FINDING THE HIDDEN CASH CHECKLIST

Transcription

1 FINDING THE HIDDEN CASH CHECKLIST ITEM NOTES/ACTION PLAN SYMPTOMS OF PROFITABILITY PROBLEMS Low Sales/Income Volume Potential Causes of Low Sales/Income Volume Insufficient Market New Products or Services New Location Virtual Location Poor Marketing Identify Their Target Market o Who are their customers? o How many are there? o What are their needs? o How much will they pay? o Best way to reach them? Analyze Their Marketing Plan o Obtain information on best marketing practices

2 o Ask other successful small business owners what works o Define the marketing budget o Modify plan based on analysis and feedback No Repeat Business Why do they have no repeat business? Poor Products and Selection o Vendor relations o Trade shows o Customer feedback Poor Technical Expertise o Training for employees o Hiring qualified personnel o Customer feedback Customer Service Problems o Hire qualified employees o Train employees o Know the customer o

3 o Make sure customers believe it is in their best interest to do business with the client o Solicit feedback from customers o Take care of unhappy customers o Empower employees to solve problems Noncompetitive Pricing Know the competition Vendor relations Perception is Reality o Superior products/services o Value added service Low Gross Profit Margin % Potential Causes Pricing incorrectly Paying too much for COGS Shrinkage o Family o Theft

4 Low Net Profit Potential Causes Low sales/revenue Low gross profit High operating expenses o High owner needs Review owner needs, budget, and other possible income o High rent Renegotiate lease Share space Relocate o High debt service Refinance debt Interest only payments Debt consolidation o Uncontrolled office expenditures Develop budget

5 Monitor actual versus budget Eliminate nonessential spending Check vendors pricing o Payroll expense No overtime Work associated with profit Non-cash rewards Terminations if needed o Insurance Obtain three quotes Drop unnecessary coverage o Everything else CAUSES OF CASH FLOW PROBLEMS Low or No Profit High Accounts Receivable In house financing instead of finance company or taking corporate credit cards

6 No or lenient credit policies No discounts for early payment No or poorly enforced finance terms Poor Collections Policy No monitoring of accounts receivable No collection process to follow up on late accounts No enforcement of credit limits No knowledge of small claims court or collection agencies No use of IRS bad debt rule Too Much Inventory Lack of inventory monitoring No knowledge of industry Inventory Turnover Rates No knowledge of price elasticity of demand Not taking advantage of sales representatives industry knowledge Wrong Kind of Inventory Unwillingness to price obsolete inventory to sell quickly

7 Ineffective use of Loss Leaders to bring in customers for Up Selling Lack of understanding of customer wants Poor planning before going to buy inventory Purchasing Long Term Assets with Cash Fear of debt Failure to anticipate cash flow needs Poor relationship with banker Tempted by vendor terms on asset purchases Line of Credit Instead of Term Loan Failure to understand cash cycle Poor relationship with banker Fear of long term debt Failure to understand purpose of of a line of credit Failure to monitor lines of credit Out of Control Credit Card Debt Used credit cards in the first place Banking of future contracts

8 Failure to make timely payments Failure to monitor interest rate changes Paying the minimum payment Too many cards Paid Too Much for the Business Trusted the seller s asking price Highly leveraged the deal Failure to check projected cash flow based on past revenue carrying the debt