Monday, February 25, 2013

How to spend less time dealing with email

Have you ever given thought to the amount of time we spend dealing with emails?  We track all our time, whether it is billable or not, so we know exactly how much time we spend or waste on it!

One thing I have noticed is how much easier it is to find an old email if there is a sufficiently detailed subject line.  It is also imperative to limit the subject of an email to as few topics as possible.  It can actually be more efficient to send multiple emails to the same person if the topics are widely divergent.  For this to work, people need to start fresh email threads when the topic changes rather than continuing to "reply" to the same thread. 

Another trick I have been taught is to look at your emails from latest (or newest) to oldest if you are in email catch-up mode.  This allows you to see if some items have been dealt with or answered by someone else and therefore your response isn't needed.  It seems unorthodox to read your email in this manner, but try it-it works!

Another tip is to limit your "reply all".  Take a moment to consider whether everyone who received the email needs your response.  We all spend a lot of time reading and deleting emails that we really didn't need to receive. 

If you are overwhelmed by the volume of emails you deal with every day, consider how many subscriptions you received via email and how often you get updates from Linked In and other groups.  Pare down your lists to the publications you really are reading regularly and unsubscribe to those you are not.

Do you have any other email tips or tricks?  Let us know!

Tuesday, February 19, 2013

3 Essentials of Cash Flow Forecasting

One step that is often overlooked in managing the small business is forecasting Cash Flow. Even if budgets are created the critical step of translating the budget to a cash flow forecast is avoided. Why? Lack of time, lack of resources, and lack of knowledge regarding how are the most cited reasons. It often seems like an overwhelming process, even for accountants who are not focused on Management Accounting. However, this critical step that we provide for many of our clients is what has allowed them to reassess their business practices in time to make the necessary changes to keep them out of financial trouble.

Cash Flow forecasts are by definition rolling forecasts. I like to prepare a higher level 12 month cash flow forecast to see the larger picture and then a more detailed short term weekly forecast that runs for just as long as you reasonably can predict what will occur. That might be 4-12 weeks depending upon how quickly you collect your receivables and how predictable your sales are. I revisit the short-term forecast as often as necessary (daily, weekly, or monthly) depending upon the needs of the business and only reassess the higher level 12 month forecast if something has changed drastically.

1. In order to begin you need to know a few key facts about your business. The first is when you expect the revenue to come in. If you do not offer any terms and are paid up front, then your revenue forecast will be the same as your weekly sales forecast. If you do offer terms, then you need to continually keep a pulse on 2 items, the percent of your sales that are credit sales and your average days to collect your outstanding Accounts Receivable (A/R turns in financial terms). You will need to determine if these factors change significantly at various times of the year or if you can analyze them only occasionally. Initially I would look at them monthly to get a feel for what they are doing and how they are reacting to the economy. Besides being necessary for your Cash Flow forecast, watching these two numbers can also be an indicator of how your customers are reacting to larger economic events and what is happening in their businesses. Further, it can be an indication of whether you are being too lax in your own collection policy.

2. Secondly you need to do some analysis of your expenditures. You need to analyze when your own payments are due (how far ahead do you have to purchase to fill your sales demand, what percent of your inventory terms are prepaid, net 30, net 60?). Add to this the various weekly and monthly payments that are due such as payroll, insurance, rent, interest and loan payments, tax payments, distributions to owners, to give you a comprehensive layout of when your cash needs to be spent.

3. The third piece is your sources of funds outside of collections. If you have a line of credit that you can tap into or a loan you can draw upon, then you need to factor the limits of that into your equation.

Build a spreadsheet using all of these parts and I guarantee that you will more effectively stay on top of your cash flow needs. You will see the shortfalls before they occur. You will know how much cash you need to have each week and can then work on the various strategies to bring in cash more quickly, extend the time needed to pay your vendors, and plan your capital expenditures more wisely. Cash Flow Forecasting is one ore tool to allow you to run your business, not have it run you.

Monday, February 4, 2013

Managing cash flow

When I was a young accountant, someone gave me a button that said "I Love Cash Flow".  I had it pinned to my cubicle and I often teased my co-workers when they would ask to borrow money for lunch near the end of the month that they, as CPA's, should be able to manage their personal cash flow better!  Cash flow management has many components and we will address them over the next few weeks.

 A business can take a couple of simple steps to manage its cash flow.  The first thing you can do is to compare the terms your vendors offer to the terms you offer your customers.  If your vendors expect to get paid in 15 days but you give your customers 30 days to pay, you are going to run into problems.  A business should consider what its competitors are offering as far as terms go, whether the customer has earned lengthier terms and what kind of flexibility it has with its vendors.

It is not unusual to require payment up front or at the time of service for new customers and then to offer extended terms once a good relationship has been established.  It is a good idea to do a credit check on any business you are considering offering extended terms to. 

If your vendors are unable to offer lengthier terms and you feel you must offer longer terms to your customers, a line of credit may be the answer.  This will provide your business with the funds to pay your vendors and then you can pay it back when you are paid by your customers. 

Receivables and payables are just two components of cash flow.  We will discuss others in the weeks to come so stay tuned.