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Financial Checkup Checklist

Summer is here, which is the perfect time do a Financial Checkup for your business.  This article suggests tackling the “6 P’s” of a financial checkup.  In the Spring you have tax season and fiscal year-end reporting, so who has time?  In the Fall companies are making a push to finish strong to meet year-end quotas before new business shuts down for the holidays.  Winter is too late to effect change for the year, and it is hard to advance work when so many people are out on vacation (or sick!).  This makes the Summer a great time for a financial checkup.

What is a financial checkup exactly?  It could be a lot of things, but here are six ideas.  Pick three of them (one per category) to accomplish.  Show that you are committed to the financial health of your business, and your business will definitely thank you in return.

Business Model Review (do at least one)

  1. Plan – re-visit your business plan. The prior year financials (the key benchmark) should be final, so use it as the foundation for a refresh of your business plan.  Do it for current year and next year.  Add another year, and you have the coveted 3-year financial plan.

A Plan is great for:

  • businesses involved in a significant financial transaction.
  • businesses that consider great planning a key to their success.
  1. Projections – prepare quarterly forecasts to see what you think the business will look like in terms of revenue growth, operating profits (EBIDTA), working capital, and the capacity to service debt and distribute capital. These are all critical financial measures regarding the health of your business.

Projections are great for:

  • giving to banks and lenders so they become more comfortable and confident in your business.
  • owners and stakeholders, so they can see how today’s business will look tomorrow.
  • leaders and managers, who can use projections to set goals and measure results.

Profits and Cash Flow Review (do at least one)

  1. Performance Reports – this could include monthly or quarterly income statements or Profit & Loss (P&L) reports. Sales trends can be analyzed to see if new business is healthy or anemic.  P&Ls can calculate profit margins and expense ratios, to show how effective you are in managing costs relative to sales generated.  Many business leaders have little time to study detailed reports, so create one-sheet scorecards with infographs and bullet point summaries. Reports are of no use if they are not read.  Create a monthly production report package, to keep an ongoing pulse on the state of your business.

Performance Reports are great for:

  • managers and leaders that want accountability for business results.
  • sharing with stakeholders, banks, and lenders, to prove that you can articulate your business from a financial perspective.
  1. Profit Conversions – profits stuck in receivables are bad for cash flow and bad for your bank account. The longer the receivable is outstanding the less likely you will be able to collect.

Summer is great for getting your cash receipts in order.  Get backlogged invoices sent out promptly.  Review credit terms for down payment and installment billings, and revisit your financing and late fee policies.  Collect all open receivables.

Reviewing cash payments is equally important.  Set up a sensible weekly check run process.  Review credit terms of key suppliers, and negotiate them.  Examine vendor due dates to see who might accept a more favorable payment schedule.

You can never have too much cash on hand, and here you can boost cash without having to sell more or spend less.  You are simply managing your cash better.

Profit conversions are great for:

  • companies running a thin line with cash and working capital.
  • companies that are interested in building that emergency “cushion” for the unexpected.
  • companies that want to go from good to great in their cash management practices.

Resource Assessment

  1. People – you count on people to make your company perform. Is everyone on the team signed up for at least one educational or development class?  Are people allowed to work on a pet project that supports the company?  People are what make the difference, and investing in people is great for:
  • building morale and team spirit.
  • developing talent and skills inside the business, so you can outperform the competition.
  1. Platforms – along with people, your company systems make up the key resources to run your business. Use the Summer to identify all key systems the business relies on to operate.  It can vary by industry, but computer and data networks, accounting and payroll systems, customer and CRM systems, and online systems and tools are universally important to businesses large and small.  Are you able to make a case that all your systems are working seamlessly and smoothly?  Can your systems today support your future growth?  If you can’t answer confidently to these questions, a system review may be your key Summer project.

Platform reviews are great for:

  • companies wanting to run leaner to increase profits and optimize enterprise value.
  • companies managing change.
  • companies that plan to grow significantly.

  360 degrees of Small Business Solutions

Arima Business Solutions (ABS) is a business management consulting firm located in the heart of the San Fernando Valley.  We specialize in solving the most top-of-mind problems for small business owners.  We offer a deep skill set and know how on running the finances, operations, and marketing areas of a small business.  This makes ABS uniquely equipped to provide 360-degrees of client service.  Finance consultants often do strictly finance while marketing firms focus mainly on sales and branding.  The best solutions are balanced solutions, that examine not just one, but all of the key areas that are important to your business.

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You and Your Banker

Bankers are great. They tell it like it is. But in good times and in a good economy, it is easy for small businesses to take them for granted. If you have loans out there, it is easy to forget—or worse—ignore a banker’s request.

Meeting loan covenants and requests for information during good times and bad is critically important. Make sure you can answer these questions:

  1. Are you filing your quarterly loan covenant requirements consistently and on a timely basis?
  2. Is everything organized, complete, documented, and supported to ensure a high-quality submission?
  3. Are any questions that are asked, for whatever reason, responded to timely, completely, and accurately?

Loans will mature and the economy will tighten. It is too late to undo past bank compliance infractions, as the notes on late, incomplete, slow responses are already noted. But building a good track record going forward can make a positive difference. Good bank relations habits include:

  1. Meeting all loan covenant requirements completely and on a timely basis.
  2. Being very responsive, consistently, on any bank requests or questions.
  3. Meeting all interest and principal payments like clockwork.

All crucial banking activities, new loans, credit line increases, renewal of matured loans, forbearances, loan extensions, or re-structures must be underwritten anew with credit committee approval. To ensure you remain in good standing with your banker, understand the terms of your loan documents and loan covenants. They spell out the rules, and understanding them well can prevent being in default with your loan.

Having a CFO or financial leader focused on banking for your small business is a luxury. Who wouldn’t want to have that go-to person on staff to oversee and negotiate small business bank and lender relations? Unfortunately, many small businesses are not budgeted to have a full time CFO with banking credentials. But there are alternatives, such as management and financial consultants who can step in to affordably clean up and monitor the banking needs of your business.

This is the story of you and your banker. Let’s all be proactive to secure a “happily ever after.”

0 comments on “Business Writing”

Business Writing

The amount of time wasted by poorly-executed emails is astounding. It’s not simply time wasted through misunderstanding but misallocation of words. The time cost and the distraction cost lead to an unfortunate business cost. Of course, we cannot control the reader, but we can control the writer.

“Writing is easy. All you have to do is cross out the wrong words.” —Mark Twain

“I only achieve simplicity with enormous effort.” —Clarice Lispector

When we put systems into place regarding our writing, we can influence our reader accordingly.

Focus

Business emails should not be written in a stream-of-consciousness style akin to a WhatsApp conversation. Your reader should not wonder if you are related to Benjy from The Sound and the Fury. Keep it simple. Before you write your email, ask yourself: What do I want to convey? What does my reader need to know?

Organization

This is the answer to “How.” How can I convey this to my reader? Again, keep it simple. You don’t need a cannon to shoot a rabbit.

Development

Sometimes we have a lot to say. Remember, though, that your long email will likely be processed in parts. And the notion that your entire email will be processed by the reader is optimistic. When you determine how extensively you need to develop your email (if it’s longer than two-three paragraphs), consider sending it in parts. (Don’t reveal your plan in the subject line, i.e., The Nestle Account, part 1.) Just set some reminders or alerts so that you know to initiate part 2, 3, etc., but do so after you’ve determined that part 1 was adequately comprehended and acted upon.

Logic

It’s not enough to proofread your email once before clicking “send.” Unfortunately, if it makes sense to you, that means very little to your reader. Many of us use inside lingo on the outside world, and then we are surprised that we’ve accidentally circumscribed our audience. Don’t proofread your email while asking, “Does this make sense to me?” Instead, proofread your email while asking, “Will this make sense to my reader?”

Arima Business Solutions has expert consultants in business writing, editing, blog writing, and ghostwriting. Reach out to us today. Let’s have a conversation about your content-creation needs.

0 comments on ““To Do” and “Not To Do” Lists”

“To Do” and “Not To Do” Lists

If you’ve been active on social media lately, you’ve likely scrolled upon an article showcasing Leonardo da Vinci’s “To Do” list. The implication is not simply that da Vinci’s list is more ambitious than yours but, specifically, that “To Do” lists are composed by successful people.

“History will be kind to me, for I intend to write it.” —Winston Churchill

“The question isn’t who is going to let me; it’s who’s going to stop me.” —Ayn Rand

While the “To Do” list has enjoyed great fanfare, the “Not To Do” list seems to be under-emphasized. What should make your “Not To Do” list may differ from others’, but consider these:

Smart Phones

When you need to focus on something, turn off your ringer (don’t allow it to vibrate either), and place your phone face down. Your focus is a hot commodity, and it should be protected. Of course, apps and telemarketers are competing for your focus. Do not surrender until you have planned to. In other words, when you are working, producing, thinking . . . when you are focused . . . build a fortress that phone notifications cannot penetrate. And then, once you are ready to switch tasks, once your focus is not at a premium, go ahead and flip your phone over, and have a look at your Facebook feed.

Carpe diem

To be clear, you should commit to seizing the day. What you should be careful of (on weekdays) is carpe noctem. This, of course, is a reference to seizing the night, and it is especially curious to see how we can arrive home after a long workday, and while we claim to be tired, we find ourselves suddenly possessed after a glass of wine (or two). We live in the moment, focused only on our immediate goal: “This feels good, so let’s fuel this feeling!!” Our less-immediate goals fall by the wayside, taking second place to a tired, tipsy, fun-loving fool. This may be why it’s not too crowded at the top. Remember, success is not an accident. If you have serious goals, then you must take them seriously.

Habit Changing

You have developed specific habits on purpose. You exercise each day for 45 minutes, or you include green veggies in each of your meals, or you kick-start your brain each morning by studying a foreign language. Maybe you meditate daily, or perhaps you make sure to read at least 5 pages from a self-help book every morning. Whatever your habits, know that when you skip a day, you are (often unconsciously) abandoning the habit and embracing a new one: the new habit, of course, is no longer doing whatever you were previously committed to. If you have deliberately chosen your habits, haphazard “habit changing” should make your “Not To Do” list.

What are some other things that should be on your “Not To Do” list? Comment below, or reach out to us today.

0 comments on “Remember “Think & Grow Rich””

Remember “Think & Grow Rich”

Any entrepreneur serious about his craft has likely read Napoleon Hill’s Think & Grow Rich. It’s been 80 years since its original publication, but the secrets offered to Hill by Andrew Carnegie remain transformative. Further, they remain fundamental to success. As Jim Rohn once said, “There are no new fundamentals. You’ve got to beware of the man who says ‘we’re manufacturing antiques.'”

“We see men who have accumulated great fortunes, but we often recognize only their triumph, overlooking the temporary defeats which they had to surmount before ‘arriving.'” —Napoleon Hill

“Defeat makes you stronger.” —Napoleon Hill

Here are 3 fundamentals from Hill’s essential work:

Thoughts Are Things

If your thoughts are buoyed by vague hope and imprecision, you will not likely transcend your place in life. If, however, you recognize that thoughts are real, then commit to making your thoughts clear and precise. This type of thinking is what Andrew Carnegie employed to turn desire into gold. He followed six steps, two of which shall be identified here:

  • First, write out a clear, concise statement of the amount of money you intend to acquire, name the time limit for its acquisition, state what you intend to give in return for the money, and describe clearly the plan through which you intend to accumulate it.
  • Second, read your written statement aloud twice daily, once just before retiring at night, and once after arising in the morning. As you read, see and feel and believe yourself already in possession of the money.

Failure

There are 31 major reasons for failure. Many of the reasons play critical roles in our story (the story we tell ourselves and often unconsciously rehearse). Among these 31 reasons noted by Hill is number 4: Insufficient education. Hill writes: “There is a handicap which may be overcome with comparative ease. Experience has proven that the best-educated people are often those who are known as ‘self-made’ or self-educated. It takes more than a college degree to make one a person of education. Any person who is educated is one who has learned to get whatever he wants in life without violating the rights of others. Education consists not so much of knowledge, but of knowledge effectively and persistently applied. Men are paid not merely for what they know, but more particularly for what they do with that which they know.”

Positive vs. Negative

Positive and negative emotions cannot occupy the mind at the same time. According to Hill, these are the major negative emotions: fear, jealousy, hatred, revenge, greed, superstition, anger. And these are the positive emotions: desire, faith, love, sex, enthusiasm, romance, hope. “It is your responsibility,” notes Hill, “to make sure that positive emotions constitute the dominating influence of your mind.”

A little bit of success literature can go a long way. Make the consumption of works like Napoleon Hill’s Think & Grow Rich a part of your daily ritual. As Zig Ziglar was fond of saying, “People often say that motivation doesn’t last. Well, neither does bathing—that’s why we recommend it daily.”

For more motivation, reach out to us today. Let’s have a conversation about your needs.

0 comments on “Bookkeeper, Housekeeper?”

Bookkeeper, Housekeeper?

Bookkeeping. What is bookkeeping, and what are they “keeping?”

A bookkeeper is “a keeper of books,” not too different semantically from scorekeeper (keeper of score), housekeeper (keeper of the house), and timekeeper (keeper of time). What’s the common thread with these vocations? At first blush, they are dull, boring, unremarkable. They are things many wish not to do. But bookkeeping (at least for small businesses) is absolutely necessary.

When companies are doing well, it’s great. Cash is coming in, new accounts abound, territories are expanding, and there may just be an IPO looming. But when this happens, if a dollar is lost, stolen, or misplaced . . . no one notices. The mentality seems to be, “The cash is coming in. We got it covered!”

When companies are struggling, it’s an entirely different situation. The mentality pivots: “We need to upsize that line of credit! Can we ward off the bank’s credit committee? How did we get boxed into this financial condition? You want me to meet our future equity partner?” These are Dickens’ “worst of times.”

Now let’s talk about bookkeeping. It is suddenly important, yes? That loan increase or loan forbearance will not happen, not if the integrity of your books is compromised, not if the system of checks and balances is scaring the credit officer. And what if you’re looking for some equity cash? Sure, no problem, but the books are not current, and they are unreconciled, so the price point certainly will adjust for that.

Good bookkeeping departments or, if outsourced, good bookkeeping services can make or break a company. But once the strong cycle has transitioned to tough times, it is too late to package a clean and polished financial statement for banks and investors. The books are already closed, for better or for worse. As Chick Hearn would say, “The books are in the refrigerator, the P&L is cooling, and the miscodes are getting hard.” It is too late.

The requirements of bookkeeping can be simply stated. Book your GAAP accruals, reconcile cash, and close the books quickly. Begin with properly trained, reliable resources. Employ oversight and/or coaching by a competent supervisor. Establish accounting processes and practices with great internal controls.

Arima Business Solutions provides full-service bookkeeping. If you need an influx of talent and new perspectives, make sure they can bind the day-to-day bookkeeping so that it supports and does not detract from the company plan. Good consultants can sniff out fraud. They can identify red flags and mistakes. They can distill the information for easy understanding by owners, presidents, and Boards. They can speak to the financial trends, positive and negative. The competition is crowded and fierce in most industries today. High credibility from very well-kept books is, indeed, a strategic weapon.

Companies that are not focused on bookkeeping? Well, you know. The miscodes are getting hard.

ABS Financial Services consultants are eager to meet with you. Reach out to us today. Let’s have a conversation about your needs.