Shaking the shoebox

January 26th, 2011

Every so often, I have a flashback to my first job at General Electric. I was a financial analyst in one of the company’s old industrial businesses—a multibillion dollar firm that would have ranked as one of the Fortune 500 if it was a stand-alone company.

Like clockwork in April, we’d hear it-it would start as a distant rattling, but as it approached, you knew what it was… the shaking shoebox. The shaking shoebox meant one thing– fess up all the extra pens, pencils, and highlighters in your desk drawers. They were going back into the supply cabinet.

The shaker of the shoebox was our department Admin. She was like the tax collector of office supplies. If you didn’t fess up enough, she’d eye your drawer to see what you were hiding.

No joke.

She took her job as the supply-cabinet gatekeeper very seriously. You wanted a mechanical pencil instead of good ole’ yellow No.2 ? You have to personally ask her for it and you were only allowed ONE. If you came back in two weeks for a second, you had to account for the demise of the first. (“The CFO took it” always worked for me.)

Did I mention that this was a multi-BILLION dollar business?

Did they really care so much about measly office supplies? Apparently so.

So where is the lesson in all of this?

1—Beware of shoebox-wielding Admins.

2—Take every pencil seriously. Have you ever looked at your office supply expenses? Do you really know where all the money went? When I ask my clients why office supplies have gone up 20 percent over the past year, practically none of them could explain what they spent the incremental money on. Staples® contributes to the big black hole in most business’ P&L– Office Supplies. It sucks a few thousand dollars every year out of a business’ profit. (I am sure they like it that way too!) Even if you saved a few hundred dollars from office supplies and upgraded your software or sunk that into a new marketing piece, wouldn’t you get a better bang for your buck?

So maybe it’s time to do a little experiment of your own. Pull out your shoebox, and make the rounds in your office. If you come up with a full box, it is probably a sign that you might have other “pen- and-pencil” type saving opportunities in the business. Think about what other metaphorical shoeboxes you can shake—who knows, you may come up with serious savings!

Posted in Cost Cutting, Recession Busters | No Comments »

Budgeting is sooo 2010

January 19th, 2011

GPS and map

If you’re like me, you’ve gotten dozens of emails about why you should set up a budget for 2011.

The word “budget” often spurs a collective groan. It sounds so restrictive. Not to mention the effort that needs to go in to putting one together and the tediousness of all that number crunching. No thanks.

We agree. Coming from the Fortune 100 world, where the budgeting process could last 3 months or longer we are disenchanted with budgets too, especially because the numbers were often obsolete before the ink dried on the fancy presentation binders!

For nimble small and mid-sized businesses we believe in dynamic planning. Set a course and then adjust it to account for what happens throughout the year. Like a GPS.

Here are our tips for painless planning in 2011:

Think it through. A budget doesn’t have to be restrictive, but it does have to be thought out well. It should account for the 4Ms of your business, Money, Manpower, Marketing and Making it Happen. For more on the 4Ms see our blog post.

Keep it simple. Really, when you think about it, only a few major things change from month to month. Maybe it is payroll costs or marketing dollars, or adding in new sales from the client you just got. Changing a few line items makes updating a plan less cumbersome—and makes you more likely to keep it current.

Keep it current and use it to course-correct. Putting together a budget isn’t a once-and-done exercise. You need to keep it updated with developments throughout the year—monthly at a minimum. You’d expect your GPS to tell you when you’ve gone off course immediately, so too, a timely and updated plan will help you identify divergence from your expectations early so you can do something about it.

Ignore “Turn around when possible.” There are times that we know shortcuts that our GPS doesn’t. Despite the GPS’s protests to go back on the designated highway we might take some back roads instead. Do you throw your GPS away when this happens? Is it useless for the rest of the trip? No! Your GPS adjusts to your new course and eventually gets you to your destination. Maybe your plan you developed in January is off-base. Even if you’ve updated your plan monthly, your business may take a whole different course during the year. It’s ok to build the “short-cuts” into your plan, just make sure that you have laid out how you plan to get to your final destination.

Stodgy, restrictive budgets are so 2010. Start the new year off on the right foot with a flexible and plan that will guide you to success throughout the year.

Posted in Forecasting, Planning, Uncategorized | No Comments »

“Keel it up!”

January 18th, 2011

Crew Team

I used to row on the crew team in college. For those of you who know me, at 5’2″ I’m not exactly the typical long and lanky rower-type. Despite my lack of height we did pretty well for a bunch of novices—and even won some regional races.

But that’s beside the point.

The boats we raced had either 4 or 8 people in it and each person had one oar. When we weren’t rowing, the oars were kept flat on the water so the boat wouldn’t tip over.

Sometimes while we were sitting on the water getting instructions from our coach or waiting for our turn to line up in a race, the boat would start tipping, ever so slightly, so that we were all sitting kind of sideways a bit. It wasn’t a precarious tip—think of a slight “lean” to one side. Because our minds were elsewhere, we would unconsciously adjust our weight in our seats to compensate so we wouldn’t fall out.

It wasn’t until the coxswain (the person who steers the boat and gives instructions) would yell, “keel it up!” we’d snap to attention and make ever-so-slight adjustments to our oars so that the boat would sit evenly on the water. After the boat was keeled up we all realized how uncomfortable we were being off-keel.

So what’s this got to do with business?

If you’ve ever had a gut feeling that there was something wrong with your business, but you couldn’t put your finger on it or you that you have a nagging feeling that something is brewing with your market, your business may be off-keel.

It could be that sales are growing but you aren’t seeing that money in your bank account. Or your customers aren’t buying from you after their first purchase. You may be “leaning” in your business and you don’t even realize it.

The critical thing with getting back on keel is to make minor adjustments. If, when the coxswain commanded to “keel it up” one side of rowers slapped their oars in the water, the boat most certainly would have tipped over, tumbling all of us into the river.

In business, sometimes it is minor adjustments that make everything balance out.

Maybe a look at costs over time will help to identify where profit is leaking. Or a quick customer survey may help you tweak your marketing message to fulfill an unmet need. Little adjustments can have a big impact.

So take a look in your business and address what you need to get keeled up. Once you do, you’ll realize how good it is to be back in balance.

Posted in Business Model, Cost Cutting, Increase revenue | No Comments »

How well have you figured out the 4Ms of business?

January 9th, 2011

For any business to be successful, they need to have a good plan looking at the 4Ms of business:

Money. Do you have enough money so that your business is paying its own bills? Or does the owner or investors need to sink their funds into the business to keep it afloat? If you are a startup this is OK and expected—there is a lot of investment required before you make your first sale and beyond. However, for established businesses this may be a warning sign of that one of the other “Ms” isn’t working.
Manpower. Do you have the right number of people doing the right amount of work? Payroll is typically one of the largest expenses for businesses, but we are often amazed how often businesses get this wrong. Too many high-paid people doing low-level work. Inefficiencies and dead wood. Star employees with untapped talent. As Jim Collins says in his book Good to Great, “get the right people on the bus, the wrong people off the bus, and the right people in the right seats.” Get the Manpower equation right and watch your business grow.
Marketing. Fancy brochures? Great. Website with Flash? Wonderful. Nobody buying what you are selling? That’s a problem. Beyond the fancy collateral, how often have you stopped to find out why customers buy from you? What is the value you bring to your customers and how much are they willing to pay for it? Have you defined who is your ideal client and how will you reach them?
Making it Happen. This is your operating plan. Can you deliver what you said you can and how much will it cost to do so? Will there be enough cash to pay the bills? If not, go back to #1 and repeat. Unfulfilled customer orders, bad customer service, poor quality all can drive a customer away. Great customer service is wonderful, but if it costs you more to deliver your product or service than the price you charge that can lead to serious problems.

The rule for the 4Ms is review, revise and repeat. As you kick off the new year, how are you planning for the 4Ms?

Posted in Business Model, Cash Flow, Labor, Planning, Pricing | 2 Comments »

Profit Point Launches $econd Opinion Service

November 29th, 2010

We often run into clients who wonder if their bookkeeper is entering transactions correctly, or if their accountant is capturing all deductions available, or they just want to check on their business’ profitability before year-end—and they don’t want to switch current financial service providers.

In response, Profit Point has launched a new service called $econd Opinion.

Included in our $econd Opinion Service is:

A review of clients’ QuickBooks file
A review of last year’s tax return
A high-level analysis of clients’ financial statements

We’ll meet with the client to discuss our findings and we’ll give them specific recommendations that they can use to:

Improve the information they get out of QuickBooks
Minimize the taxes they pay
Increase profitability and cash flow

We’ll also let them know if their current provider is doing just fine. The service can be customized for each client and is much more affordable than calling in separate consultants. Depending on what services the client selects, they can get advice from a Controller, CPA and CFO for less than $500.

There is no further obligation or sales pitch involved—just our honest opinion.

If you are interested in learning more, contact us.

Posted in Profit Point Announcements, Uncategorized | No Comments »

Your most important information may not be in QuickBooks

November 10th, 2010

If you are puzzled by your profitability, looking at your P&L will give you only part of your answer. If you are trying to figure out why you are not making any more money even though your sales are increasing, or if your bottom line hasn’t moved from the last few years, here are some tips to think outside of the QuickBooks “box.”

Financial Statements are a look in the rearview mirror: They are a print-out of what happened in a given time period—expressed in dollars and cents. If you hired someone, you will see an increase in salary and a reduction in profits. Likewise, an equipment purchase will show up on your balance sheet along with the way you paid for it, a reduction in cash or an increase in loans. This information is useful, but it may not tell you the whole story.

Look beyond the dollar signs: Data from your day-to-day operations (not normally in QuickBooks) gives you equally useful information. Things like measuring output for a given employee, reduced production time gained with the new piece of equipment, or even something like customer turnover. If you were just looking at these measures, however, you might be missing the other half of the story—the translation into revenues, profitability or improved cash flow.

So if you marry up the financial and operational data what do you get? Real information.

Like peanut butter and chocolate, they were meant to go together.

In technical terms, these measurements are often called Key Performance Indicators (or KPIs). They give you insight as to how well your business is being run, not just how profitable it is. Each industry and business has a few KPIs that are leading indicators—they help business owner’s spot trouble before it begins. Maybe a decline in revenues means you should reduce headcount, maybe a higher customer turnover rate means that profits will begin to decline because it costs more to acquire new customers. You probably know what yours are but just haven’t done the math.

KPIs will tell you more than any simple P&L or Cash Flow Statement or Balance Sheet will. So spend the time and do the math for your company—and more importantly track it. You’ll find what you thought was a good predictor of your company may not be as good as a KPI. You might also find that the KPI you use change over time. Today you measure output by employee but 6 months from now customer turnover is a better predictor. Whatever your KPI– think outside the QuickBooks box when you are determining where you want your business to go.

Posted in Planning, Recession Busters | No Comments »

Making the most of 2009’s misery

December 30th, 2009

The last holiday presents have been unwrapped—now it is time to think about wrapping up 2009. It hasn’t been a banner year for many companies but there are some things you can do to make the most of 2009′s misery and make sure you are prepared for 2010.

Here are a few things that you need to do before the end of the year:

Want cash fast? Get your books in order. If your business sustained a loss in 2009, you want to get your books in order so that you can quickly turn them over to your accountant and get your rebate for any overpayments. To do this, reconcile your bank statements, clean up your chart of accounts and re-categorize anything that made it into the “Uncategorized or Miscellaneous Expenses.” You will save a lot of money by doing this yourself before you turn your books over to your accountant. If you are at a loss on where to begin, book clean-ups are one of our specialties. We can do it at significant cost savings from having your CPA do it, and we pride ourselves in our accurate, quick turnarounds.

Call your accountant—now. There are many attractive tax incentives available that expire after December 31^st. Check with your accountant and share your preliminary results for 2009 and what you expect to happen in 2010. A little proactive planning can save you big bucks.

Put the pencil to the paper and hash out your strategic plan for 2010. These coming weeks are typically slow for most businesses and are a perfect time to reflect on the year and determine what will do differently next year. The pencil and paper (or Word document or Excel spreadsheet) is key. Don’t just think about what you are going to do, create a record of it.

Put numbers to it. Any plan in theory– good. A written plan– better. A plan with numbers in it– best. Having the discipline to set up a plan using numbers (e.g. how many customers will it take to make $X in sales, what kind of marketing expense will that require etc.) will make your plan real—and realistic. We’re big fans of dynamic budgeting—a budget that changes with reality—because we know it is an important discipline to incorporate the numbers while running your business. Ask anyone who has put together an operating budget—not only are they surprised a how much it cost to run day to day operations, but they always have an “ah-ha” moment when they see where they are spending their money. At a loss how to create a plan?

With all hope, 2010 will be a better year than 2009 for most companies. Spend the time now to plan so you can start the new year off on the right foot.

Happy New Year!

Posted in Uncategorized | No Comments »

When your customer shows sign of financial trouble

September 20th, 2009

The importance of having a strong and open relationship with your accounts in tough economic times is critical and it is important to pay attention to the warning signs in your business before they hit you where it hurts. Mary Repke, owner and “Chief Bag Lady” at Coakley Business Class, knows this first-hand. As a manufacturer of upscale professional women’s bags, Coakley relies on a series of distributors to get products to stores. When some of her distributors were experiencing financial hardships, Mary was quick to act. By doing so she minimized her exposure to customers closing their doors and jeopardizing her company’s future as well.

Mary has these suggestions to minimize risk with customers:

Pick up the phone and make the call: As you recognize that your orders are slowing down you need to contact your customers and find out what is going on with them so you can get a more clear picture of what the potential impact on you will be.

Try to collect on all open invoices according to terms.
If your customer moves toward slow pay because they can’t make a full payment, help them out by offering to take payment on a credit card or a monthly payment plan for three months (this may give them extended terms or cost you a few points, but you have a better chance of getting paid in full than not at all).

Make sure your paperwork’s on top.
Take the time to resend a billing statement with back copies of all open invoices every month.
You want your paperwork on top of their papers, not buried at the bottom.

Be the squeaky wheel.
Take the time to make collection calls. The squeaky wheel gets paid first.

Credit card only, please. If they have an opportunity to sell more of your product during this time, put all new orders on credit card only sales so you benefit from the sale and don’t incur additional risk.

Don’t over-ship–period. You know what is normal sales flow with your accounts so be very mindful of this during a recession. You don’t want to be over exposed. It’s better to reduce your minimums and get paid than have a big sale on your books that doesn’t get paid.

Do your own financial housekeeping. As your sales and revenues slow down, and your accounts begin to pay slowly, you need to immediately cut your expenses and be very mindful of what your fixed expense requirements are on a weekly and monthly basis.

Like it or not, you need to generate a few extra monthly financial reports so you can stay on top of things.
Cancel any truly unnecessary expenses or programs you have underway. Prioritize your spending by things that drive revenue.
If you do get into trouble, it is very important to take the initiative to contact your vendors and let them know about your situation. Be very honest with them and ask them to work with you as you commit to a payment plan system to continue to send them money as you receive it until you can move back into a profitable cash flow situation.
Keep focused on getting your business right-sized. Find other ways to generate income, especially if you are a start-up.

Tags: Cash Flow, defensive strategies, smart cash management
Posted in Cash Flow, Recession Busters | No Comments »

Preventing loss from bankrupt customers

September 9th, 2009

It might start with late payments, or unreturned phone calls. It might be that you had no idea there was anything wrong and you get a notice in the mail. When a customer files for bankruptcy it could have a big ripple effect throughout your organization. Here are a few tips to prevent a loss for your company:

Analyze your risk: All eggs in one basket= trouble. We all have that one gem customer that buys a lot from us, and while this steady stream of income is good it can also spell disaster if the company goes under. Do a quick sales analysis to see what percentage of your sales comes from each customer. If someone represents more than 20% look to diversify your client base.

Be proactive: Periodic credit checks may help to identify problems. The $100-$200 you spend on a credit check through Experian or Dun & Bradstreet may be pennies compared to not collecting on some of your bills. Make sure that you monitor your Accounts Receivable Aging reports and you set limits on the amount of credit you extend to your customers.

Communicate, communicate, communicate. Before any negative information shows up on your customer’s credit report you may find that keeping in touch with your client can help you see red flags of problems before they become your problem. On the upside, you may provide a solution to keep them from going under, or at least you can take preventative measures like putting them on a cash-only basis to ensure that you are not at risk.

Don’t be afraid to cut them off. There, we said it. Yes, you will lose sales—you may even have to lay people off. A non-paying customer, no matter how big they are, is bad news. You didn’t get into business to run a charity and a non-paying customer is sapping you out of both cash and profit. Try to work with them but stand your ground.

Get creative. If you are owed a lot of money, you may need to think outside of typical 30-day payment terms. Installment plans make a debt easier to pay off, especially if a customer is struggling. Beware, though, since this opens you up to risk, and you should balance your cash needs with the risk of not getting paid the full balance. This may be your only option if the customer is on the brink of bankruptcy to recoup a piece of what you are owed.

Tags: defensive strategies, smart planning
Posted in Cash Flow, Recession Busters | No Comments »

Finding Funds in the Credit Crunch

July 2nd, 2009

Will you have enough funds to take advantage of the economic upturn? Despite “green shoots” of economic recovery, one problem still persists for many small businesses: access to credit. For those businesses battered by the recession, cash can be hard to come by to fund day-to-day operations, let alone expansion. We’ve come up with a list of organizations who are lending, even in the downturn.

Banks & Credit Unions

Best for: businesses and individuals with excellent credit and collateral.
Rates: 5%-9%
Summary: You may be surprised that banks still do have money to lend, and they are eager to do so for people who qualify. The key is in having good credit and some collateral. Banks will lend owners up to 10% of sales before they look for collateral. If you want more than that, be prepared to put up your house or other asset as collateral. Before you waste your time filling out the long application only to find out you don’t qualify, put together an executive summary about your business, detailing your loan request. Be specific. Outline how much you need, what you need the money for, and what you are offering as collateral. If you are a majority owner of the business, you should include a personal financial statement that lays out what you own and what you owe since ultimately you will be guaranteeing the loan. Then go to the banks and pre-screen them to see if you would meet their standards.

SBA Loans

Best for: Businesses and individuals who are borderline qualifiers for traditional lines/loans
Rates: 5%-9%
Summary: If your bank isn’t comfortable underwriting your loan on its own, you may qualify for any one of the SBA programs. You still apply through your bank, and the SBA will back up to 90% of your loan. Don’t be wooed into thinking this is easy money. Most banks look at the SBA as an insurance policy, and the application process can be complicated. If there is a mistake made in the application process, and the loan goes south, the SBA could back out of its obligation. There are different loans and line of credit programs, including a new program to lend up to $35K to meet current debt obligations.

On Deck Capital

Best for: Retail shops with strong cash flow, in business for more than 1 year
Rates: 18%-36%
Summary: Unlike other lenders we feature here, On Deck Capital does not rely on the owner’s credit to make its decision. Instead, they look at the strength of the company’s cash flow. provides a quick infusion of cash into retail businesses that have strong cash flow. They extend loans up to $100,000 to retailers and arrange repayment by weekly draws from your checking account. This alternative may prove to be better than a credit card, but not by much given the steep rates. When you can’t qualify for traditional credit, OnDeck’s quick loan decisions and 7 day fund transfers may just be the cash boost you need to avoid a major crisis.

NJ Economic Development Authority

Best for: Businesses who have been established for at least 1-2 years, good credit
Rates: As low as 5% + application, closing, and commitment fees which can equal >2%
Summary: The NJ Economic Development Authority, like the SBA, has a number of programs available for small to mid-sized businesses. Some are direct loans from the EDA while others are guarantees to the banks to encourage lending. Loans can range from $25,000 to $2.5MM depending on what the money will be used for. There are special programs for job creation, capital investment, and urban development. Although the interest rates are low, the fees for these programs can make this an expensive option, depending on the size of the loan.

Peer-to-Peer Lending

Best for: Established businesses who need up to $25,000 and a quick decision
Rates: 7.5%-18%
Summary: Companies like Lending Club and Pertuity Direct offer unsecured loans for borrowers with a good credit history. Minimum credit scores that are required are about 660 and up. P2P might be an alternative if you are a credit-worthy borrower who needs a small amount of money and you don’t qualify for traditional loans. The loans are 3-year term loans, which makes monthly payment a bit easier to digest from a cash flow perspective.

Factoring:

Best for: Businesses with receivables from large companies.
Rates:2%- 30% (depending on length of time it takes for them to collect on invoice)
Summary: Factoring is when you sell your accounts receivables to another company called a factor in exchange for cash. The factor will pay you a portion of the invoice upfront and will take a percentage based on when the customer pays the invoice. Many factoring companies require that you sign a 6 month to 1 year contract and factor all invoices through them. This could mean that you can give 3% or more up on each invoice that gets processed through the factor. are not interests in one-off invoice factoring and some require that they receive a minimum percentage annually. This can be an unpredictable and costly way to get cash, however it could be a last resort. Beware, however, that factors take some time to set up because in essence, you are having all invoices sent to the factor and they become the payee and then forward you the cash. Factors will look at your customer’s creditworthiness in order to determine your fee structure. The longer the invoice is outstanding with the factor the less you collect in the end.

Non-profits:

Best for: Businesses who do not qualify for traditional loans
Rates: 2%-10%+
Summary: There are a number of non-profits that are lending to small businesses who do not qualify for traditional bank loans. Loans or lines of credit issued by these institutions range from $500- $50,000 and carry an interest rate up to 10%. The Greater Newark Business Development Consortium’s (GNBDC) focus is on financing small business growth and development, specifically those owned by minority, women and low-income entrepreneurs possessing the capability to operate successful business concerns. The Union County Economic Development Corporation (UCEDC) offers microloans up to $35K for startup financing and gap financing for existing businesses throughout New Jersey. Both organizations also offer valuable training classes for continued professional development of their leaders. Be prepared to provide a complete and compelling loan package to these organizations, including financial projections and a well-thought-out executive summary.

Tags: Cash Flow, loans
Posted in Cash Flow, Planning | No Comments »

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