| Have you ever wished there were red flags
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| | interest in a year. The lower interest
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| to alert you when your business was
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| | rates are important, but so is the term
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| heading into a slump? Maybe you can find
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| | of the loan. Businesses should keep the
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| a miracle tool that would alert you
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| | term as short as possible.
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| before wading into uncharted waters where
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| | Past Due Notices
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| that cause so many small businesses to
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| | This is the ultimate red flag or warning
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| sink? The good news is, there are tools
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| | sign. It signals to the business owner
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| that will do just this.
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| | that they have lost a grip on the
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| Money Curve
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| | business's cash flow. No matter how much,
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| Following the money curve is more
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| | or how little, a business has coming in,
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| difficult than it appears. The first step
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| | it is vital to ensure that the business
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| is to learn how to budget. One of the
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| | is self sustaining.
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| most common business mistakes is spending
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| | Stealing from The Company
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| money as it comes in and leaving nothing
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| | The company should be seen as a separate
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| for major projects such as an advertising
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| | entity. Its cash belongs to it. A
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| campaign, upgrading equipment, or
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| | business needs to be nurtured. In the
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| starting a passive stream of income.
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| | brick and mortar world, a business should
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| Cash management starts with the ability
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| | be self-supportive for the first five
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| to budget money and prepare a cash flow
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| | years.
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| projection. If this tool will tell a bank
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| | Traditionally, business owners never
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| whether the business is a good credit
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| | expected the business to support the
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| risk, then it will tell the business
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| | family through this time. Internet
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| owner how healthy the company is.
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| | businesses have a shorter span, but they
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| The second half of the strategy is the
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| | still need to be nurtured.
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| Cash Flow Statement. The projection lets
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| | Every time money is removed from the
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| the owner calculate what they need in the
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| | company the business owner should tack a
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| future. The statement tracks the money
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| | 'red flag' to their cash flow charts. All
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| that goes out. The statement can be
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| | revenue should be returned to the
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| created based on the actual cash,
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| | business until it is self sustaining with
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| including personal money, or it can be
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| | enough 'cash in reserves' to avoid at
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| based solely on the business's books.
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| | least on emergency, and support
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| Watch for Falling Sales
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| | expansion.
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| Never wait until the cash flow starts a
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| | How to Avoid Problems
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| downward trend. A healthy business should
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| | Get Help: There are thousands of
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| have a gradually upward curve. A level or
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| | qualified professionals who freelance for
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| wavy curve is a sign of trouble. An
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| | a fraction of what a company would
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| advertising campaign should be started at
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| | charge.
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| least six months before the cash flow
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| | Be Truthful: Avoiding issues, brushing
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| starts a downward turn.
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| | over problems, and lying to people who
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| Another thing to measure is profit
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| | can help should all be considered warning
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| margin. Sales and profit margins are
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| | signs. When you run into financial
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| different and can be totally unrelated.
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| | trouble, then head to the bank. They have
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| Sales and Revenues are the money that
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| | a lot in stake and will help, even if the
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| comes into the business. Profits are the
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| | business owner hasn't borrowed any money.
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| money left over after the expenses are
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| | Save Money: Save money, even if it only
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| withdrawn.
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| | means sticking $1 into a jar every week.
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| Two companies may earn $10 000. One earns
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| | Cut Costs: There are some vital questions
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| $1000 profit, and the other earns $5000
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| | to ask before spending any money. Do I
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| profits. Calculate the profit margin.
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| | need it? Can I get it cheaper? Am I
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| Create a 'cut off' rate. Anything below
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| | buying this because I 'want' it? How long
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| that level should be considered a
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| | can I do without? What problems will I
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| 'warning.'
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| | encounter if I don't buy this?'
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| Borrowing
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| | Emergency Plan: This is a plan of action
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| Borrowing money to pay debts is a sure
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| | that you'll use to help avoid problems.
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| sign of trouble. This doesn't mean that
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| | There are several ways to use these
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| it is wrong to borrow. The amount
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| | tools. One business owner can keep a
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| borrowed should never climb above 20% of
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| | chart. Another one may put red pins on a
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| revenue. Any amounts above this should be
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| | cork board. Another will create a
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| considered a 'warning' and be corrected
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| | strategy plan to solve the problem.
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| as soon as possible.
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| | Whatever is used, it should be considered
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| Another aspect of borrowing is to
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| | a vital part of business success.
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| calculate the amount of money spent on
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