Small Business University

A visit to this blog is like attending Small Business University ("SBU") while sitting at your computer anywhere in the world!!! The mini-courses cover:

1. How to start a small business.

2. Basic marketing strategies for a small business.

3. Business is for making money, not for making friends and pleasing your family.

4. Obtaining a Small Business Loan from the SBA (Small Business Administration)

5. Year-end tax planning for a Small Business.

6. Exit Strategies for Small to Medium Business owners.

7. Now is the time to improve your management team.

8. Cash Flow Forecasting

9. Improving your Sales and Marketing for your Small to Medium Sized Business.

10. Sales is working in your business while Marketing is working on your business.

11. Reducing the cost of Insurance for small businesses.

12. Better techniques for collecting your accounts receivables.

13. Cash Management tips for Small business owners.

14. How to reduce your health and medical insurance costs.

15. Ten tips on how to stay in business with this bad economy.

16. How to find and hire the right attorney for a small business owner.

17. How to find and hire the right outside accountant.

18. How to find and hire the right tax professional for a small business owner.

19. How to find and hire the right insurance agent.

20. How to find and work with the right banker for a small business owner.

21. How to use Linkedin and other social networking websites as a tool to market your business.

22. How to find and hire the right consultant.

23. How to downsize your business in a down economy!

There will be other topics for mini-courses within this blog that will help Small Business Owners with improving the profits of their business. Small businesses for this blog will be defined as businesses with annual sales of under $10 million. Medium sized businesses will be businesses with annual sales of over $10 million and under $25 million.

Tax Planning - Now is the Time!

If you are a small to medium-sized business owner, now is the time to start "tax planning" for 2009. You should call your "tax man" today and schedule a meeting. He or she can give you good advice as to what you should do between now and year end 2009 to reduce your tax liability for the year. If you wait too long before you meet with your tax preparer, he will be "hand-cuffed" with his suggestions.

With the current economy, all businesses should do whatever "legally possible" to reduce the outflow of cash with all expenses, especially income taxes!!!

Weekly Flash Report

Every Owner/CEO/President of every small to medium-sized Company should receive a "Weekly Flash Report" prior to noon on Monday that reports the following information:

1. The Cash Balance: Last Week's Closing Balance, the cash receipts for this week, the disbursements and the ending balance.

2. The Line of Credit: Last Week's Closing Balance, the week's barrowings, the paydowns, and the ending loan balance.

3. The aging status for the past 5 weeks for Accounts Receivables: Current, 31 - 60, 61 - 90, 90 days and older (both dollars and percentage of the total).

4. The aging status for the past 5 weeks for Accounts Payables: Current, 31 - 60, 61 - 90, 90 days and older (both dollars and percentage of the total).

5. The payroll expense for the past 5 weeks broken down into categories: Administrative, Sales, Manufacturing, etc. (both dollars and percentage of the total).

6. Sales Statistics for the past five weeks: Customer Proposals, Orders Received, Shipped Orders, etc.

If the Senior manager of the Company has this information available to him or her every week, the company can be managed properly while monthly financial statements almost become obsolete.

Weak Senior Manager

If you have a small to medium sized business, you should evaluate the quality of your management team at least every six months.

If you have a weak manager, you owe it to the rest of your management team and to the company to replace him or her with a stronger manager. Most companies have four disciplines or functions; Sales, Operations, Information and Finance. View those four functions as four legs of a chair. If one of the four legs of the chair is weak, the whole chair falls down. If one of the four managers responsible for the four functions (Sales, Operations, Information and Finance) is weak, the whole company fails!

The Less Inventory, the Better!

The less inventory the better in a small business! Recently, I had a client that was in a business that he could order the raw materials today and receive it tomorrow morning for an order that he did not have to shop for two weeks and only took 4 days to manufacture. The bottomline was that he really needed zero inventory on hand or very little. This was a company with less than two million in annual sales which was less than two thousand dollars in average monthly sales. He had over $650,000 in inventory. In a small business, as far as I am concerned, inventory is a bad thing. It can get damaged, stolen, lost, etc. The less inventory on hand the better. The less the inventory, the more cash in the bank. The less inventory on hand the less property insurance needed to pay for. There are many, many good reasons to reduce the inventory and have all that cash in your company checking account! The lower the inventory on hand, the higher the company profits!

Cash

If you have an accountant posting your general ledger, always have your monthly bank statement for your company checking accounts mailed to your house rather than to the business. When you get the bank statement, open it immediately, review all the signed checks and any charges to the account. The bank statement should be reconciled immediately to ensure that the reconciled balance agrees with the company's records. This goes without saying that this is a control point to make sure that your company Bookkeeper / Accountant / Controller / Chief Financial Officer is not stealing from you...or the company.

GPS Systems in Company Vehicles!

By installing controls, monthly reporting, GPS systems, operating budgets, and accountable reporting, our client was able to reduce their overall operating expenses the first year by approximately $450,000.

If the company owns vehicles, the vehicles should have GPS systems installed. There are huge benefits to have a GPS system on all your company vehicles. The technology in the current GPS software can tell you the following facts:

1. The Client was able to monitor those drivers who were speeding while using the company vehicle and reprimand those who violated the speeding laws, therefore reducing the amount of accidents by the employees, as well as lawsuits and the future auto insurance policy premium increases;
2. The Client was able to identify where the vehicles were physically located twenty-four hours a day, reducing the possibility that the employees would have lunch at a bar, drink alcohol, and drive the company vehicle in the afternoon. This control reduced the possibility of DUI incidents with the company employees driving company vehicles;
3. The Client was able to monitor the use of the vehicle during the weekends or after work hours, thereby reducing the cost of gasoline, oil, repairs, wear and tear, etc., thus reducing the overall expense cost for the use of the vehicle;
4. The Client was now able to monitor the reporting of the overtime payroll hours by the employees who did not report to the office in the morning each day. The company was able to see what time the vehicle left the employee’s home in the morning and arrived home in the evening, providing the Company with a method to audit the hourly payroll. After the GPS systems were installed into the vehicles, the overtime hours were reduced by 80% after the first month of installation. The company experienced a reduction of payroll and associated costs of in excess of $200,000 per year.

Effective Sales People

The best way to make a sales person effective is:

1. Assign weekly, monthly, quarterly and annual goals.

2. Make each sales person account for their time by day each week.

3. Ask for a weekly status report for new clients, existing clients and target potential clients to be visited.

4. Have a good incentive or commission program that is "win - win" for both the salesperson and the company and that they can not cheat. If the sales people are cheating, change the program.

5. Commissions should be "paid on paid" meaning that the sales person earns their commission when the customer pays their invoice in full.

6. There always should be new customer goals because a sales person can land a big account and sit fat and happy for a long while. After the first year, all commissions should be reduced for existing accounts. New accounts should earn a higher commission. The goal is for the sales staff to focus on winning new accounts ("hunters") while customer service people ("farmers") take care of the existing accounts.

7. Call a weekly sales meeting every Friday afternoon to go over the past weekly activity. Normally in many companies, you can find the sales people on the first tee on the golf course right after lunch on Fridays! If one of your sales people have a five handicap, you know that you have a problem!

Strong Management Team

The only way to make a profit is to have a strong management team. You can have a great product in a growing industry, have the perfect location, in a strong economy, and if the company has a weak management team and the company loses money! Or the company has a mediocre product in a poor location, in a declining industry with a bad economy and the company has a strong management team, the company will be successful! There is nothing more important in a company than the strength of the management team!

Signing the Company Checks

If you own your own company and want someone to steal from you, the best way is let an employee have the authority to sign company checks. I am a very strong believer that in a company that does less than $5 million in annual sales, there should only be one signator on the company checking accounts and that is the owner.

The Accounts Receivable Collector should have relationships!

Another important factor on collecting the company's accounts receivables is hire the right person! It takes a special quality of person who can be a good collector! The collector should establish a relationship with the clients' accounts payable clerks so if there is a problem, the AP clerk with call and resolve the problem instead of ignoring the issue and the invoice does not get paid.

Call 5 Days before the Accounts Receivable Invoice is Due.

A good procedure to improve accounts receivable collections is to have your collector call the client five days before the invoice is actually due to verify there are not any problems with the processing of the invoice that would interrupt payment within the payment terms. Problems can be resolved prior to the due date and payments can be received on time.

Accounts Receivables - Invoice the Customer Right the First Time

The best way to collect your receivables is: Do it right the first time...in other words, make sure that the invoice is accurate and agrees with the client's purchase order. The best way to delay collection of the receivables is invoice the client different than the agreed upon price, quantities or terms.

If the invoice agrees to the client's purchase order, the payable clerk will just process the invoice and there is not need for any further management approvals which only delays payment.

Definition of Accounts Receivable

My definition of Accounts Receivable in a small business... Accounts Receivable is "your money" in someone else's checking account.