The economy has caused a credit crunch for businesses large and small so the one thing that all businesses should do is to get cozier with your banker.  This can take the form of calling more often, visiting, inviting your account manager to your business premises, anything which will provide more real world contact with your banker.

The one thing that is definite right now and that account managers are under more pressure to ensure their clients are worthy credit risks and are up to date in their monthly bank reports.   So now more than ever, its important to better your relationship with your banker, even if you don’t need more financing at this time, but very important if you think you may need to re-finance,  get waivers, or get amendments to their current financing.

Banks through their own databases, but also through credit bureaus have statistics on every industry and if you’re an underperforming company compared to the average in your industry, you may have already gotten a call to ask you whether you really do need for example a $4 million credit line, when you’ve only used $1 million for the past 3 years, yet your debt to equity ratio is higher than the industry average.  Not a good sign, but manageable if you take the time to provide comfort to your banker.

It’s hard to think of your banker as a partner, but they really are, they want to see you succeed, not fail, so having them understand your business and your competitive advantage compared to your competition is very much smart business.  So here are some steps to take to improve your banking relationship:

1. Make Verbal Contact with Your Banker
   - Call your account/relationship manager at least once a month or even better twice.
   - If your company isn’t doing well it’s even more important to outline your strategy to your banker to improve and give them comfort in what’s your business direction.
2. Build Trust with Your Banker
   - Private companies have quite often reported the bare minimum information to their banks, because they have wanted to remain private in all respects.  In today’s economy, in order to get help either re-financing or potentially finance acquisitions its time to bring down the curtains and let the bank see what you’re doing well.
3. Prepared Detailed Forecast Information
   -  Public companies are used to sharing information with their banks so for them this less of an issue because of the quarterly presentation done by CFO’s for their public companies, but some have gotten away from this practice in the last few years but should think about re-instituting it only for the confidence it shows to stakeholders about their business direction.
   - These forecasts should include various scenarios of financial, operational, and employee headcount variables.
   - The forecasts should include worst to best case scenarios going out at least 2 years.
4. Hire Reliable, Knowledgeable Financial Advisors
   - Today its a good practice to ensure that information is presented accurately and consistently by advisors who understand your industry, your business, and advisors who have gone through economic downturns before where maybe your current management haven’t.  In today’s times, you better know you’re making decisions on good reliable financial information.
5. Communicate, Communicate, Communicate!
   - Now is the time to be proactive, treat your banker as your partner in business, keep them informed of major milestones, and what you’re doing to beat the current economic environment.  Be a leader, manage your banker rather than have the bank manager you!

Written by Richard Wong, CMA    rwong@firstchoicecapital.ca

Marketing and advertising is one item you shouldn’t cut from your expenses budget as according to research, companies which continue to promote themselves in downturns do better than their competitors once the economic downturns have subsided.  Here’s a list of 5 ways to promote your organization:

1. Send out promotions with your customer invoices, either electronically, fax, or mail.
2. Create a Facebook page for your company.
3. Give free workshops on your products or services.
4. Create a video for your business and upload it to Youtube.
5. Network in new circles and ask for referrals from your old customers.

What’s important to remember is that it’s still important to promote your organization in tough economic times and if you’re not comfortable doing some of these things then get someone else in your organization to do it.

Written by Richard Wong, CMA   rwong@firstchoicecapital.ca

Cash flow is important anytime, but especially in today’s economic environment of tighter credit.  We know today that the credit crunch has affected the economy and that banks are now able to pick and choose who they extend credit to, how much credit they extend, what conditions they extend it to, and how they can pressure you the CEO, CFO, or owner of the business into improving your financial results to comply the banking arrangements.

Here are 5 hints to Improving Cash Flow:

1. Invoice ASAP & Follow up next day to double check client has received the invoice

• Get in the habit now of invoicing as soon as the job is done and getting it into the hands of the customer electronically, either by fax or email or if handwritten invoices spend the time after delivery to now write the invoice earlier in the day before delivery, rather than “I’ll invoice you later.” Most accounting software from Simply Accounting & QuickBooks to Microsoft Great Plains, Sage ERP, to Oracle and SAP the email invoices feature can simply be turned on.

• Now considered a best practice, be proactive you don’t want to find out 30 days after the invoice date that the customer hasn’t received it.  Customers may find this irritating at first, but you can always tell the customer that you are just trying to ensure they are happy with the product or service they received and that there aren’t any issues with the invoice.  You can say that you’re trying to improve your customer service at this time.

2. Ask for a Retainer or Deposit

• Depending on the industry or whether it’s a new client or old this is one worth trying as if you can get a deposit for goods/services ordered then paid in installments is better than waiting for the payment to come 30 days after the job or product has been delivered.

3. Offer Cash Discounts for Quick Payment

• If you haven’t offered a cash discount for payment within 10 days, ie. 2% 10, net 30 means that the customer gets a 2% discount off the total invoice if  “they pay within 10 days only” or the customer has the standard of paying within 30 days.
• Think of it as a sales discount you’re willing to give to be able to get the money in your hands earlier rather than someone else’s hands.

4. Become a Pit Bull of Receivables (Keep after them!)

• Start reviewing your aged receivables reports weekly if you don’t have a Key Performance Indicator system (KPI’s for short) and seeing if you have late paying customers how late they are get your receivables people to start action right away by either emailing them right away then calling them the next day.  Some customers need to be reminded, that’s why if you’re proactive and invoice right away and follow up to ensure they have received the invoice and processed them you’ll have to do less collections work in the end.
• Why wait, it’s your money?

5. Pay Invoices Only When Due

• Review those vendor contract terms to see when those invoices are actually due for payment rather than paying them right away because you want to get them out of the way.
• Setup online banking payments so you can schedule when payments are due and you are able to download electronic information to your accounting software.

In summary, these are some quick things to implement to improve your cash flow and also at the same time improve your customer service and satisfaction.  Protection of cash should be the CEO’s biggest concern nowadays and any ways to improve the order to cash cycle should be attempted.

Written by Richard Wong, CMA     Email: rwong@firstchoicecapital.ca

“Sometimes we do our best, sometimes we need to do what’s required” Winston Churchill.  Those choice words really apply today, doing what’s required. We have had a great economic run these last several years and for many people doing business was more about taking sales orders and making record profits year over year.

Today though we are back to how business was before the business boom, and that is working harder to keep our clients, working harder to get new clients, keeping a watch on the bottom line, and what we have in our cash flow reserves. What we know is that companies which have good leaders ie. Sergei Brylin (Google), Steve Jobs (Apple), Chip Wilson (Lululemon), have learned to take companies and ideas from past downturn times into the present day with great vision, but even more importantly, greater execution.

Leaders, come out of economic downturns better than anyone else. Why? 5 Qualities distinguish them

1. Have a clear vision
2. Reap what you sow, sow more and you will reap more.
3. Know the difference between a problem finder & a solution provider.
4. Who do you spend the most time with? The 5 people you spend the most time with have the most profound effect on you. Your income is the average of those 5 people.
5. Get good at whatever you practice.

10 Ideas to Lead:

1. Think of loss leaders, 20% of all your customers provide 80% of your revenue, therefore you can give away more freebies to help you get more revenue from your best clients.
2. Go beyond the call of duty: Example. You need to have your shoes shined before a early morning presentation but its late at night and the hotel doesn’t have a shoe shine station or anyone who can do it. What does the hotel manager do, he gets someone before the presentation starts to shine the presenter’s shoes from outside the hotel.
3. Look within your own organization to give away something for free that doesn’t cost you anything.
4. Think about joining hands with other groups to do business with to save costs.
5. Keep staff productive ie. Bob Rennie of Rennie Marketing gives his employees Friday afternoons off because he thinks they’ll be more productive and fresh thinking because he can’t pay the same amount of bonuses this year compared to last year.
6. Think of how important your value is to of consumers and communicate it with staff and customers.
7. Shopping centers provide a great opportunity for businesses to get good value for upcoming leases.
8. Try to be a FAD (Feelings, Attitudes, Distinction) should be taken into account in your decisions of your customers.
9. Goals written increase the likelihood by 1000 times of those goals being achieved. The top 3% write goals, the top 2% write goals as if they’ve already reached the goal.
10. Continue branding and marketing

Organizations are now required to going back to doing the basics and they can endure hard times by doing what’s necessary. A Booz Allen Hamilton study on how organizations endure over time led to their findings showing that:

1. Organizations changed and grew.
2. Organizations stayed true to its founding principles

The message today is work hard, be the best that you can be, don’t take yourself or your customers for granted, and be proactive to lead your organization into the future out of this economic downturn.  Be Bold and be a leader!

Check out this  video on being bold.  http://www.odpn.ca/demand/videos