Category: Finance & Capital

Whatever you believe is true…at least to you.
Averages, don’t you love them? What mama ever said to her children that the goal in life
is to be “average”?
Lowly manager…Largest asset
Sometimes it’s more but on “average” 40% of a business’ assets are in the form of
accounts receivable…short term money due from the sale of a product or service. In direct
contrast to the size of the asset that they are responsible for creating and managing,
credit managers are most often lower echelon managers who are at the very least one
step removed from the corporate decision makers…and their paycheck reflect it.
Forget the traditional organization chart with branches that in turn branch off and so on.
Instead of organizational charts think of totem poles…the carved columns erected by
the Native Americans of the Pacific Coast.
Totem poles are representations of men and animals and of their relationship. Now
forget about corporate titles, initials after names, and the size of the paychecks earned
by different business managers; instead focus on their ability to influence profitability.
Where would credit managers sit on the totem pole; close to the top, in the middle,
at the bottom…if at all?
The Pay Back
When allowed, encouraged, and supported by “upper management”; credit managers
can and should seek to find ways to say yes to new profitable sales, to keep existing
credit customers current and buying and to identifying and communicating cost reducing
opportunities for improvement through out the entire business chain of suppliers,
sellers and customers.
A credit application can represent the successful result of marketing and sales efforts,
a customer wanting to buy, or a risk for non-payment…of loss if the customer fails to pay.
Corporate attitude will determine how performance is measured and if DSO (days
sales outstanding) and % bad debt are used the message to the credit manager is clear,
“be real careful who is approved for credit and if a credit customer fails to pay within
terms ..throw them on credit hold/stop”. The end result of focusing on and measuring
for risk will be great DSO and bad debt numbers …but at what cost/loss?
Instead of measuring for risk a company should measure for profit and if it does credit
approval becomes the process of finding a way(s) to say yes to profitable sales . The
profit measurement looks at the % of applied for dollars approved, or exceeded.
Measure for profit and past due A/R management (it’s not collections) becomes the
“Completion of the Sale” with the goal being to keep credit customers current and
buying. With repeat sales often being the most profitable, companies should measure
for % of credit customers current…and buying. If the total credit line (never credit limit)
for all credit customers is $10,000,000…what % of the total line is being utilized?
…and are those customers with an unused line being encouraged to buy more?
A secondary goal of Completion of the Sale (past due A/R management) is the
early identification and control of the small % of past due that represent a potential
for loss…type two financial serious and type three avoiders.
The largest percentage of past due A/R are tied to something going wrong. On
“average” 70% or more of past dues are type two system related…something went
wrong somewhere. In the process of identifying, fixing and communicating those
things/processes that have gone wrong; the credit area can help drive down
everyone’s costs. Constant improvement in how things are done provides a
payback far greater than more new sales, repeat sales, and improved cashflow
combined.
Numbers and results
Payment on account and expectation fulfillment are linked. If a customer orders
a green “whatever” and is shipped a blue “whatever” the seller shouldn’t expect
to be paid. Employees are kind of like that; they tend to go with the flow , with the
expectation. If credit managers are low paid, if they are thought of as the “ugly
step-child of accounting” and if their performance is measured by DSO and bad
debt loss…not much is being asked nor is likely to be delivered. On the other hand
if a company measures for profit…for new sales, repeat sales and improved
efficiencies…cash flow and bad debt will take care of themselves.
Total Cost of Business
On “average” 25% or more of the total cost of doing business is tied to inefficiencies,
to things not being done as right as possible the first time. And not to be repetitious,
but the credit manager in a company is like the man following a parade with a shovel
…when something goes wrong the customer doesn’t pay and in the process of fixing
things the credit manager interfaces with just about every aspect of business; and if
asked the credit manager can point out improvements that drive down everyone’s cost
of doing business.
Summary
Whatever you believe is true and it’s the same for companies…whatever they measure
for defines their thinking, their attitude.
The full profit potential of a business is influenced by its attitude toward the credit
function and to Credit’s placement on the corporate totem pole.
And if your company still measures for DSO and % bad debt…your attitude is showing.

Abe WalkingBear Sanchez is an International Speaker / Trainer / Consultant on the subject of cash flow / sales enhancement and business knowledge organization and use. Founder and President of www.armg-usa.com, WalkingBear has authored hundreds of business articles, has worked with numerous companies in a wide range of industries since 1982 and has spoken at many venues including the Shakespeare Globe Theater in London.

This article is by our guest writer Sandra Hajda, a freelance journalist, publisher and avid investor. Sandra resides in Melbourne and can be contacted at hajdasandra@hotmail.com.
It’s increasingly recognised that shrewd investment is essential to achieving a high standard of living, especially after retirement. The web is awash with stories of middle income-earners (teachers, laborers and IT professionals) who have created extraordinary wealth by studying the markets.
The average investor can expect to live more comfortably (not everyone will rake it in like Rene Rivkin!). But financial terminology is prohibitive, to say the least: a minefield of jargon, abbreviations and subtle distinctions that may take years to master. Here’s our helpful introduction.
Bond Investing
A debt instrument. When you buy a bond you become a creditor- the idea is that someone uses your money to raise capital (for their business, say). The bond is a promise that you will be repaid with interest by a specific date (maturity). Popular index: Merrill Lynch Domestic Master.
High Yields
Feeling brave? Looking for high risks with high potential returns? Then you want high-yield bonds. High-yield is basically a rating: it means a bond is regarded as ‘risky’, with high probability of default (the bond equivalent of bankruptcy- you get zilch!). If there’s no default, the payout will be oh-so-sweet.
Money Market
The market for borrowers and lenders whose transactions are settled within thirteen months: your short terms investments. If you’ve ever invested in a Money Fund (particularly Repurchase Agreements), handled a Certificate of Deposit, or made a deposit in US dollars outside the United States, you’ve participated in the Money Market.
Investors
Anyone-or anything- that makes an investment; individuals make up only a tiny percentage of active investors. Venture Capital Funds, Investment Banks, businesses, Investment Trusts, Hedge Funds and Mutual Funds are all investors, and most are prepared to invest on your behalf.
Equity Funds
These funds invest in equities, better known as stocks. The goal is long-term growth. The Money Market can offer immediate liquidity, Government Bonds offer safety, and regular Bonds give maximum income, but Stock Funds give the highest probability of a big payout. If you’re willing to wait.
Market Timing
Market Timing is the strategy used to buy or sell; it allows you to profit or lose. Many sophisticated theories (such as Time Zone Arbitrage) have tried to predict the market, but most analysts regard investment simply as a form of gambling.
Investing for Beginners
First choose a good broker. Ask yourself: do I want someone selecting my investments? If so, use a Full Service Broker (eg. Morgan Stanley). They’ll set you up with a package of bonds and stocks. Feeling independent? Sign with a Discount Broker, watch the indices yourself and make the decisions.
Hedge Funds
A hedge fund attempts to offset losses by ‘hedging’ its investments; Short Selling is the major strategy used. The hedger sells an asset he doesn’t then own, hoping to purchase it later once the price has decreased. By ‘shorting’ hedgers can profit from price decreases as well as price rises!
Emerging Market
The markets of developing countries, including China, India, South Asia, Mexico, Latin America and some of Eastern Europe. Political events play a bigger role in influencing the markets in these countries; theoretically you could profit by reading the papers and selling assets quickly when you smell political upheaval.
Investing in Gold
Can be done by purchasing shares and derivatives or by literally owning bullion! The gold price is influenced by changes in sentiment, gold hoarding and the activities of the International Monetary Fund. Thought to preserve wealth in the face of inflation, but won’t offer the long-term returns that stocks do.
Now that you’ve done the groundwork those rambling financial articles won’t seem so daunting. Happy investing!

Bankaholic: Entrepreneurs are the brave souls who make our economy go, or at least they were when our economy was actually going anywhere. Especially in this currently questionable financial climate, starting your own business is undeniably a dicey proposition. Start-ups go out of business all the time, often before they even have a chance to even really star up at all. The main culprit in the savage slaughter of these young establishments is the same perpetrator behind the bulk of our fiscal difficulties: Debt.
As an emerging entrepreneur, it is very easy to quickly accumulate debts that are substantial enough to kill your burgeoning business before it even gets off the ground. But it does not have to be that way. Take the time to examine your business workflow and you will likely discover a number of extraneous costs that can be eliminated to improve the health of your bottom line.
Here are eight common practices that lead to common results; learn to avoid them and you will be uncommonly successful.
1. Not sticking to the necessities.
As good a place to start as any, this is an all-encompassing, catch-all principle. Be a good bootstrapper by spending money only on what is absolutely necessary to operate your business.
2. Trying to do too much too soon.
If you jump the gun and attempt to launch too many projects at the same time, your limited capital will severely limit the time and budget that can be devoted to each distinct venture.
3. Not designing for scalability.
There is little worse than achieving initial success only to be undermined by your initial lack of vision and poor preparation. If your business design cannot be scaled up when you hit it big then you may be forced to absorb all sorts of unexpected expenses as you are attempting to redesign from scratch.
4. Failing to delegate.
Always remember, you’re the big idea man; don’t spend your time performing tasks that could be done just as well by a cheap hired hand.
5. Buying in bulk.
If you are starting a small business, don’t worry about having a year’s supply of copy paper on hand the first day that you hang up your shingle. You will have all sorts of expenses in the early stages of your start-up and you will need all of the ready cash you can keep your hands on.
6. Paying your bills late.
Whenever possible, meet your expenses with the cash that you have one hand. Rack up big bills on that shiny new business credit card and you could end up putting as much money towards accumulated interest and late fees as you are towards growing your business.
7. Throwing away your receipts.
It is difficult for many entrepreneurs to learn to separate their business expenses from their personal expenses, and this can end up costing a new business owner thousands of dollars in lost tax deductions. Be fastidious about saving your receipts and you will be in much better shape come tax time.
8. Failing to collect accounts receivable.
Sure you want to be the nice guy as you are starting your new business, but you need to make sure that you get paid as well. With the available tools for notifying clients of payments that are due, there is no excuse for not being on top of your accounts.
8 Easily Avoidable Causes of Business Debt [Bankaholic]

Entrepreneur: Many financing efforts fail because of avoidable mistakes that are made in pitching potential lenders, structuring the agreement or managing the money once the deal is done.
Steering clear of these missteps can increase your chances of success, both in obtaining startup funds and keeping the money flowing. Be sure to avoid these blunders:
Half-baked business plans
There’s nothing worse than going into a money meeting unprepared. If you haven’t put the time and energy into writing a full-blown business plan complete with elements, such as a cogent business description, financial projections and a competitive market analysis, the people with the cash won’t put the time into evaluating your proposal.
Focusing too much on the idea and too little on the management
It’s not enough to convince potential backers that you’ve invented the next must-have gadget or can’t-miss clothing store concept. You also need a team that can generate the revenues to repay a bank loan or provide an exit strategy for a VC or angel investor. Many business novices ignore the second part of the equation; that can doom their money quest. Showing that you have recruited a top-notch salesperson, a skilled marketer, an accountant with startup experience, other key personnel, and even outside experts like an attorney or business coach who can supply professional guidance is essential to finding a funding source.
Not asking for enough money
In a 2004 U.S. Bank study of reasons for small business failures, 79 percent cited “starting out with too little money” as one of the causes of their collapse. That’s often because entrepreneurs who are wet behind the ears don’t realize that they should calculate their borrowing needs based on their worst-case scenario instead of their best-case forecast. If you’re underfunded, you won’t have a cushion to tide you over in the event of slow initial sales or unexpected market conditions.
Having too many lenders or investors
One of the hazards of securing financing from multiple sources is managing too many relationships and expectations. It takes time away from your core business. These not-so-silent partners may have conflicting interests or demands and the consequences can be devastating. This is particularly true when you raise money from friends and family.
Failing to get the proper legal agreements
This is arguably more important than a prenuptial agreement for a couple with significant individual assets. Every lender or investor eventually will need his money back, and a legal document covering everything from the terms to the timing can avoid the kind of acrimony just described.
Poor cash flow management
Too many new business owners burn through their seed money too quickly and fail to reach cash flow-positive status in a timely manner. Some causal factors, such as late product deliveries and economic downturns may be beyond one’s control, but the executive team is clearly at fault for others, such as unnecessary spending and overly optimistic expense/income forecasts. Financial sponsors don’t take kindly to that sort of mismanagement. And if they turn off the tap, all of your hard work may go down the drain.
The 6 Biggest Mistakes in Raising Startup Capital [Entrepreneur]