through could be a big setback. You can manage your business’s growth without the pain of capital and cash-flow concerns. Doing so requires a strategic approach that includes both pursuing opportunities and avoiding pitfalls.

  1. Analyze objectively

Opportunities come in all shapes and sizes and some are better than others. When considering investing in infrastructure, new hire, or other investment, think big picture such as the impact it will have on your brand, earnings trajectory, and organizational structure, etc. Focusing on short term profit alone may not be good for your organization’s long term health.

2. Be in the know

Rather than being surprised by upcoming cash flows needs, such as making payroll or a major vendor’s invoice coming due, get ahead of the game by having a cash flows projection. A cash flows projection is the crystal ball into a company’s future cash flows needs. A cash flows projection will allow you to see gaps before they actually happen so that you can line up your funding sources to bridge those gaps. On the flip side, it also allows you to strategically pursue opportunities.

3. Take control of cash flow

As your company grows, install systems and processes to ensure you’re managing your cash flow well. Instead of sending out invoices at the end of each month, send them out as soon as you completed the jobs. You may also consider offering a discount for fast payments, or allowing your customers to finance the invoice. These options allow your company to get paid upfront while giving customers the option to make payments over time.

4. Evaluate your borrowing options

When your business is growing, you may need new credit opportunities to provide you additional capital. Make sure you understand the return on investment (ROI) each dollar will bring to your business. Small business lending should always be a revenue-generating activity and never a take-it-because-it’s-there decision. Take only exactly what you need and when you need it and so that you have time to assess the ROI to your business.

5. Diversify your funding sources

Capital is the fuel to businesses of all sizes, whether just starting out or growing quickly. Businesses benefit from peace the mind when they have access to capital when needed. Not all business expenses can be paid the same way. For example, you can’t issue payroll on your business credit card. So, multiple funding sources allow you have the option to select the right source for each expense. Consider all of your options and use them at your disposal to create a capital and cash flow safety net. You can make a lot of mistakes and see your way through them if you have the cash.

6. Talent on demand

With a tight labor market, it becomes more costly to hire and keep good talents. Your best solution may be to bring on just-in-time workers. These are individuals with specific skill sets you bring on only when you need them to perform specific tasks. It’s the beauty of the currently thriving gig economy. “Flex talent” helps you control labor costs before you’re ready to bring on another full-time employee.

7. Partner up with your competitors

Keeping inventory in stock is a catch 22. You need inventory to sell to generate revenue, but you need revenue to pay for products or raw materials to sell. Building relationships with competitors can help. Consider buying from other companies that sell the same stock. If you can negotiate a discount for a longer-term relationship, the companies can essentially split the profit margin.

Looking for more advice on improving your business’s cash flows? Contact us for a complimentary consultation.

US Department of Labor Final Overtime Rule – how does it impact my cash flows?
By CFOconnections

US Department of Labor Final Overtime Rule – how does it impact my cash flows?

CFO Connections attended a briefing from the US Department of Labor Wage and Hour Division on the final rule on overtime pay, effective January 1, 2020. Here are some of the important questions addressed during the briefing.

Q. How many workers will become overtime-eligible as a result of this Final Rule?

An estimated 1.3 million workers will become newly entitled to overtime protection because of the increase in the salary level.

Q. What will the “Overtime” Final Rule do?

The final rule updates the earnings thresholds necessary to exempt executive, administrative, or professional employees from the FLSA’s minimum wage and overtime pay requirements. They are exempt if they are employed in a bona fide executive, administrative, or professional (EAP) capacity, as those terms are defined in the Department of Labor’s regulations at 29 CFR part 541 .

Q. What is “overtime”?

Unless specifically exempted, employees covered by the FLSA must receive pay for hours worked in excess of 40 in a workweek at a rate not less than one and one-half their regular rate of pay. This rate is referred to as “overtime” pay.

Q. What determines if an employee falls within one of the exemptions?

To qualify for an exemption in this rule an employee generally must:

  1. be salaried, meaning that they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the “salary basis test”);
  2. be paid at least a specified weekly salary level, which is $684 per week (the equivalent of $35,568 annually for a full-year worker) under this final rule (the “salary level test”), the current salary level is $455 per week (the equivalent of $23,660 annually for a full-year worker); and
  3. primarily perform executive, administrative, or professional duties, as defined in the Department’s regulations (the “duties test”).

Certain employees are not subject to either the salary basis or salary level tests (for example, doctors and lawyers). The Department’s regulations also provide an exemption for certain highly compensated employees (HCEs) who earn above a higher total annual compensation level ($107,432 under this final rule) and satisfy a minimal duties test.

Q. May employers use bonuses to satisfy part of the new standard salary level test?

Yes. In recognition of evolving pay practices, the Department is permitting employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary test requirement. Such bonuses include, for example, nondiscretionary incentive bonuses tied to productivity or profitability (e.g., a bonus based on the specified percentage of the profits generated by a business in the prior year). The Department recognizes that some businesses pay significantly larger bonuses; where larger bonuses are paid, however, the amount attributable toward the EAP standard salary level is capped at 10 percent of the required salary amount.

For employers to credit nondiscretionary bonuses and incentive payments (including commissions) toward a portion of the standard salary level test, such payments must be paid on an annual or more frequent basis.

Q. May employers make a catch-up payment in the event that an employee doesn’t receive enough in nondiscretionary bonuses and incentive payments (including commissions) in a given year to remain exempt?

Yes, if an employee does not earn enough in nondiscretionary bonuses and incentive payments (including commissions) in a given 52-week period to retain his or her exempt status, the Department permits a “catch-up” payment at the end of the 52-week period. The employer has one pay period to make up for the shortfall (up to 10 percent of the standard salary level for the preceding 52-week period). Any such catch-up payment will count only toward the prior 52-week period’s salary amount and not toward the salary amount in the 52-week period in which it was paid. If the employer chooses not to make the catch-up payment, the employee would be entitled to overtime pay for any overtime hours worked during the previous 52-week period.

Q. When will these changes take effect?

The effective date of this final rule is January 1, 2020.

Q. What Should Employers Do Now?

The DOL estimates that approximately 1.3 million additional workers will now be eligible for overtime under this new rule.  Over the remainder of the year, employer should strongly consider taking the following steps:

  1. Identify employees who will need to be reclassified, i.e. current employees who are currently exempt but are paid less than $35,568 annually.
  2. Analyze the financial impact of either raising pay to the new threshold level, reclassifying the position as non-exempt and paying overtime, or lowering hourly pay to offset the overtime requirements.
  3. Review job descriptions and tasks to ensure that your employees are properly classified.
  4. Consider how pay changes or other changes in job assignments may impact your business.
  5. Consult with your employment attorney to ensure compliance and help maneuver your business through the DOL regulations and classification changes. 

We’ve highlighted the core of the final rule. For a list of complete FAQs, please go to the US Department of Labor website https://www.dol.gov/agencies/whd/overtime/2019/overtime_FAQ#20

During the briefing, the USDOL Community Outreach and Planning Specialist indicates that the DOL typically goes back two years when reviewing employers compliance with the overtime rule unless it finds employer willfully neglect compliance, in which case, DOL will go back three years. In addition, DOL investigators focus more on substance of the job duties rather than form and investigators typically interview employees to gain an understanding of their job duties.

CFO Connections is ready to help you determine the cash flows impact as a result of this final rule. Contact us for further discussion.

By CFOconnections

The Many Benefits of a Budget That Sets You Up for Success

As 2019 comes to a close, it is important to take a look at our progress and take steps to set ourselves up for future success. Creating a budget will help you see what the needs of your business will be in the coming year. Budget helps you track business expenses, and now much revenue you need to keep your business growing. By putting these numbers to paper, it helps you anticipate future needs, spending, profits, and therefore providing your business with a roadmap to understand where you are going with your business. It also may let you spot problems before they mushroom, so that you can switch gears.

Budget also gives you insight into how your business is performing from year to year, reveals savings opportunities that can improve performance and helps you anticipate the needed funds to purchase new equipment. It’s like being in a car without a map or GPS system. You hope you are going in the right direction, but you don’t know.

There are other reasons why a budget is important to a business. Bankers may want to see a budget when you ask for a loan. Investors may want to know how you spend your money and how you plan on growing your business before investing. Some business owners also believe that employees should also be privy to the budget so that they understand where the business is going and are motivated to work harder. They believe that business’s goal is a group goal and they can’t expect their staff to meet the business’s goal if they don’t know what they are.

Budget can also help you minimize risk to your business. If you have plans to sign a new lease or invest in new machinery or equipment, it’s better to find out whether you have the funds to commit to the new office space or the new equipment before you commit. A budget can be used to shed light on the funds needed for labor and/or materials, total start-up costs for a new business, your costs of operations, the revenues necessary to support the business and a realistic estimate of expected profits.

Once a budget is developed, it is important to use it to track actual expenditures and revenues each month so that you know whether you’re on target. If you’re missing the targets set out in your budget, you can use the budget to troubleshoot by figuring out how you can reduce expenses, increase sales by more aggressive marketing, or lowering your profit expectations.

A budget allows you to plan and adjust. It allows you to evaluate whether you can afford to hire that superstar, or to seize that attractive opportunity that could open up your business to a whole new world. Without a budget, it’s like shooting in the dark – you hope you are shooting straight but you don’t. Contact us to schedule a complimentary consultation.

By CFOconnections

Seizing Your Next Opportunity with Ease

A recent experience in CFO Connections brings me back to my child hood and it reminds me that listening to my parents has really served me well in life. I didn’t know my mother was a wise woman until years later when I look back on my life experiences. I now realize that she was steering me and showing me a better way to do things and to live life. She wanted me to learn from her life experiences so that I can make better decisions in life. I would often hear her say, “Some mistakes you just don’t want to make yourself. Sometimes, it is better to learn from other people’s mistakes.” How does that translate into the business world?

An entrepreneur with a brilliant idea put the wheels in motion a few years ago and it has grown tremendously into a second stage company with investors knocking on its doors. Recently, the founder of the company decided that he would take the company public. You ask, “hey, it all sounds great, so where is the problem?” Well, in order to go public, the company must have audited financial statements and the company plans to go public within a couple of months. This is already a challenging time frame for companies having their accounting records in tip top shape. Unfortunately, for this particular company, the accounting function was largely ignored for the past few years. With investors and underwriters pushing to move quickly and the company’s auditors in their busy audit season (so their time comes at a premium), the company must now frantically catch up in order to meet its goal of going public in a short period of time. Racing against time and pressure from investors and underwriters, the company hired a part time CFO to steer the company towards the right direction. Next, the part time CFO hired three accountants with different expertise to clean up the accounting for the past few years. This process has been costly and time consuming. Additionally, since the accounting function was largely ignored in the past, the company is also not in compliance with multi-states sales tax reporting and collections (and interest and penalties are accruing in the meantime) and its income tax filings. There are also no processes and procedures in placed with regards to internal control. Needless to say, it has been almost five months since the wheels have been put in motion and it is still a long road ahead for the company to reach its goal.

How would the alternative be different for the company? Having strong accounting leadership and an accounting team may be costly. After all, talents who can provide strategic leadership and help a company grow don’t come cheap. However, this is an investment that will generate returns many times over for a company. Taking a proactive approach on accounting means that it is less likely for a company to fall out of compliance. Being diligent in accounting also means that a company has time on its side. For example, for this particular company, it would have allowed them to strategically time the execution of the audits of its financial statements during off-season at a lower price tag. Most importantly, it allows a company to strike while the iron is hot. Opportunities don’t come often and money doesn’t have patience. This is especially true in these scenarios:

  • Investors knocking on your door – they love your idea and entrepreneurial spirit but also want to know that your company is making money
  • You decide to sell the company in the next few years – the buyer wants to know that your business is profitable
  • You have just secured a large customer and need funding from a bank to hire more people, buy more equipment, manufacture additional inventory, or acquire a new facility
  • You see opportunities and advantages in buying your competitors – you need funding in order to make it a reality

“When people tell me they’ve learned from experience. I tell them the trick is to learn from other people’s experience” – Warren Buffett

Which one are you? At CFO Connections, we are passionate in learning from each other and helping you grow. We know you have big plans ahead. Wouldn’t it be nice to know for certain that you will be able to realize those plans without the constraint of time and money? Let us help you seize your next opportunity. Contact us now.

By CFOconnections

Entrepreneur Accounting

Steve Case, AOL founder and venture capitalist, is convinced the future of American startups lies outside of Silicon Valley. In April, he’ll head to Florida and Puerto Rico to prove it.

Source: https://www.businessinsider.com/steve-case-rise-of-the-rest-florida-puerto-rico-2019-2

You had a great idea that solves a huge problem many people have. You thought to yourself, “I’m going to solve this and make this problem go away”! You drew up a business plan, picked up the phone and lined up suppliers and business allies, got your spouse’s support, and BOOM! You did it! You are now an entrepreneur.

Despite accounting’s boring reputation, however, it can’t be emphasized too much how essential it is that your business follow accounting’s best practices right from the start. In fact, financial mismanagement is an oft-cited reason for business failure. An influential study by CB Insights of 101 failed startups found that cash flow was the No. 2 reason why some of those small businesses failed, and was second only to businesses trying to sell a product that their market didn’t need.

So, whether you’re a bootstrapped startup or you’ve secured funding, pay very close attention to proactively managing your business’s cash as it ebbs and flows. That kind of attention is vital for both long and short-term success.

Doing it right from the get-go!

Building a strong and accurate foundation is an absolute investment in your business success. From selecting the right accounting software to understanding the stories behind your financial reports, an experienced accounting professional can provide the guidance you need to help you make the right decisions. You are good at what you do, and you want to nurture it with your time and energy. So why won’t you hire a professional and let them take care of the accounting for you? Investing in your accounting and finance function from the beginning will save you a lot of stress, time and money down the road. It’s an investment that will prove valuable as you grow and build your legacy.

Don’t let growing pain stop you!

Your business is taking off and you are making a name for yourself. Customers want more of what you offer, and investors want in as your business partners. On top of that, you can’t keep doing the job of a 3-person team anymore. You need to hire! Growing pain is a necessary part of the growing process but it doesn’t have to be stressful if you make the investment at the beginning. If your accounting and finances are in order, you will be able to strike while the iron is hot by producing timely AND accurate financial statements to investors. Accurate financial information can also help you dial into your cash flows patterns, determine pricing, evaluate how big of a team you need to build and how much to pay them. Your early investment in accounting will deliver the vital information to you so that you can decide on the right commitment to make in this crucial phase of your business.

Key to Your Legacy!

Investing in a strong accounting function is one of the best ways to create value in your business. It shows that you are a goal and growth-oriented business owner and sets yourself apart from your competition. Business owners who invest in building a strong accounting function are often able to maximize the value of the business and reap dividends at the time of exit. This is because the business has good cash flows, effective internal controls, timely AND accurate financial information, audited financial statements and strong financial leadership. Your CFO should be able to quarterback your exit planning process by gathering a team of professionals to help you mitigate tax impacts of the transaction, wealth preservation and transfer, asset protection and charitable giving, etc. Finance and accounting professionals have a knack in understanding and assessing the capabilities of other professionals. They are often more conservative, level-headed, complimenting the skillsets of the business owners.

Final Thoughts

No matter what type of business you run, never underestimate the importance of employing accounting best practices for your business from the very start. This may not seem like the top priority in the early stages of your startup, but as your business grows and demands more of your time, effective accounting and cash-flow management structures will become critical to your business’ ability to scale.

At CFO Connections, we are entrepreneurs with 20 years of accounting and finance experience. We feel the excitement and growing pains you feel because we’ve been there. We know that entrepreneurs at different stages of their business often invest differently in their accounting functions. Therefore, we have options for you to choose from that best compliment your desired level of investment. Make the investment right now and watch your business reap its benefits in the years to come.

Contact us.

By CFOconnections

Are your financial resolutions for your business going to stick this year?

Happy New Year! Now that the ball has dropped and the celebrations are settled, it’s time to get started on your resolutions. Some people want to lose a few pounds and eat more healthy. Perhaps you want to spend more time with friends and family? If you are a business owner, do you have financial resolutions for your business? Much like personal resolutions, most people don’t stick to them and by February, they are back to their old habits when the fun and newness wear out. Here are our top 4 financial resolutions for growing your business in the new year.

  1. Assess your current situation – this is a great yearly tradition to find out where your business is – and where you want to be. Ideally, businesses should take a look at where they’ve been in early January. How did it do compare to forecast? Every business should have a forecast because it gives us clues as to what worked and what didn’t. It also tells us where we made the most of our money. Doing this will allow businesses to set goals that they have the best chance to accomplish this year.
  2. Look at last year’s spending – did your money go where you really wanted it to go? If it didn’t, it will if you spend it mindfully. That means making spending decisions in the context of your goals. If one of your top goals is to expand the commercial line of your business, do you need to spend more on marketing to that segment of your business? Does that mean spending less on residential marketing? Spending mindfully may require you to reprioritize spending and being more aware of patterns. This will help you make better spending decisions every year.
  3. Forecast your cash flows – this is perhaps one of the most important things to have in order to run your business and stay ahead of the game. After assessing your current situation, looking at last year’s spending and setting goals for this year, do you have the cash flows you need in order to accomplish your goals? Forecasting your cash flows will help you see whether there are gaps in your cash flows or excess capacity. Having that knowledge is crucial because it helps you determine whether you need to supplement your organic cash flows with outside funding. The sooner you discover gaps in cash flows, the better negotiating power you will have with lenders. If you have excess cash flows, you may be able to take advantage of discounts, pay off debts or invest to earn some interests.
  4. Talk to your CPA periodically – this is an important preventative financial maintenance you can do to ensure the financial health of your business. Don’t wait till there is an emergency to talk to your CPA. Much like going to the emergency room, it is often stressful and expensive when an emergency brings you to see the doctor. Financial emergencies (e.g. embezzlement, lack of accurate and timely financial information, unexpected cash flows shortfall, unexpectedly high tax bill, unprepared for a financial audit, etc.) put you and your business in a stressful and expensive situation. The key is to minimize stressing your businesses from these emergencies by focusing your effort throughout the year. Your CPA can also help you carry out these financial resolutions for your business and set you up for success for the year.

Like the old saying “To know where you are going, you have to know where you’ve been”. So, look back, assess, evaluate; then look forward, put a plan together, engage your CPA to help guide you along the way and you are already many steps ahead of your competitors. At CFO Connections, we pride ourselves on being the financial compass for businesses. We’ve transformed chaos into stability for many businesses in Tampa and beyond. We love sharing best practices with business owners. To help you kick start and stick to your new year financial resolutions, we offer a one-hour complimentary consultation. Please click here if you want to have a successful 2019!

By CFOconnections

Tax preparers, auditors and business owners! Stress free tax filings and audits are just one-click away!

Every year CPAs bemoan the chaos and rush to file taxes and complete audits for many of their business clients. Would you prefer to have more clients with efficient tax preparation and audit engagements with high realization? How about reduced stress and pressure during busy season and delivering real benefits for the clients themselves? CPAs with clients who plan for year-end well ahead of time are much more likely to file accurate taxes, avoid fees and penalties, have adequately prepared for audits and have accurate revenue and profit projections for the new year. Also, their fees are lower, which is important to client retention. The key is organization and planning.

As a CPA, we are in the best position to help our business clients appreciate and implement a proactive year-end strategy. Not surprisingly, they come down to being proactive, being timely, and minimizing unnecessary costs. Right now, after the turkey has settled, it is the perfect time for CPAs to educate their business clients on the immense value (more than just peace of mind!) that comes with planning ahead versus scrambling to the finish.

  • Cost savings: What business doesn’t like to save money? Planning ahead saves on CPA fees and ensures the business is not paying more than it needs to due to lack of time to weigh all of the filing options and scenarios. And don’t forget the savings from avoiding penalties and fees!
  • Time savings: By adequately preparing for audits, it means proactively anticipating the accounting and auditing issues the auditors care about. Talking to your auditors right now means no surprise during the audits, and that translates to efficiency – giving business owners and CFOs the time to focus their effort on growing the business rather than handling compliance issue.
  • Positive impacts on business credit: Tax returns and audited financial statements are essential credit-scoring components, which are central to fueling long-term growth. Failing to plan ahead raises the chances of inaccuracies and errors on tax returns and financial statements, which can result in negative marks on an organization’s credit-worthiness and stifle future growth potential!

Identifying inefficient clients is the easy part; helping them change their perspective and culture isn’t. Here are some best practices I’ve learned from my own experience with my clients that can help businesses you serve transition smoothly to a timely year-end filing mentality:

  • Close the books regularly — ideally on a monthly cadence. Entering transactions throughout the year and closing monthly (completing reconciliations of bank accounts and other balance sheet accounts such as prepaids and accruals) helps to develop a rhythm of your closing process over time, and avoid the stress and mistakes that often result from trying to close out your books once a year. Our experience is this monthly cadence almost always is a lower-cost approach to accounting. Encourage your clients to close their books more frequently, and ideally monthly.
  • Review the numbers and project — at least quarterly. Being disciplined and planning ahead can make the difference between surviving and growing. Companies should use historical information as basis for planning ahead. Having regular internal financial discussions about history, targets and projections is essential if companies want to grow with purpose. CPAs don’t need to be in these meetings, but encouraging your clients to have these reviews will help them get ahead of their numbers. It will help your clients start looking forward.
  • Reflect upon and forecast where an organization will end the year. Remember that a proactive year-end approach requires leveraging a business’s team to their fullest — and everyone has an important role to play. Management or owners should meet at least once a quarter with the accounting team to review past results. This allows the companies to make necessary adjustments to operations going forward. Owners and management should also meet with their tax accountants and auditors twice a year. This allows the companies to find out what their tax accountants and auditors need and gather and have them ready.
  • Make a year-end checklist. CPAs love checklists! They ensure that nothing gets missed. Companies can also benefit from a year-end checklist. This helps them avoid surprises at the last minute and ensure that they have a plan to execute year-end responsibilities smoothly and accurately. At CFO Connections, we began providing our clients a checklist to help them prepare for year end planning. E-mail us to receive a copy so you can give it to your clients.

The bottom line is that planning and operating proactively for year-end is a best-practice approach for success. Doing so leads to many benefits, including timely and accurate filing of tax returns and completion of audit, lower filing costs and audit fees, the elimination of penalties and fees, and better overall business planning. Looking forward, and not just backward, is a key factor for robust company growth. Importantly, if you can help a client change their culture in this way, they will continue to see your CPA firm as a valuable partner as opposed to a necessary expense.

At CFO Connections, our background as auditors allows us to know first-hand how a company can prepare for an efficient audit and reduce audit fees. We now serve as audit liaison for companies who work with auditors on their annual audits. We management a company’s audit process and help them anticipate important accounting and audit issues to avoid significant auditors’ adjustments and last minute surprises. We also help companies with their year end closings and work hand in hand with their tax accountants in seeking out additional tax savings opportunities before the year ends. To learn more about what we can do for you and your clients, please visit our website or e-mail us for a complimentary consultation.

 

 

By CFOconnections

The 3C’s to Better Credit – the Lenders Edition

On September 26, 2018, the Federal Reserve raised interest rate by 0.25%. That brings prime rate to 5.25%. Rate has been increasing at 0.25% interval at each quarter this year. I recently presented the 3 C’s to Better Credit in front of local business owners and arming them with valuable information on how to prepare themselves before talking to lenders. The best time to talk to lenders is NOW before rate continues to rise again and the cost of borrowing becomes a factor hindering growth. This could put a stop to growth plan and ultimately lead to layoff or going out of business.

Recently, I attended a panel discussion at the Commercial Finance Association in Tampa and asked the panelists (bankers and alternative funding professionals) this very important question. The answer not only doesn’t surprise me, it confirms what I have always believed that being proactive is always the best approach.

I asked that if businesses are planning on obtaining a loan, are there things that they can do to prepare themselves, not only to set themselves apart from their competitors but also would enable them to get financing quickly and with less frustration? The panelists responded that business owners should ensure that the business’s accounting and finance are in order. It is important to know that underwriters don’t begin the process of their evaluation and risk assessment until ALL requested information, both financial and non-financial, is received. Underwriters need to see the complete picture when forming those analysis. If business owners are not prepared, they could run into problems at the 11th hour and causing significant delay or even denial to much needed capital.

At CFO Connections, we educate business owners on the 3 C’s to Better Credit:

  • Credibility – show lenders you are serious by doing your own due diligence and get your accounting and finance in order and up to date. This could include doing a public record search on any potential outstanding lien and updating corporate records and creating a short list of vendors that may be a good fit based on service level, industries served, terms, or even locations, ensuring accounting records are up to date and having a deadline driven month end closing schedule.
  • Cash flows – use processes and systems to build consistent and predictable cash flows. Lenders need to know that a business can make payments on its debt. When a business has these processes and systems, it speaks to its ability to service the debt, and therefore, instantly attracts lenders’ attention.
  • Control – use effective internal control to protect cash flows and assets used as collaterals. Having all the cash flows in the world doesn’t mean much if they were threatened by fraud and embezzlement because of lack of internal control. By the way, 42% of small businesses with less than 100 employees are more susceptible to fraud as a result of lack of internal control, compared to businesses with more than 100 employees. Losses suffered by these smaller businesses are twice as much (approx. $200k) as that in larger businesses (approx. $104k).

We provide these services to business owners to help them proactively manage growth in their business. We believe that in doing so, it puts them ahead of their competition and makes them instantly appear more attractive to lenders. When a business is credible, has cash flows and controls to mitigate fraud, it becomes easier and quicker for lenders to make the important decisions, saving them more energy to work on the next deal.

If you are working with prospects or clients that are struggling to provide you the information you need, we can help smooth out that process by helping them strengthen the 3 C’s. Please reach out to us so that we can better help you and your clients and prospects. E-mail to [email protected]

By CFOconnections

Growing Your Business in a Rising Rate Environment

In June 2018, Federal Reserve Chairman Jerome Powell spoke at a news conference. Mr. Powell said that the economy had strengthened significantly since the 2008 financial crisis. Mr. Powell signals that rate could go up twice again during the remainder of 2018 and again in 2019. The Wall Street Journal prime rate currently sits at 5%, up 0.75% from a year ago.

It is certainly good news that our economy is strong but what does that mean for businesses that need to borrow to grow? Here is what commercial lenders recommend: be proactive and start talking to lenders now.

Applying for a business loan is not any different from applying for a mortgage. You fill out an application, provide the necessary documents, and wait for a call from the mortgage company. You anxiously wait for that call and when you finally hear from the mortgage company, 9 times out of 10, it isn’t a go right from the beginning. The mortgage company has done the due diligence on you and is now requiring you to clean up your record before giving you the green light. If that isn’t stressful enough, you now are concerned that your dream house could be off the market in the time that it takes you to “get everything nice and pretty”. Does this scenario sound familiar to you?

Commercial lenders use a similar approach when evaluating companies applying for loans. You can be certain that one of the companies is likely your competitor. How do you position yourself at the front of the pack to get the lenders’ attention? The key is to understand what kind of due diligence they perform to uncover the weaknesses in your businesses. Wouldn’t you, as the business owner or CFO of the company, like to know those weaknesses and proactively correct them before going to the lenders? In addition, lenders use the 5 C’s approach to size you up against other companies vying for capital to grow their businesses. They use them to evaluate your ability to service the loan and the strength of your collaterals, among other things.

Time is money. That rings even more true when growing your business in a rising rate environment.

  1. Do you have a growth plan in the next few years that requires capital to bring it to fruition?
  2. Do you want to attract lenders’ attention and obtain the most favorable terms?
  3. Do you want to be your industry’s leader?

We are passionate about helping businesses grow. At CFO Connections, we help business owners become less anxious about time and money. We help businesses rise to the top of their game by improving cash flows, and building and protecting business value. If you answer YES to any of these questions, please contact us and we will stop by for a complimentary visit!

By CFOconnections

Are you profitable on paper and have no cash in the bank? 7 ways to tackle the problem that kills 1 out of 4 small businesses

At CFO Connections, we help business owners feel less anxious about time and money!

It is three days before payroll and you are having a hard time coming up with the cash to pay your employees. You know your business is profitable so how is it that you don’t have the cash to meet your obligations. I hear this a lot from bankers, business owners and general managers.

It all comes down to managing the timing of cash inflows and outflows. Here are 7 strategies to maximize the conversion from profit to cash.

  1. Get paid quicker! Try setting up payment terms to incentivize customers to pay early. Also, actively monitor customer balances and stick to your credit policy. Another consideration is to develop business relationship with un-creditworthy customers who most likely would be required to prepay for services or products because it is less likely that they are being serviced by your competitors.
  2. Take advantage of payment terms! Depending on how strong your cash position is, you should consider either utilizing the full credit term provided by your vendors or pay your vendors early to get early payment discount.
  3. Watch your inventory level! If your business has inventory, it is especially crucial to watch for excessive inventory level. If you just landed a big sale that requires you to purchase additional inventory, think about requiring the customer provide a down payment against the inventory purchase to relief the burden on your business’s cash flows.
  4. Buy or finance? Consider buying appreciating assets such as real estate and finance or lease depreciating assets such as trucks, machines, etc. to keep more capital in the business. Consider utilizing a loan that matches the useful life of the asset and make sure there are sufficient cash flows to service the debt.
  5. Plan and monitor! All businesses should use cash forecast for at least 12 months on a rolling forward basis. It is also important to monitor the results, update as conditions warrant and have a plan B to address shortfalls well before they occur. Have you considered a line of credit from a financial institution? How about alternative financing such as asset based lending (ABL), receivables factoring, or purchase order financing, or a combination of the two?
  6. Reinvestment vs. return! It is natural for business owners to want to receive cash flows from the business as a return of their investment. However, depending on the maturity of the business, profit distributions should be balanced with reinvesting in the business, paying down debt, and improving resilience.
  7. Crunch the ratios! Are you monitoring the KPI around cash flows management? Do you know what your debt service ratio is? How about your liquidity ratios?

At CFO Connections, we have experienced CFOs who have helped business owners feel less anxious about time and money. Don’t let your business become that 1 out of 4 businesses that failed. If you are interested in learning more about these strategies and how you can implement them in your business, give us a call at 813-508-5846 for a complimentary consultation or e-mail us here.