19 Best Practices in Due Diligence for Profitability



To lead your company to high profitability – and to stay there – due diligence is needed in critical values.

Here’s a checklist:

1. Financial statements

Continuously monitor and evaluate your financial statements to understand the earning power of your company. Keep an eye on your cash flow and return on investments.

Know your cost of goods sold (COGS). That means keeping your sales margins high by keeping your COGS down.

Zero in on your sales and operating ratios. To get a good snapshot, use best practices in preparing financial statements.

2. Accounts receivable id-100116225

Analyze your receivables in increments of 30, 60, 90 days and more.

The longer your receivables are outstanding, the less value of these accounts.

Look at your top accounts and evaluate their creditworthiness.

If necessary, develop the right strategies. Then do the same for your other accounts.

3. Debts and liabilities

Look at your loans, notes and other debts. Consider how you can reduce your debt-collection headaches.

4. Industry and market trends

Evaluate your industry and your market segments that you target. This is to help analyze your profit potential.

Are industry sales increasing, decreasing or remaining flat. Compare them with your industry’s ratios, which you can find in reports produced by Dun & Bradstreet and The Risk Management Association.

5. Disruption potential

Identify opportunities for disruption in your niche by asking three questions:

  • How can your assets be used differently to fill needs?
  • What companies in your supply chain aren’t meeting needs?
  • Concurrently, what can you do to better serve the market?

There are five recommended strategies to use if you need to rebrand your business.

6. Your business reputation

Research how your customers, suppliers and other stakeholders perceive your company – either as an asset or a liability.

Best practices are needed to manage your global brand and Web reputation.

7. Business location and market area

Evaluate your business location, the demographics of your locale, the area’s economic situation, and your competition.

This includes analyzing whether you have unnecessary challenges in receiving or delivering products.

If you anticipate growing, here are tips to pick the best business location.

8. Customer patterns

Track your customers. Determine whether they’re repeat, loyal customers as well as your retention rate.

Evaluate your peak seasons, months, weeks, days, and hours. Determine which products are popular and the preferred price points.

From this information, develop and implement multi-dimensional strategies to maximize your sales.

9. Sales

You should be looking at your pattern of sales. Track your sales records by product, and whether customers buy them with cash or credit.

If your sales are down, here are sales management tips.

10. Pricing

Evaluate your price points for profitability. Draw industry comparisons. Forecast when you believe you’ll be able to increase prices.

To manage the sweet spot between price-optimization and costs, avoid 11 typical pricing mistakes.

11. Marketing strategies

Evaluate how you target customers – from public relations to advertising. Don’t forget the effectiveness of your sales literature.

Analyze your costs and the sales results. If your foot traffic is up but sales are flat determine why.

Understand and use the critical essentials to develop the best marketing formula.

12. Inventory

Determine the condition of your inventory. Is it moving quickly enough? What are your inventory costs?

For the best cash flow, manage your inventory costs.

13. Management

Review your management practices and policies. Determine how you can improve.

Communication skills are critical for managers. Typically, they have 10 management attributes for effective communication.

14. Human resources

Evaluate your staff. Consider their communication skills with customers and how they relate to each other. Determine what HR training is needed.

Evaluate your personnel policies, employee benefit plans, profit sharing, health and life insurance, and vacation policies.

Consider your salary structure and how it compares industry-wide.

To improve your business performance, implement 15 HR strategies.

15. Equipment and technology

Obviously, the welfare of your company depends on having an up-to-date information technology (IT) system. IT now impacts every facet of your business.

Evaluate your equipment and technology to see if it needs modifications to propel your growth and enhance your financial system with internal controls of IT and financial systems.

16. Taxes

To stay competitive in this difficult marketplace, it’s vital to be proactive on your taxes with 11 payroll and tax tips.

17. Occupational Safety and Health Administration (OSHA) requirements

Check whether you’ll successfully pass OSHA inspections. Correct any shortcomings by minimizing liability and managing an OSHA inspection.

18. Insurance

Review your insurance coverage to see if you’re adequately protected against all liabilities and if you’re paying fair premiums.

To keep your money from walking away, here are business insurance tips.

19. Planning for disasters

Make sure you plan for the unthinkable – protect your core assets from a disaster.

From the Coach’s Corner, here are related tips:

10 Strategies for Internal Controls of IT and Financial Systems — Obviously, the welfare of your company depends on having an up-to-date information technology (IT) system. IT now impacts every facet of your business. So it follows that you should invest in IT controls to protect and enhance your financial system.

8 Strategies to Enhance Your Customer Service Image — Poor customer service is a salient reason why consumers aren’t loyal to businesses. True, today’s consumers are very demanding. It’s worth noting they’re demanding because they constantly encounter poor customer service.

Your Best Source for Business Advice: Your Customers — The new economy – with a highly competitive marketplace – is making it becoming harder and harder to for businesses to sustain growth. So customer engagement and word-of-mouth advertising have taken on an increasing importance.

Clues You Need a Vision Plan for Growth – How to Write It — If you don’t have a written vision for fast growth, the reality is that you’re losing out on potential business. A written business plan is best. But if you don’t have the time and resources to write it, go to plan B – a vision plan.

Embezzlement: Guidelines to Uncover and Prevent it — Embezzlement is a widespread nightmare. Here are proven strategies to discover embezzlement, and to prevent from occurring.

“Care and diligence bring luck.”

-Thomas Fuller


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.




Photo courtesy marin at www.freedigitalphotos.net


First Step in Fighting Lawsuit Abuse – Risk Management



Published reports on two southern California media Web sites illustrated the polarizing effects of laws affecting business. They’re still applicable now even though they were published in November 2011.

The first article in Signon San Diego, “Businesses fight ‘abusive’ lawsuits, explains the fears and concerns of many small businesses. Written by Tanya Mannes, it describes how a legal-reform organization is leading the fight against what it terms as lawsuit abuse in California.

A group calling itself California Citizens Against Lawsuit Abuse (CALA) has issued a report showing what it believes are large number of disingenuous lawsuits, and is lobbying the California Legislature for legal reforms.

Ms. Mannes quoted a CALA regional director, Maryann Maloney Marino:

“Anybody can be subject to a lawsuit in California…More than 1.4 million lawsuits were filed last year alone, but that does not take into account the hundreds or thousands of demand letters businesses get.”

As part of its marketing, the group launched a Facebook page.

Yes, as a biz coach, I’m empathetic for business having to cope with the litigious environment in California and across the nation.

Sexual abuse case

On first glance, a second article would seem to support the group’s cause. The CBS headline reads: “Jury Awards Woman $65M In Punitive Damages.”

However, the article – one of many on the case – explains how and why jurors reacted to a healthcare company that employed a male nursing assistant who sexually abused a patient. Encino-Tarzana Regional Medical Center and its former owner Tenet Healthcare Corp. were ordered to pay the victim $2.36 million in compensatory damages.

The article also relates how the jurors in their deliberations were so deeply moved they arrived at the $65-million figure in punitive damages.

“Anybody can be subject to a lawsuit in California…More than 1.4 million lawsuits were filed last year alone, but that does not take into account the hundreds or thousands of demand letters businesses get.”

Little wonder. The article indicated the jurors weren’t convinced the company was doing its best as a healthcare organization – were they thinking this was an example of the term, oxymoron?

To exacerbate the situation, the employee-predator, a fugitive, was cited on Fox television’s “America’s Most Wanted” two years in a row.

Two key questions

Moreover, the case raises salient questions – for starters: What about the hospital’s recruitment policies, background checks, and management procedures?

And why was a male nursing assistant even allowed intimate access to a female patient? Other professions, like police agencies and physicians, have noteworthy safeguards in gender protections.

The lesson? To prevent being hit by a lawsuit, do your due diligence in risk management.

Conduct a SWOT analysis of your strengths, weaknesses, opportunities and threats. Then, take the necessary proactive steps for good stewardship. Document everything for a paper trail.

You’ll sleep better. More importantly, it’s the right thing to do.

From the Coach’s Corner, here are other employer tips:

“The first step in the risk management process is to acknowledge the reality of risk. Denial is a common tactic that substitutes deliberate ignorance for thoughtful planning.”

-Charles Tremper


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.






Forex Trading: Prevent Tragedy with Due Diligence



Forex trading is a daily marketplace in the trillions of dollars. But scandals serve as a reminder about due diligence.

In Canada, the B.C. Securities Commission accused Horizon FX Investments of illegally soliciting $34 million from 1,000 investors, according to The Vancouver Sun on Nov. 10, 2009.

Ten days later, The Wall Street Journal reported a new managing director was appointed to lead Chinese conglomerate Citi Pacific Ltd. to replace a predecessor in the wake of huge losses in a Forex scandal.

banker David Castillo DominiciThat’s not all. Enter the key words, “investor scandal,” on any search engine and you will find numerous references.

Reader’s question

So, I decided to focus on due diligence after receiving and answering the following question:

“Hey Coach, I’m a business owner and fairly new to investing in the stock market. I keep hearing about Forex trading, but I don’t understand what the buzz is about. Can you help?”

My response:

Especially since the Digital Age began to really take root, we’ve been seeing a whole of innovations, changes and advances – all thanks to globalization and technology. My earliest recollection is when I was a journalist in the 1970s long before the Internet.

Many have been great developments. Ask George Soros, a remarkable story, who has made mega bucks as a speculator.

But the scandals show the downside from not practicing due diligence.

Forex trading is exciting and fast-growing, and it can really get your juices flowing. I think it’s a rather sexy subject because Forex success necessitates staying abreast on a broad range of current topics including economic trends and political developments.

One of my business-professor buddies has taught it as a college-level class, which means it is a complex subject and I’ll only attempt giving you a basic primer.

Not to oversimplify, Forex trading mainly refers to the foreign exchange market for international trade and investment in currencies and cash via what’s called the interbank market. Forex trading is highly specialized and it isn’t available at every bank and financial center. It’s important to only deal with reputable people and use competent Forex software.

Traders include speculators, central banks, private-sector banks, and companies. Investment strategies can include algorithmic trading using software for price, quantity or timing.

For you as a business owner, this means you have the opportunity to make money throughout the world while simply sitting in your home or office. Of course, that includes Forex trading of any currency.

If, for example, you want to start trading with a country in the European Union, a foreign exchange deal will help you buy or sell Euros.

Perhaps a bit complex for you as a novice, essentially, it’s all about convenience and flexibility to make money across the globe in trading currencies.

That includes the variety of factors influencing exchange rates, market liquidity, 24-hour trading during the week, trading volumes, geography across all borders, and the use of debt or leverage to supplement investments.

Due Diligence

Before you get excited, please note: Don’t make any rookie mistakes.

Forex trading is transacted on margins, which means high-profit potential but nonetheless it is risky. Funds in an account are less than the amounts that are controlled. It’s worth noting that currency exchange rates on an average day are not large but can be small. However, trading on margin is risky.

So do your due diligence by studying in Forex exchange courses or reading blogs. Know your broker and check authoritative sources like Forbes.

A great source of Forex tutorials and information are blogs, which are easily updated with current information, which you can arrange for RSS feeds to your computer.

More on due diligence later.

OK, I feel better. Now that I’ve cautioned you, Forex trading is fun because there are continuous opportunities because of the high liquidity and other factors.

Countless enthusiasts invest in managed Forex accounts. Because of the Forex-market dynamics, a managed Forex account is usually ideal for someone who doesn’t have the expertise and time to stay current.

Investors choose among such spot transactions (the spot market is the largest) or forwards, which are basically deals to buy or sell in the future for an agreed-upon price now.

Most nations allow Forex derivative trading although it is not acceptable in third-world countries. There are tier-levels of participation, which depends on the amount of money being traded. It is unlike when you trade in the stock market.

Institutional investors from pension funds to insurance companies have been a pivotal part of the growth.

Forex is highly speculative and focuses on what is anticipated in terms of movement of currency. So again, I advise caution.

ETFs

You’ve probably heard the acronym, ETF. That stands for exchange-traded funds. Many will follow or track the trends of currencies vis-a-vis the dollar.

For example, when comparing the dollar to the Euro, an ETF can increase its value when the dollar drops vs. the Euro.

For pricing, in essence, individual investors rely on Internet market makers.

To get credit with banks in the interbank market, such Forex brokers use their own money in participating in foreign exchanges. They land the most competitive pricing – if they have good credit relationships with banks because they are then-better capitalized than their competitors.

Again, there have been many unsettling events. Scandals have resulted when predators have taken advantage of unsuspecting souls.

As in all business issues, relationships are important. This is especially true during challenging economic periods. In other words, if the marketplace is volatile, respected brokers continue to get the best deals. So, deal with a respected Forex broker.

In conclusion, that’s your Biz Coach primer. Have fun. But did I mention due diligence?

From the Coach’s Corner, suggested reading:

“Diligence is the mother of good fortune.”

-Benjamin Disraeli


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy David Castillo Dominici at www.freedigitalphotos.net

Seattle business consultant Terry Corbell provides high-performance management services and strategies.