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infinancialcontrol · 7 years ago

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November Newsletter

Hi, and welcome to the November newsletter. It is hard to believe Christmas is just round the corner as another year seems to have just flown by.

This month we put your business banker under the microscope, and see if they are on the money. We also look at turning a business around, where we list some small achievable steps that can make a big profit impact and finally managing your Foreign Currency risk. In a global economy more and more businesses have some exposure for Foreign currency exposure and it is important to take steps to minimise the risk so it doesn’t eat into your profit.

I hope you find this information useful

Your business banker – are they on the money?

Cash and cashflow are key for any and every business. Money keeps your business ticking over and the person who can most influence your access to external cash, is your business banker.

Banks usually assign a business banker to every business turning over more than one million dollars, so if you have some scale about your business there is every likelihood you have been assigned a business banker. It is their job to understand your goals and to make banking easy for you.

With constantly changing business and cash conditions it’s crucial to have a good business banker as your partner.

But do you know your business banker? And if you do, how can you tell yours is up to scratch?

What makes a good business banker

1. They’re in regular contact – it might be once a quarter, once a month or in the case of some clients, once a week (or more), but it should be regular.

2. They should take an active and authentic interest in your business.

3. They understand your business, and its cash cycle. They know roughly how many days normally pass from when you purchase stock to when you receive payment from your customers? And if your business banker understands your cash cycle, then –

They will offer products and terms on loans that match your business’ requirements

They will think beyond the ‘now’ to other products and services that may suit you later. These products may not be their own, but they don’t care. They genuinely want to help you.

They introduce you to other people within their business who may know how to help you.

4. They are flexible – where there are short term limitations. They have the flexibility to support you with extra cashflow – provided you can show you can pay it back.

When it comes to your business banker, a strong relationship and regular contact is important. Some business bankers only turn up for the annual review. You need more than this.

Don’t wait until your cash flow situation is desperate

If you don’t have an existing relationship with your business banker and you go to the bank when you urgently need cash it is probably too late. Your bank manager won’t know enough about you and your business to take a risk. If they don’t understand your business they can’t offer you cash quickly when you’re in a tight spot.

If your banker understands your business and you have had regular discussions about your current cash flow and potential requirements, then they will be far better placed to assist you when things get a little tight, providing you meet their lending criteria.

And finally, don’t let the relationship be entirely one sided. As a business owner, you should also take the initiative to maintain the business banking relationship and stay in regular contact with your banker.

Business performance: Small changes can make a significant impact on the performance and results of your business

Many business owners dream that their businesses will suddenly have a huge growth spurt or a big direction change. They might wish for overnight success, or easy passage through a difficult patch.

Unfortunately, the reality of running a business isn’t quite so magical, and improved business performance or results are usually made up of many small improvements (and hard work) which all add up to something bigger.

Here are some ideas for a few small changes you can make, or actions you (or your staff) can take which could potentially have a big impact on your business:

- Make five extra new sales calls a week

- Call five existing customers each week and see how they are going. Customer follow up and service often leads to more sales

- Find ways to save 5% on the cost of production and increase your gross margin

- Increase prices by 2%

- Provide a tempting value-add to your product that customers are prepared to pay a premium for

- Cut your overhead costs by 2-5% by reviewing all your suppliers regularly to make sure you are paying competitive prices

- Remind debtors of upcoming commitments just before they are due, to increase the chance of being paid by the due date, reducing follow up time and putting funds in your bank account sooner

- Pay accounts on time to take advantage of discount terms offered by suppliers

- See if suppliers have steps in purchase quantities. If there is a discount for bulk then work out if this could save some dollars

All these initiatives on their own might seem small but when aggregated can have a big dollar effect on your bottom line.

The best way to do this is with financial modelling. This lets you play with different scenarios and helps you establish which actions have the biggest potential impact on your business. A good finance or accounting expert can help you with financial modelling.

We have recently been involved in a successful business turnaround.

Much of this business’ new success came through measuring and making sure all the small things were done and closely managed. There was no single action that turned things around but efforts across all areas have turned a struggling business into a financially successful one.

Taking a position on Foreign currency

Whether we like it or not, all businesses who import or export goods to or from overseas are affected by the vagaries of foreign currency.

A change in foreign exchange rates can increase or decrease the price you pay your supplier.

A change in foreign exchange rates can change how much you receive in AUD from your debtors if you invoice in foreign currency.

A change in foreign exchange rates can change your margin if you have a price list in a foreign currency and pay for goods in a local currency.

There are many ways a change in foreign exchange rates can impact on your margin and profitability. Whether you like it or not, we are operating in a global economy and foreign currency exposure comes as part of transacting with overseas suppliers or customers. It’s called Foreign Exchange risk (FX risk).

How do you manage FX risk?

It is difficult to know how currencies will move relative to one another. There are so many different factors involved on a global scale, nobody can predict the direction currency is moving in, not even economists and traders (though they may try to convince you otherwise).

When you look at the forecasts produced by the big banks, they often have opposing views of where the Australian Dollar is headed compared to other currencies.

Foreign Exchange (FX) rates and management of FX exposure is unlikely to be your area of expertise. So, what can you do to manage and minimise the impact of foreign currency on your business?

Protect yourself and your business against exposure to foreign currencies

Yes, it’s possible to do this.

You can buy forward exchange contracts, for the amount of currency you are expecting to receive, to convert back to Australian Dollars (AUD). This sets the foreign rate at an agreed contract rate you can buy from your bank. It’s also known as hedging.

When you have a forward contract, you have certainty about the price you are going to pay (i.e. the exchange rate at which your foreign currency will be converted to AUD). This means you can set prices and calculate the costs of your product with some certainty.

Forward contracts won’t necessarily give you the best rate (in fact, it’s unlikely), but they will give you a set rate. A set rate provides certainty for planning and cash management. It would be foolish to attempt to make money from foreign exchange trading when it is not your primary business. Bigger businesses than yours have suffered trouble when they have tried this.

Once you have a forward contract, you have certainty of your future income or expenditure, even as exchange rates move around. It’s possible that you may have received more (or paid less) money had you not hedged your FX risk. But you’ll never know for sure. Knowing your potential income allows you to plan, budget and not fear exchange rate movements. If you leave your foreign exchange risk unhedged, there’s always a risk that if the currency moves in the wrong direction you could find yourself losing money – which will have a negative impact on your business.

The best person to talk to is your business banker who understands how to manage foreign exchange risk and can get the ball rolling for you.

If you have any questions regarding the points raised in this week’s newsletter, or you would like to know more about our services, contact Peter McLean at In Financial Control.

#businessbanker #cashflow #smalllbusiness #foreigncurrency #fx #smallbusinessprofit #smallbusinessturnaround #smallbusinesscfo #virtual cfo #cfoservice

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melvinfeller · 5 years ago

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Marketing — Getting the biggest bang for Your Buck as Discussed by Melvin Feller MA, MBA

According to Melvin Feller, MBA and business owner as well as an online educator, marketing is an ever-changing, sometimes elusive activity. Even the marketing experts are continually tweaking their strategies in order to remain focused on attracting the customers they want. So, what should typical small business owners do, whose expertise is in delivering the product or service they started the business for?

First, understand that marketing is simply the message you send out to connect with people who want what you sell. Communicating this message is actually easier than creating the message itself. And herein lies the problem. Most business owners focus exclusively on the type of transmission vehicle that carries the message instead of crafting a compelling message that entices their customers to want to do business with them. When this happens, most marketing programs are equally as effective and tend to deliver the same poor results.

Melvin Feller teaches and analysis marketing messages and believes that the fact is, that business have an identical marketing weakness as do most industries where there are tons of competitors with virtually no obvious differentiation.

Most competitors’ web sites or marketing messages make the same-sounding claims, describe the same-sounding services, and make same-sounding lead generation offers.

Some try to break from the pack by making either of the three big marketing mistakes:

Mistake 1: Boasting about leadership. “We’re the leader in…” Even if it’s true, unless you’re a household name it sounds fake, and no one cares except your CEO. It’s not a key differentiation point.

Mistake 2: Making up terminology to describe yourself. “We use the unique A.B.C. process to…” If prospects never heard of it, they don’t care. They are not here to learn about you — they just want to know if you can solve their particular problem.

Mistake 3: Broad customer description. “Everyone from the Fortune 500 to small businesses use our services.” Prospects don’t think of themselves as generic (even if they are), so they don’t want to buy generic services even if it would suit them.

Melvin Feller’s bottom line advice is to focus your positioning on the customer — not yourself!

Feller recommends that you start by reviewing what you have received for the money you have spent on marketing programs. While every business has unique qualities that may favor particular approaches, here are some of the more common forms of marketing and some tips on how to evaluate their effectiveness.

Local phone books- Most of these directories have been replaced by more robust on-line services. Still, a tremendous number of businesses continue to advertise in ‘yellow page’ style books. Look at the section of the book you occupy. Based on competition, the size you select and cost you agree to pay, the listing should be big enough to have one main message plus contact information. Anything more and the cost associated with it can be put to better use.

Newspaper ads- Unless you do a substantial volume business or rely on holidays for the majority of your business, forget them. The cost grossly outweighs the benefit.

Coupon mailers- These vehicles are acceptable for car washes, haircuts and pizza but not much else. Most people don’t even open the envelops and if they do, they usually don’t look through more than 4–5 on the top. In any case, the coupon redemption is less than 1% so figure out how much you will pay to get 2–3 people to call you.

Online local listings- Several companies sell services to place you in all local listings for an ongoing monthly fee of anywhere from $99 to $499. If you have the know-how, you can do 90% of this yourself and save some money.

Door flyers- Most of the cost of this promotional approach is in the cost of delivering the flyers. They can be very effective if combined with something free. Real estate agents do very well by advertising themselves on pads of paper. This way, your name stays in front of your prospect for some period of time.

Mobile Text Messaging- A relatively new advertising medium, this service sends text promotions and offers to people who sign up using a text message code. They can work very well for low cost purchases or time specific offers like free sodas with any sub during the lunch hour. Other than that, I predict this program will fade as people will tire of getting ads sent to their phones.

Radio- Broad reaching but can be expensive. Depending on the time slots, you may or may not even be talking to your potential customers. All times are not equal so ask lots of questions about the schedule you buy into.

Billboards- Predominantly dependent on your message and the location. Unless your business has a visual component, I would pass on this sort of advertising.

Networking events- An excellent way to build visibility and referrals but it can be time consuming. You may need to test a few different groups to see which ones attract the types of referral partners and customers you are looking for. For most quality networking groups, look at WWW.meetup.com

Websites- One of the single biggest marketing expenses for a small business, your content, appearance and functionality must all work together or your designer and hosting costs are going down the drain every month.

Be very critical of your returns with any of these marketing approaches. If you are spending $500 to $2,500 per month on a variety of programs, make sure you can message the business you get with the right message. If the return is poor, cancel the agreement.

#Marketing #Small business #smallbusiness #smallbusinessmarketing #onlinemarketing #lowcostmarketing #increasemarketing #websitemarketing #smallbusinessprofits #business #entrepreneur #melvinfeller #melvinfellerintexas #melvinfellerinoklahoma #melvinfelleroklahoma #melvinfellerbusinessconsultants #melvinfellerbusinessgroup #melvinfellerfacebook #melvinfellerlinkedin

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infinancialcontrol · 7 years ago

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September Newsletter

Hi, and welcome to the September newsletter

This month we are covering issues that we have come in contact with recently, including corporate fraud – which I was recently an unsuspecting victim of, getting your pricing right, which a couple of businesses I spoke with recently had trouble doing and the importance of having accurate numbers to make good financial decisions.

I hope you find this information useful

Corporate Fraud – be vigilant, it can easily happen to you (it happened to me)

Corporate fraud has always been a problem, but it seems hackers and thieves are becoming more inventive every day about how to convince people that their fraudulent requests are legitimate. These devious humans use any method they can (including our inclination to trust people we know!) to get hold of our hard-earned cash.

The truth is, even the most financially savvy among us can fall victim to corporate fraud. I know this because it happened to me. It’s frustrating and infuriating (not to mention embarrassing) for any business owner. And once the money has left your bank account, it’s extremely difficult to get it back. It’s best to focus your efforts on avoiding in the first place.

Corporate fraud is one of the biggest issues both banks and business face and this example is one of the most common ways it is committed at the moment.

From within your business

First your fraudsters hack into your business network and infiltrate the mail system. Then they analyse your emails and track who sends and receives what, until they work out who pays the bills (usually the bookkeeper) and who makes authorisations for payment of invoices.(this is often the owner)

Once they have enough information, these thieves send a pretty authentic looking email with an invoice attached (that looks like it comes from whoever authorises payments) requesting the invoice be paid. The staff member sees no reason to doubt this email is authentic, it comes from their boss after all who is often the business owner. It looks just like lots of other emails they receive. So, they pay the invoice.

And the hackers have your money.

All you can do is hope this is discovered quickly and you can contact your bank and the recipient bank before the money is gone forever.

From within someone else’s business

Or, these devious types hack into your supplier’s system and send you an email advising they have changed bank accounts. They give you their new bank account number (which of course are the hacker’s account details) within a perfectly legitimate looking email from their business.

Next time you pay that supplier, you dutifully use the ‘new’ bank details, sending cash straight into the hands of the hackers. Next thing you know, your supplier is wondering where your payment is and you’re trying to tell them it’s all paid.

Once the money is gone, it’s super hard to get back. This is the scenario that happened to me. I’m still seething.

How to make life difficult for fraudsters

Always have two people involved in the payment process. One person reviews the goods or services purchased, and double checks payment details and authorisations are correct. The other person makes the payment. This means there’s more of a chance that anything unusual will be picked up.

Be alert to when things ‘just don’t feel right’. You know what normal is. So, you’ll also know when something feels off. It could be the language in an email, unusual spelling mistakes or a weird account number.

And anytime anyone sends you a message regarding changed bank details, call them directly (don’t use the number on the message, go back to an old invoice) to check it’s legitimate.

You can’t stop fraudsters from trying to illegally access your money, but with a little vigilance and a strong payables function, you can at least double-check situations that send up red flags and be alert to unusual requests.

Staff at every level of every business should be made aware of and alerted to the warning signs.

Don’t let the fraudsters win!

What Price for Profitability?

Lately I’ve come across a few businesses who are struggling to get their pricing right. This has resulted in them selling for little or no margin and risking the health of their operation.

Without a healthy margin, you won’t be in business long.

When you’re calculating price, there are a range of methodologies you can use. And if you want to stay in business, you need to get your pricing right. Different industries have different challenges in calculating costs and working out the best price to charge customers.

Here’s a plan for you to start with:

1. Begin by covering all your direct costs

Manufacturing

do your calculations carefully

In a manufacturing environment, you must cover all your direct costs and also factor in some recovery of indirect costs.

You will need to estimate your production levels to determine the level of recovery

We recommend you have a professional doing these calculations. Back of the envelope estimates might get you into trouble

Professional services

staff are your biggest expense so get this part right

For any industry, when factoring in the cost of staff don’t forget to include on costs like super, Workcover and payroll tax which can add about 15% to your labour costs.

When calculating prices in professional services, it’s important to make allowances for utilisation and staff leave. Staff down time has to be covered in your pricing

Importers of stock

Don’t forget your exposure to currency

Make sure you factor in the related price variations that come about as a result of currency movements.

2. Once you know your exact costs (and you know they’re right because they have been carefully calculated by a professional) you must decide the gross margin you want.

In its simplest form: Decide how much money you need to make on each item. That’s your gross margin. Add your gross margin to your cost per item and you have a price per item to charge customers.

Ok, it’s not quite that simple. You must also make sure you consider price points and competitor pricing. You don’t want to price yourself out of the market.

Top tip: don’t get mixed up between mark up and gross margin.

Gross margin is the difference between your selling price and your costs. If you know your cost per product or service and you know what you’d like your gross margin to be, then your selling price should be fairly easy to set. If your cost per item is $8 and you want a gross margin of $2, your selling price should be $10. Leaving you with a gross margin of 20%

Mark up is the percentage above costs that you sell your product at. A product costing $8 and sold at $10 has a 25% mark up

3. Finally, work out how many items or services you must sell to break even.

We know it’s not always easy and there are many components to think about when price setting. Ultimately you want to be sure you can retain a few dollars of profit for yourself. Pricing yourself too low and operating on tiny margins means this will never happen.

It’s wise to get advice from an expert if you can, especially if price setting is not an area you’re confident in. A business adviser or accountant (or virtual CFO) can help you develop a strong process for pricing your goods and services, that will stand you in good stead going forward.

Good luck

Good Data leads to good decisions but dirty data can lead to disaster

Having access to accurate financial data is crucial for a business owner.

Having inaccurate or dirty data makes it difficult to make good decisions. You can’t make good decisions about what is selling, how much you are making, and how much does it cost to run your business if you don’t have accurate up to date numbers

You can’t show dodgy figures to a bank when you’re asking for a loan, and you need to present accurate numbers to the tax office at year end.

Inaccurate numbers create a world of pain for business owners.

When we get invited into a business we often find that financial accounts and reports are not right and business owners are making decisions based on inaccurate information. This occurs for a number of reasons:

o Systems haven’t been set up correctly

o Transactions are being posted to the wrong place

o Some accounts haven’t been reconciled

o The bookkeeper, despite trying their hardest to keep the books up to date and accurate, doesn’t have anyone to turn to with questions, meaning some of their decisions have not been ideal

These are the most common issues we come across, but there are many more. It all leads to “dirty data” or inaccurate data in the accounting system.

Oblivious to the problem, happily believing their numbers are accurate, business owners base decisions on them, often important ones. And making big decisions based on inaccurate financial data leads to bad decisions.

The impact? Wrong decisions invariably lead to lost time and lost money.

Read on and learn how a part time CFO can turn dirty data into good data and good decisions.

Systems are set up correctly from the start. (If necessary, existing systems can be set up to run accurately going forward.)

Systems and processes are set up, documented and taught to staff. This makes sure every transaction is recorded correctly and accounts can be regularly reconciled.

We guide and train your bookkeeper or graduate accountant to do things the right way, to ask questions (the right questions) and to double check anything they’re not sure of.

We don’t assume everything is right just because we’ve set it up. Mistakes can still happen. We check on the accounting system and reports monthly to ensure the data remains accurate. Checks and balances are put in place to make this easy and routine.

Knowing the data is accurate means reports are correct and can be confidently presented.

You can now be certain that any decisions you make are based on accurate information.

We’re not suggesting you retain a CFO for huge amounts of time. But investing some money in a virtual CFO for a good quality set up will save you not just money, but stress and anxiety because it helps you avoid mistakes and poor decisions further down the track. You can’t put a price on the value of reliable, accurate financial information, but you can clearly see the value of a virtual CFO as your company thrives and grows, backed up by solid numbers and informed decisions.

#smallbusiness #smallbusinessprofit #corporatefraud #smallbusinessreport

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