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Finance

How Do I Manage Business Cashflow?

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Keeping a tight control of your cashflow is the single most important thing you can do when running a business; particularly when you are just starting out. All companies need cash to survive – and thrive – and meeting your financial obligations and having money to invest in opportunities is critical. But how do you manage your cashflow properly, and what are the best methods of doing so? We’re going to reveal all in our guide to managing cashflow – read on to find out everything you need to know.

What is cashflow?

Understanding cashflow is the first thing you need to do if you want to know how to manage it properly. Cashflow is the amount of money that comes in and goes out of our business, and you need to track it on your cashflow statement. A positive cashflow is the ideal, as it means you have more money coming into your business than leaving it, although many startups will usually have a negative cashflow – which means there is more money going out of your business. However, having a positive cashflow doesn’t necessarily say that you are turning a profit, as that money coming into your business could also include borrowing.

Working out a benchmark

So, when it comes to managing your cashflow, the first important step is to work out a reference point – or breakeven point. It’s this point where your business becomes profitable, and it’s an important goal to set for any new business. Not only will it help you achieve a level of safety for your business, but this benchmark or breakeven point is also a way of predicting your cashflow in the future, and can help with your financial planning. The general rules of cashflow are relatively straightforward: know where you are at right now; know where you will be in six months time. You can’t possibly know either of these if you don’t work out your breakeven point first.

Getting paid

Having access to cash is vital for your business, so it’s important to ensure you are getting what you are due as fast as possible. In the vast majority of cases, this task involves getting money from clients and customers. According to research, the average customer pays around two weeks late, so it’s easy to see where many of your problems might arise from. Never invoice people and then leave them to it – remind them regularly and be proactive in chasing them up. You can sue automatic emails at regular intervals before a due date, and if that time passes with no payment, you can also consider imposing late payment fees. Don’t be afraid of chasing money – you have a right to be paid for your work, and the longer a customer leaves it, the more exposure your business will have to risk.

Paying others

Of course, the money that goes out of your business also has an impact on your cashflow, And whereas you should be encouraging your customers to pay straight away, you should be avoiding paying your suppliers and other payables for as long as possible. We’re not suggesting missing deadlines, of course, as that will attract fines. But by establishing longer credit terms – changing a 60-day payment to a 90-day, for example – and you will find that your cash flow improves by a significant amount.

Quick turnover

If your business buys inventory, it’s vital to ensure that you are making sensible decisions about how you buy, store, and manage it. Don’t forget, everything you buy will impact on your cashflow, as it ties up valuable money that you can’t use for meeting your financial obligations or investing in improvements. The fundamental principle of inventory management is to order stock in quantities that you can sell on quickly, without impacting your sales with out of stock issues. It’s a tricky balance to strike, but absolutely essential if you don’t want your cash tied up in inventory that lingers around your business for months on end.

Build reserves

At some point in time, all businesses will experience periods of a shortfall when it comes to cashflow. And one of the best ways of protecting against such occasions is to ensure that you have some reserves put aside – emergency savings if you like. Of course, this can be difficult to achieve when you are just starting out, but it’s something you need to consider if you want to avoid potentially dangerous financial situations arising.

Borrowing

Borrowing money for your business is a great way of improving your cashflow, but bear in mind that you have to counter this by being able to turn a profit. Look at something like a cashflow loan if you need to fund a new marketing campaign that can pretty much guarantee results. While these types of loans can be expensive if you don’t pay them back on time, the funding they deliver can help you achieve your goals far more quickly than saving a little each month and raising them yourself. Small business loans are also an interesting idea, and as long as you research the market and get the lowest interest possible, they can provide you with vital funding to help you pay for your growth strategies.

Boost sales to current customers

Acquiring new customers is an expensive task, both regarding resources and money. So, if you want to increase sales to improve your cashflow, you are far better off trying to sell more to your current customers. Research suggests it is up to six times cheaper to sell to old clients, so it’s easy to see how much value it can bring to your business. Look at what people are buying, and spend some time analyzing their shopping habits. Is there a way of enticing them back with discounts or better deals? However, one thing to bear in mind is that you have to focus on getting money quickly – don’t allow your credit out to build up, or it will just cause you further cashflow issues. The idea here is to make money, not increase your accounts receivable.

Additional Resources

10 Tips for Better Managing Cash Flow
Running a Small Business? Stay Ahead of Cash Flow Woes with These 5 Tips

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Finance

Undeniable Proof That You Need Freight Factoring

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Sometimes business owners are too proud to admit that they need help with their finances. What they fail to realize is that it happens even to the very best of companies. Cash flow is a matter that can be fixed without you having to apply for a loan at a traditional bank. There are options available, and freight factoring is one of them.

If you’re still in denial about why you should consider freight factoring, here are things to think about.

You’re failing to take on more significant projects because of limited cash flow

Are you failing to take on more substantial contracts and projects because your clients are taking so long to pay you for work you’ve already completed? It’s not unusual in the world of business for clients to have a 90-day grace period in which to settle their accounts. However, this could very well mean going more than two months without receiving a dime. It can hamper efforts to grow your business.

You’re failing to retain top talent because you can’t pay on time

When clients take their time clearing their invoices, it can cause problems on your end in your business. If you’re struggling to get payment and paying your employees on time, this can become a problematic issue in your company, which could see you losing top talent. No one wants to work for a company that doesn’t pay on time and is continually coming up with excuses as to why it can’t pay them. Don’t be this type of company. Find a factoring company to help you out.

You are seen as a defaulter by business associates

You want people doing business with you to think well of you and your trucking business, isn’t that so? No one wants to be thought of as a defaulter or someone who doesn’t do what they said they would do. This is particularly true if you have people you need to pay that have rendered your business service. Once again, if there is no positive cash flow in your firm because clients are taking longer to process and pay you what they owe, it can have negative repercussions on other areas of your business.

You’re getting rejected because of bad credit

Perhaps you’ve had a rough patch in your business, and your credit score isn’t too good. Maybe you’ve even gone to banks to see if they could lend you a helping hand, but they turned you down because of this bad credit score. Is there no hope for you? Fortunately for you, there is. You see, freight factoring companies don’t consider your credit score when they choose to extend a line of credit to you. They look at your clients’ credit, and if your clients have good credit, then your application stands a higher chance of being accepted.

You’re considering filing for bankruptcy

When a business is struggling to keep up with its day-to-day operations, things can become so complicated that at times, one considers filing for bankruptcy. If a lack of liquidity is making you feel like retiring your business, then you need to think again. This is something a freight factoring firm can help you out with. Thanks to their quick application and approval processes, you can almost solve this dilemma overnight!

If your business is suffering from any one of these points, it might be time to consider partnering up with a freight factoring company.

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Finance

How a Fractional CFO Can Help Your Startup Grow

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A fractional CFO can help start-ups by providing services for organizations on a part-time or contractual basis. This means the company can gain the expertise of a CFO without the significant costs that an in-house, full-time CFO may bring.

Typically, a CFO is brought on for a specific project to meet the company’s financial goals, or to address financial challenges sustainably.

What Can a Fractional CFO Do for a Startup?

Fractional CFOs work on a number of projects that require expertise in financial modeling, accounting and business strategy. They usually work on a project or challenge that the company’s current in-house staff are not equipped to deliver on.

Future Forecasting

Many in-house accounting and back-office finance professionals spend their time working on past financial transactions and the present. A fractional CFO may be brought on to forecast the future of the business from a financial perspective, providing strategic recommendations for its growth.

A fractional CFO often contributes to a business by strategizing the best ways to achieve the growth required. This often requires thinking about financial goals over the next few years and making recommendations on financing the business, through external investment or loans.

Improving Cash Flow

Understanding how cash flows in and out of a startup will be a key consideration for the founders and investors of a company. A fractional CFO can assist by improving the analytical capabilities of the business’ data and will then create a plan of action based on the analysis.

They can get to the bottom of where revenue leakage exists, with the goal of minimizing leakages and creating innovative ways to improve cash flow depending on the business goal.

How to Make Cost Cuts

A job that many startup founders and management teams do not enjoy is looking for ways to cut costs. However, running a startup in a lean fashion is often a requirement due to limited funding of the business. A fractional CFO can make this a more bearable process by analyzing incomings and outgoings and figuring out what can be cut or reduced for a more profitable business. It can be easier for a fractional CFO to make the required recommendations, as they find it easier to act objectively compared with an in-house CFO.

Business Acquisition Analysis

Deciding to acquire a business can be a risky but rewarding decision. One important factor is valuing a business for sale correctly. Preparing well is the way to get it right and a fractional CFO can help with just that. An experienced, capable CFO will understand how to analyze detailed company financials and review the market for comparable businesses to arrive at a fair valuation. A CFO can then work on how to fund the acquisition through debt or equity.

Growth Strategy

Many people believe growth is the responsibility of the founder, salesperson or marketer of the company. However, fractional CFOs are likely able to provide important input for the growth strategy. A modern CFO will use customer acquisition cost analysis and customer lifetime value analysis to work out metrics. An example of this is identifying ROI on marketing expenses and then looking for ways to decrease the cost of acquiring customers. By using data analysis to inform them, CFOs are at the heart of a business’ strategy. A CFO will be able to predict near-term financial performance and engage with marketing teams to help improve practices.

A fractional CFO has many benefits to give to startups looking to grow their business, lower costs or simply get a hold of their accounting and future forecasts. A full-time CFO staff member may not be affordable for many small businesses who may still be building their product or getting traction in their market. However, a fractional CFO could give serious value to a growing company, if hired to help achieve specific, ambitious business objectives

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Finance

Making Money With Short Term Rentals

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Investors love investing in real estate as it usually outperforms other investment types like shares and managed funds. There are many ways to make a profit for your business with real estate too including ‘flipping’. This term refers to purchasing a revenue-generating asset and then shortly thereafter selling it again for a profit. In the US, the two asset classes mostly used for flipping are initial public offerings and real estate.

The longer-term real estate investing strategy that’s prevalent is buying homes to rent out on long term tenancies. It’s not just businesses that invest in rental properties, as a retirement strategy workers also look to have one or two investment properties in their portfolio for the weekly income and the long term capital gain on resale.

What’s also caught the attention of businesses and workers alike is the option to make money from short term rentals. Generating more income with short term rentals and by listing these properties on Airbnb is disrupting the accommodation sector and anyone with a home can do it. AirBnB is a disrupter and it has changed the way we travel. Staying in a spare room for a night or two, rather than a hotel is now accepted as the norm among all types of holidaymakers.

If you want to know how you can earn money with short term rentals, here is a quick guide.

What Is Airbnb?

Airbnb is an online marketplace for lodging around the world. It is popular among travelers who want to save money on accommodation. Because hotel rates are getting expensive, solo and group travelers are looking for more affordable options. Property rental listings on Airbnb can be a whole apartment, one room, or villas. Users can input the location and dates of arrival and departure to look for available properties.

The company started in 2008, and since then, it has reached worldwide popularity. Not only travelers are using this app, but also business-minded individuals take advantage of Airbnb’s technology to generate more money.

In the United States, there was a 45 percent increase in year-to-year bookings. Airbnb attracts millions of users worldwide, which comprises of frequent travelers and individuals who travel for work. About 700,000 companies are now using Airbnb for work-related purposes.

Earning Money with Short Term Rentals

You do not need to buy a property to list it on Airbnb. You can go for short term rentals to gain a more significant profit from daily or weekly rentals. Some people are already doing this strategy for years now, and you can also do the same if you find a property in a prime location.

Because this venture requires capital in the form of deposits, you need to be ready. Some property owners require bigger deposits, especially if the unit or apartment has appliances and furniture. Ensure that you have enough money to cover for deposits to get the business rolling. Once the apartment is ready for occupancy, you need to create an Airbnb account and list the property.

Other considerations you need to know:

  • Property Maintenance
  • Property Rating
  • Security
  • Facilities

Studying the market and how the business works can help you optimize the trade. Create a checklist to go through the essentials every time before a guest checks in. Besides, you can also connect with other people who do this business in different areas.

Technology opened up more profit opportunities for people. In hospitality, even you, who do not have much experience in property rentals, can earn money. Listing your extra room in the apartment can be a good start, but you can always experiment with making more profit. By short term rental, you can get access to excellent properties that can be listed on Airbnb.

Continue exploring the real estate market and make sure to learn new knowledge from experienced individuals. Who knows, you might gain financial freedom by being successful with this Airbnb venture. Check how other hosts present the properties, so you can have an idea of how to operate yours.

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