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How to Limit Those Nasty Financial Surprises
No one likes financial surprises. Successful business owners are constantly aware of the delicate balance between company cash, inventories of materials or parts, and indebtedness. Spotting signs of trouble is crucial to preventing those nasty surprises.


Building a business from scratch will turn virtually anyone into an optimist. As the founder, you develop enthusiasm for what your enterprise creates, produces, and sells. This is good; a sense of confidence is essential to continually strive for greater success.

But optimism can easily turn to blindness. Wise business owners combat this inability to face reality by developing a critical perspective on their operations. They assess conditions as if they are evaluating a potential investment in an unfamiliar company - spotting weaknesses and problem areas that cry out for improvement.

For this you'll need help: An important ingredient in this process is regular consultation with a loyal team of financial professionals. For example, ask your bookkeeper about any unusual recent expenditure that made a substantial impact on cash flow, and/or consult with your accountant about performance ratios and trends. These professionals have both the objectivity and the familiarity with your financial statements to provide the information required for long-term success.

Warning signs

No matter how sound your business model, flaws in managing cash will sink your enterprise. Among those unpleasant financial surprises are cash flow constraints, which result in missed opportunities and necessitate redirecting scarce time to devising solutions. Ensure you understand the figures in a cash flow statement as well as the differences between accrual basis financial statements versus cash basis.

Monitoring debt also needs constant review. Borrowing power is, of course, important, whether it's from available credit card limits or bank credit lines. But loans must be repaid. Amounts previously borrowed are barriers to further borrowing. Sufficient cash flow must be generated from business operations to service both present and impending debt. Mounting indebtedness is a vital element to compare with cash flow.

Analysis of accrual basis provides the truest picture of performance. Cash basis may be best for income tax reporting, but this doesn't show accounts receivable or accounts payable. You need accrual basis financial statements to determine how quickly your business collects on invoices and pays vendor bills. Low receivables turnover will stifle cash flow, and prolonged payables turnover is often an initial warning sign of cash limitations.

Compare your financial standing over the same period in the prior year, paying special attention to revenue growth and profit margins. Even if sales are growing, you want to know if the rate of growth is rising or falling, and why. Some issues, such as seasonal factors, are likely temporary; but analysis may indicate permanent changes in customer sentiment or technology.

Equally important is profit margin. A downward spiraling profit margin is indicative of ascending direct costs. Slippage in net profit margin indicates that overhead is growing faster than sales. If this continues to trend over several quarters, danger lies ahead.

Avoid surprises like these with a critical eye and help from your team.

Steps to Success: Marketing Your Business on a Budget
Good news: You don't need a huge marketing budget to promote your business. Why not? There are abundant opportunities to gain exposure through social media.

"Customer-ize" your marketing. Since social media is all about engagement, use social media platforms to learn about your customers, identify topics that matter to them, and engage with them rather than sell to them. Ask questions, solicit opinions, and find ways to strengthen connections. Get people talking about your product or service.

Platforms. Facebook, Twitter, Instagram, YouTube, and Pinterest are essential platforms. For these and others, there are many low-cost/no-cost ways to reach out. Here are some from an article on bootstrap marketing in The Balance:
  • Blog: Start your own blog and/or comment on other related blogs.
  • Vlog: Upload videos to a branded YouTube channel or embed video on your website and share on social channels.
  • Post a podcast, webinar, or tutorial workshop, or host a real-time Q&A session.
  • Use Meetup to organize networking events with potential customers and demo or distribute samples of your products.
Spotting trends. These approaches can help you spot trends. Focus on what people are searching for online; keyword research is an easy way to identify hot topics, and there are free tools, such as the Google Keyword Planner and Soovle, for this. Getting to know, understand, and communicate with your customers is probably the most powerful marketing technique you can use. Best of all, when you do this through social media, the only real expenditure is your time.

Steps to Success: How to Build a Comprehensive Business Plan
"I have always thought that one man of tolerable abilities may work great changes, and accomplish great affairs among mankind, if he first forms a good plan, and, cutting off all amusements or other employments that would divert his attention, make the execution of that same plan his sole study and business." Benjamin Franklin

There is no better way to thoroughly know and understand your business, your industry, and your market than to go through the process of researching and developing a business plan.

A good business plan outlines a vision for your company and demonstrates how you intend to realize that vision. It serves as a blueprint to guide you through start-up, establishment, and eventually, business growth. It will also help you secure loans and attract investors.

In a comprehensive business plan, you should include an executive summary, a mission statement, descriptions of products and/or services, a market review, detailed financial analyses, and a succinct description of the business's short- and long-term goals.

Also necessary are in-depth data about your target market, sales and marketing strategies, cash flow projections, operational particulars, and growth milestones and other ways of measuring progress.

There are many tools available to help streamline the process, including templates, business planning tutorials, videos, and kits. Many of these are free and available online. But the prospect of writing a business plan can still be daunting for a would-be small-business owner.

That said, and in the spirit of Benjamin Franklin, writing a business plan is a critical step in establishing your business as a success. And over time, this essential, living document will be just what you need to guide your business decisions and keep your business on track.

Automation Requires More - Not Less - Outside Support
Business owners know that to stay on top of conditions impacting their companies, they need to become one with their financial reports. However, this isn't easy; wringing useful information from financial reports needs to be the result of tireless bookkeeping work.

In the start-up phase, pieced-together data in a spreadsheet may deliver adequate information. But a business owner expecting to thrive over the long haul needs better numbers. Fortunately, there is accounting software to automate the process. Unfortunately, automation is also the bane of small-business owners with limited bookkeeping knowledge.

Why? Because not everything in an automated system is automatic. Individuals lacking experience with double-entry bookkeeping commonly make data entry mistakes. Some events, such as purchases and sales of capital assets, depreciation expense, and borrowing arrangements, pose real problems.

If you enter data yourself, you may make mistakes - which can slow you down or throw you off track. If you expect a family member or college intern to handle the function, well, more of same.

Truth is, there's no substitute for an expert. Whether you're a do-it-yourselfer or you opt to hire someone for data entry, you still need professional assistance to check for errors and record complex transactions. Skilled accountants and experienced bookkeeping services deliver crucial value. In return for the cost, you have the security of reliable financial statements to aid in managing your business.

The takeaway: Automating your accounting doesn't relieve you of the need for outside assistance tailored to your needs and budget. In fact, it may make it even more crucial.
Michele Ball
Perfect Additions
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These days, news is everywhere and constant, and it can feel overwhelming wading through the noise. But reading financial news - and news in general - doesn't have to be overwhelming. Learn what strategies to implement to help you make sense of it all.

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As Larson points out, very few of us track the outcomes of the decisions we make. Even top executives. A survey of 500 managers and executives found that a shocking 98% of participants failed to implement best practices when making decisions at work. To discover seven ways to make better decisions, read on.

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By John Boitnott

Are millionaires just lucky, or is there something they know that the rest of us don't? According to Boitnott, most invest in themselves, ensuring they're building their lives on a strong foundation. As Boitnott puts it: "Their health, productivity, and all manner of other things are so solid that success flows through more naturally." And it's results, not hours worked, that count with this group. Create your own luck by following their lead.

You and Your Suppliers
You know suppliers are key to your business's success, but have you unlocked the "hows" of managing yours? Business owners need to know how to fully engage their suppliers. Use the following links to strengthen your supplier knowledge and build a strong supply chain:

Who are your suppliers, and what makes a good one? Find out here:
How to Find and Work With Suppliers

Establishing good relationships with your suppliers is vital. Discover the secrets to supplier relationship success:
How to Establish a Good Relationship With Suppliers

Is your business getting the agreed-upon price? Here's how to protect your bottom line:
Your Business May Not Be Getting The Pricing Your Suppliers Agreed To

Find reliable wholesale suppliers for your business with these tips:
4 Tips for Researching and Finding Wholesale Suppliers

Are trade shows a good source of new suppliers? Find out here:
Should My Small Business Use Trade Shows to Find New Suppliers?
This newsletter and any information contained herein are intended for general informational purposes only and should not be construed as legal, financial or medical advice. The publisher takes great efforts to ensure the accuracy of information contained in this newsletter. However, we will not be responsible at any time for any errors or omissions or any damages, howsoever caused, that result from its use. Seek competent professional advice and/or legal counsel with respect to any matter discussed or published in this newsletter.
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