Slow paying customers, seasonal revenue variations, an unexpected downturn in sales, higher expenses — any number of business conditions can contribute to a cash flow crunch. If you own a small business, you may find the suggestions that follow helpful in minimizing cash flow problems.

Billing and collections. Your employees need to work with clear guidelines. If you don’t have a standardized process for billing and collections, make it a priority to develop one. Consider sending invoices electronically instead of by mail. And encourage customers to pay via electronic funds transfer rather than by check. If you don’t offer a discount for timely payment, consider adding one to your payment terms.

Expense management. Know when bills are due. As often as possible, pay suppliers within the period that allows you to take advantage of any prompt-payment incentives. Remember that foregoing a discount in order to pay later is essentially financing your purchase.

Take another look at your costs for ongoing goods and services, including telecommunications, shipping and delivery, utilities, etc. If you or your employees travel frequently for in-person meetings, consider holding more web conferences to reduce costs.

Inventory. Focus on inventory management, if applicable, to avoid tying up cash unnecessarily. Determine the minimum quantities you need to keep on hand to promptly serve customers. Systematically track inventory levels to avoid overbuying.

Debt management. Consider how you use credit. Before you commit to financing, compare terms from more than one lender and keep the amount to a manageable level. For flexibility, consider establishing a line of credit if you do not already have one. You will be charged interest only on the amount drawn from the credit line.

Control taxes. Make sure you are taking advantage of available tax breaks, such as the Section 179 deduction for equipment purchases, to limit taxes.

Develop a cash flow budget. Projecting monthly or weekly cash inflows and outflows gives you a critical snapshot of your business’s cash position and shows whether you’ll have enough cash on hand to meet your company’s needs.

Don’t get left behind. Contact us today to discover how we can help you keep your business on the right track. Don’t wait, give us a call today.

Find out how you can save time and stop worrying about the numbers and leave the accounting to us! Call our Fort Smith, AR accounting firm* today at 479-242-1236 or request a consultation.

To lease . . . or not to lease. This is an issue business owners often face. If you are weighing the pros and cons of leasing versus buying, here are some things to keep in mind.

Cost
Evaluating costs is more complicated than comparing the price of leasing a piece of equipment versus its purchase price. You will also want to consider these issues:

• How soon will the equipment need to be upgraded or replaced? Highly technical or specialized equipment becomes obsolete quickly and may be a good candidate for leasing.
• How will you arrange for service and repair? Leasing arrangements often include maintenance of the equipment. If you’re thinking of buying, research the equipment’s repair history as well as the cost and availability of reliable service.
• How long will you need the equipment? If your use will be short term, then leasing may be the better option.

Cash
If you’ve been leasing your equipment, then your costs have been predictable. Purchasing equipment can substantially alter your cash flow. Be sure you consider how purchasing your equipment might affect your business’ finances.

• Can you save money by buying or leasing equipment? If — and when — cash savings will be realized is an important factor for you to weigh.
• Do you have the cash available to purchase the equipment? If you use cash for a down payment, you may have less cash for operating and other business expenses.
• How will financing your equipment purchases affect your ability to get credit for other things? If you anticipate having future credit needs, you may want to avoid adding equipment loans to your current debt load.

If you’re weighing leasing versus buying, give us a call. We can help you look at how the various options will play out.

Find out how you can save time and stop worrying about the numbers and leave the accounting to us! Call our Fort Smith, AR accounting firm* today at 479-242-1236 or request a consultation.

We at ValueMetrik CFO want to send a shout out to all our community bankers here in the Arkansas River Valley and across the country.  We all know that healthcare professionals around the country are on the front line of this war against COVID19 and that they are our true heroes.  However, our bankers have been brought into the battle of helping small businesses survive over the last couple of weeks, and they have emerged as our “small business heroes.”

Bankers have been put in a very difficult position recently.  It’s almost as if there’s no way for our community bankers to win in this situation.  Their small business customers are flooding in loan applications requesting funding immediately while banks generally are not staffed to handle the surge in volume and the rules surrounding the new loan program have been a challenge to digest.

It’s been a “pressure-cooker” situation for bankers to be sure.  We at ValueMetrik CFO, like many other financial management consultants and accountants have been coordinating with many bankers and small businesses in our area to help arrange loans under the new Paycheck Protection Program (PPP) recently.  Throughout, we’ve witnessed bankers going above and beyond to do everything they can to be responsive to the needs of their small business customers. Bankers have been working long days. Most of them worked all weekend last weekend, so many have been working for 10 days, straight, as of the date of this message.

Bankers will get this job done for their customers. But even after doing all the work and figuring out all the new rules, let’s face it, this is not a hugely desirable rush of business for banks.  That is, bankers are straining to make all these loans that stand to generate only very low amounts of interest income. The interest rates are extremely low and many of the loans may only be on the books for two or three months.  As a former banker, I know that’s not a way for banks to make money, so it seems there’s little, if any, financial upside for banks in making PPP loans.

That being the case, PPP loans are one thing bankers are working their butts off for really just to serve others, and we want them to know we appreciate them for that.  Concerning is that, instead of receiving praise and “thank you” right now, we suspect most of them are just on the receiving end of frustration and complaints from impatient, if not desperate, business owners.

It’s understandable because small business owners are nervous, upset, and scared about the uncertainty surrounding us right now.  But we at ValueMetrik CFO have been so impressed by the efforts we’ve witnessed recently by our community bankers to rise to the challenge.  We appreciate their efforts and we know they are doing their best to take care of our small business community. In our view, they are motivated not by an opportunity to make money, but by their sense of duty to our community and their desire to be a part of the solution.  Bankers are working to do the right thing regardless of the unprecedented risk they may be taking in making these loans and regardless of a general lack of appreciation for their efforts.

For those reasons, we think our small business community should see our bankers as the small business heroes they are and go out of their way to support and thank our community bankers for putting forth so much effort to help us fight this battle.  But, hey, don’t pick up the phone and call our bankers to thank them right now… they don’t have time to chit chat. Don’t flood their inboxes with long “thank you” emails. Instead, just be patient. Know they are working hard for you right now. They are very aware of how time is of the essence in getting PPP loans out to small businesses.  Respond to their requests for information as quickly as possible and be kind and courteous in your communication. Let them know you appreciate them by the way you interact with them while they’re working their butts off for you. Then, when the moment is right… and you’ll know when that is, please be sure to express appreciation for all their efforts.

Take Care and Be Safe,

Darren Brewer, ValueMetrikCFO

It’s a given that businesses need to be profitable to survive. A key element in making a profit is pricing. Here are some suggestions that can help you get your pricing right.

Identify Your Costs

If you don’t know what your product’s or service’s total costs are, you can’t price them accurately. What makes up total cost? The components may include:

• Cost of materials or merchandise
• Labor costs, including salaries plus benefits
• Overhead costs, such as taxes, rent, insurance, marketing, utilities, and transportation

Determining how much you need to charge just to cover your costs is an essential first step in setting prices. Be sure to reevaluate your costs regularly. If you are experiencing difficulty moving certain products at an acceptable profit, your costs could be too high.

Know Your Customers

Customers generally fall into distinct categories. Some are very price sensitive. Others focus less on price and more on convenience. The implied status or exclusivity of certain goods and services is very important to certain other customers. Once you identify the type of customer you are targeting, it becomes easier to set your prices accordingly.

Know Your Competitors

Knowing what your competitors charge for similar products or services helps you position your business in the marketplace. For example, if you determine your competitors focus on low prices, you can decide if you want to differentiate your business by focusing on superior service.

Leveraging service as a value proposition may justify charging higher prices than your competition. Or there may be other differentiators that allow you to charge higher prices, such as exclusive merchandise or highly knowledgeable employees.

Experiment and Monitor

Look for ways you can sell options, service contracts, and add-ons to a primary product or service, perhaps by offering several “packages” at different prices. Or consider applying discounts based on the quantity ordered.

Continuously monitor your prices and your profitability. Knowing which products or services are making you money allows you to make data-driven decisions about inventory and pricing.

We invite you to call our office at 479-242-1236 to learn more or request an introductory consultation through our website.