Archive for the ‘Finance’ Category

The biggest obstacle any company faces on a day to day basis is financing. This is especially true for small businesses. Small businesses are constantly fighting to make their way in the world and get a foothold in the domestic market. Those small businesses that have been successful fight to get a foothold in the international market as exporters. It is even more important for these businesses to be able to secure the necessary financing needed to expand overseas.

While there are many obstacles to overcome in exporting the acquiring capital to start the expansion process is the largest one. Small businesses will not find very many investors who will put up capital to finance an overseas venture. The recent credit crisis has made investors leery of shaky ventures such as exporting, and in some cases the funds are simply not available. A successful exporting business can cost a few million dollars to create and keep running, with the initial investment being the largest and most important part. It sets out the financial foundation of the company, allows the company to get established in the country it is servicing and helps build customer relations.

However, finding an investor is not always easy because of the amount of money that has to be put into place during the initial investment phase. Most small businesses are lacking in assets that can be used as collateral for a loan. This makes it hard for most small businesses to get the funds they need to open an exporting branch. There are, however, options available to the small business owner to help them get their exporting business rolling.

One option is assistance from the Small Business Administration (SBA) that can help a small business borrow the capital they need to get their exporting business started. The SBA acts as a go between for the small business and a third party lender, allowing the business to finance up to $750,000 to be used for business purposes such as expansion. This program has been popular with entrepreneurs and is one of the many options available to businesses just starting out.

OPIC (the Overseas Private Investment Corporation) is another option for small businesses looking to expand overseas. The company acts as a facilitator for small businesses that are looking to market their products internationally and have revenue of less than $250 million. OPIC will determine if these companies are eligible for a loan and they could receive anywhere from $100,000 to $250 million to start an export business. Businesses with revenue up to $35 million can receive a loan from $100,000 to $10 million to help start their exporting division.

Both of these programs are backed by the government and recognized as reliable sources of capital for expansion. However, not every company may qualify for a loan and the repayment terms may vary. If the small business is a good fit for the program, then they may be able to realize their exporting dreams quicker than they expected. Contact us today to see how we can help facilitate your capital requirement needs in a timely and cost-effective manner.

A cash flow projection is a forecast of the difference, over periods of time, between cash coming in the business and cash going out of the business. The estimation or projection of cash flow is a powerful management tool. If you were to choose one financial management tool to use on a routine basis, cash flow projection and analysis would be the one. By knowing your cash position now and in the future, you can:

• Make sure you have enough cash to purchase sufficient inventory for seasonal cycles;

• Take advantage of discounts and special purchases;

• Properly plan equipment purchases for replacement or expansion;

• Prepare for adequate future financing needs.

Cash is the lifeblood of your business. Only cash pays the bills – profit does not. Know where your cash is going, from where it is coming, and what the future holds. Cash flow projection is the tool. The ability to predict and plan cash outlays means that you won’t be forced to resort to unexpected and costly borrowing (such as credit cards) to meet your cash needs.

How to Prepare A Cash Flow Projection

Preparing a cash flow projection is something like preparing your budget and balancing your checkbook at the same time. Unlike the income statement, a cash flow statement deals only with actual cash transactions. Depreciation, a non-cash transaction, does not appear on a cash flow statement. Loan principal and interest payments will both appear on your cash flow statement, as they both require the outlay of cash.

Cash is generated primarily by sales. But in most businesses, not all sales are cash sales. Even if you have a retail business and a large percentage of your sales are cash, it is likely that you offer credit (charge accounts, term payments, lay-a-way, trade credit) to your customers. Thus, you need to have a means of estimating when those credit sales will turn into cold hard cash.

Cash flow projections should be prepared for short-term (weekly, monthly) and longer-term planning purposes.

Purpose of Short-Term Cash Flow Projection (Weekly and Monthly)

• To determine short term cash position.

• To plan the amount of cash not needed in the short-term and, therefore, can be put in short-term investments or used to take early-pay discounts from vendors.

• To estimate cash needed for due obligations and working capital requirements.

Purpose of Intermediate Term Cash Flow Projections (12 months)

• To show how much cash will be needed to run the business in the coming year.

• To determine where the cash will come from.

• To determine seasonal variations in cash flow.

• To estimate annual borrowing requirements and ability to make repayments.

• Supporting information for loan application.

Purpose of Long-Term Cash Flow Projections (3 to 7 years)

• To support strategic planning

• To determine equity needs

• Substantiation and support of long term debt or equity raising efforts

The level of detail needed in your cash flow projection will vary depending on the complexity of your business.

Suppose a profitability analysis reveals that the company is earning poor profits in certain products, territories, or markets. Are there more efficient ways to manage the sales force, promotion, and distribution in connection with these marketing entities?

Some companies have established a marketing controller position or hire outsourced help to improve marketing efficiency. They examine adherence to profit plans, help prepare brand manager’ budgets, measure the efficiency of promotions, analyze media production costs, evaluate customer and geographic profitability, and educate marketing personnel on the financial implications of marketing decisions.

Sales Force Efficiency

Sales managers need to monitor the following key indicators of efficiency in their territory:

• Average number of calls per salesperson per day

• Average sales call time per contact

• Average revenue per sales call

• Average cost per sales call

• Entertainment cost per sales call

• Percentage of orders per 100 sales calls

• Number of new customers per period

• Number of lost customers per period

• Sales force cost as a percentage of total sales

When a company starts investigating sales force efficiency, it often finds areas of improvement.

Sales-Promotion Efficiency

Sales promotion includes dozens of devices for stimulating buyer interest and product trial. To improve sales-promotion efficiency, management should record the costs and sales impact of each promotion. Management should watch the following statistics:

• Percentage of sales sold on deal

• Display costs per sales dollar

• Percentage of coupon’s redeemed

• Number of inquiries resulting from a demonstration

Distribution Efficiency

Management should search for distribution economies in inventory control, warehouse locations, and transportation modes. One problem is that distribution efficiency declines when a company experiences strong sales increases. Strong sales surges can cause a company to fall behind in meeting delivery dates. Management responds by increasing sales force incentives to secure more orders. The sales force succeeds but once again the company slips in meeting delivery dates.

Management needs to identify the real bottleneck and invest in more production and distribution capacity.