Archives for April 2018

Financial Flipside Podcast, Episode 9: Cash Flow

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What is cash flow? Put simply, it’s the money (cash and cash-equivalents, so CDs, shares of equity, government bonds, bank accounts)  coming into and going out of your business. It’s an easy enough concept to understand, but day-to-day cash flow management is the Achilles’ heel of many a small business. A study by US Bank found that 82% of all failed business are undone by poor cash management. Admittedly frightening statistics aside, there are a number of reasons for small businesses to care about cash flow. In the first half the episode, we discuss what cash flow awareness can do for your company, where to look for cash flow information, and how to understand what you’re seeing.

 

We generally talk about cash flow in a business context, but it’s equally important to keep on top of the movement of money in and out of your life and personal bank account. In the second half of the show, we chat about applying cash flow management principles to your personal finances, including budgeting, expense planning, and whether or not skipping that latte will keep you from financial ruin.

 

What are your biggest cash flow challenges? How do you manage cash flow in your life and business? Let us know in the comments,via twitter (@financeflipside), or email (info@financialflipside.com)!

 

Missed an episode? You can find us on Apple Podcasts and Google Play.

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Funding the Future with Your Business

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Your small business does many things. It supports the community by providing goods and services. It supports the local government by paying taxes and fees. And it supports your employees by providing their livelihoods.

Your business provides for you, too, now and for the future. But don’t count on that just “happening.” You need a plan for using your business to create personal wealth.

Fund a Retirement Plan

Contributing to a retirement plan is a great way to convert money from your business into a personal benefit. Over time, you may be able to accumulate a substantial amount, especially if you contribute the maximum amount. If you don’t have a retirement plan, your financial professional can give you information about the options best suited for small businesses.

Fund Your Exit Strategy

 

A potentially more lucrative way to convert business wealth into personal wealth is to sell your company. This is a big step and it could take longer than you think, so allow plenty of time. Make sure you have a business valuation done early in the process. That way, if the value isn’t as high as you want (need) it to be, you have time to make necessary changes.

If you don’t have a formal succession plan, create one. If you do have one, make sure it’s kept up to date. A succession plan shows potential buyers that you are committed to having the business survive without you. A buy-sell agreement is a popular way to provide for the transfer of a business. Such agreements are legal contracts that establish who can buy an interest in a company and under what conditions they may do so.

Fund Your Buy-Sell Agreement

 

Life insurance is a popular way to fund buy-sell agreements. If you’d like to learn more about the role insurance can play in your — and your company’s –future, call your financial professional.

Whether you need individual or business tax advice, give us a call. We’ve got the answers you’re looking for, so don’t wait. Call us today.

Financial Flipside Podcast, Episode 8: I Put That on My (Credit) Card, Part 2: Business Credit

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After our tax reform detour in Episode 7, we’re back to talk a little more about credit. Specifically, we discuss business credit: how it differs from individual credit, some of the different types, and how and when to use it. If you’re concerned about balancing funding sources or wondering what the SBA actually does, this is the episode for you.

Mentioned on the show:

Bonus: the  tax consequences of crowdfunding

 

Do You Truly Know Your Business Costs – You Better !

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Your company’s profitability depends not only on sales but also on effective cost management. Are you adequately addressing the cost side of the business equation?

Analyze Your Cost Structure

You probably can readily identify the products and/or services that are generating your greatest sales volume. But can you identify all the costs associated with providing each product or service? Only when you know your true costs can you effectively allocate resources to the work that is most profitable for your company.

Actively Monitor Operations

As the busy owner of a small business, you can’t be everywhere all the time. But you do need to stay in circulation, regularly observing the day-to-day operations of your business and talking to your managers and employees. By staying visible and encouraging an open dialogue, you’ll be in a better position to uncover costly problems before they seriously erode your company’s bottom line.

Solicit Bids

Even if you are satisfied with a current vendor, you may want to talk to the competition from time to time. You won’t necessarily want to switch vendors simply because you are quoted a better price. But you may be able to use that price in negotiating more favorable terms from your existing supplier.

Watch for Discounts

In the interests of cash flow, your company may routinely pay its bills only when they come due. While this generally is a sensible strategy, it may not be wise if you are passing up generous cash discounts for earlier payment. In the current low-interest rate environment, borrowing the funds you need to take advantage of discounts may be a better move. For example, suppose a vendor offers your company a 2% discount for paying a $10,000 invoice 20 days early. Passing up the discount will cost you $200. Instead, you might borrow $9,800 from your bank, pay the discounted invoice, and repay the loan in 20 days. If the rate on your bank line of credit is 8%, you’ll owe about $45 of interest — for a net savings of $155 on just one invoice.

Effective cost management requires good information and careful planning. For more tips on how to keep business best practices front and center for your company, give us a call today. We can’t wait to hear from you.