Terry Corbell, The Biz Coach
By Terry Corbell
Business Consultant

Step-by-Step Solutions for a Financial Turnaround



If you’re struggling like many businesses, you know the myriad of entrepreneurial challenges. However, despite the challenges, it is possible for businesses to successfully complete a financial turnaround.

First, you might have to put on a different set of glasses – see this economy as a marvelous opportunity.

ID-100258930 jscreationzsBut it’s not just a matter of increasing sales. There’s more to it.

Sometimes, I get inspiration from non-businesspeople like the most revered president in American history, Abraham Lincoln: “If I only had an hour to chop down a tree, I would spend the first 45 minutes sharpening my axe.”

To sharpen your axe, there are salient areas that need your focus in order to turn your business around, which include financial, marketing, and internal operations.

For space limitations in this column, let’s deal with finances.

Businesspeople are embarrassed by having to face the trauma of continuous collection calls.

They often don’t communicate effectively with creditors on managing cash flow issues. So tell creditors you’re working to correct the situation.

Cash flow

The first objective is to manage cash flow in three steps:

1. Increase the cash balance. Collect the outstanding accounts receivable and generate cash from any saleable assets.

2. Prioritize the cash disbursements. Focus the available cash toward the must-pay expenses first, including payroll and associated payroll taxes, and pay other vendors with your remaining balance.

3. Develop a cash forecast. Project realistic cash receipts by customer (preferably include the products or product lines) and disbursements by creditor on a weekly basis for the three months – and monthly thereafter for a year. This means reducing the revenue and collections in your projection by 10 to 30 percent to make certain the actual results are achievable and you do not run out of cash. Develop and implement plans to operate and keep you in business at the lower projections.

… you might have to put on a different set of glasses – see this economy as a marvelous opportunity.

Denial

Denial is usually the biggest consequence: Acknowledge your situation, develop a turnaround plan, and communicate with your bank, with vendors, and your employees.

Once you acknowledge the situation, consider your company’s mission statement, define the core business, including your target customers, and your company’s unique competencies in the marketplace. The bottom-line question – are your products or services responsive to the market demand?

Next, determine your company’s strengths, weaknesses, opportunities and threats with a SWOT analysis.

Negotiations

If you owe money to banks or vendors, most would rather be repaid over time than take over your business or force your company into bankruptcy, provided you can show them how they will benefit by working with you.

For your lenders, provide your operational and financial turnaround plan exhibiting the company’s viability and outlining a repayment plan and timetable for the bank and explain how you intend to protect the bank’s collateral. You may have to show your lender how they will receive less money if they force you to liquidate to repay your line of credit if they don’t extend the repayment terms of your loan.

In dealing material suppliers, offer to pay them cash on delivery on future shipments so that they can continue to earn their gross margin on your purchases and suggest that you will also pay a small percentage toward their prior outstanding balance. Your vendor will keep you as a profitable customer and their outstanding receivables will be reduced over time.

Keep your commitments on making payments to re-establish credibility.

Identify your company’s key performance indicators, or critical success factors.

Key performance indicators

Continue to monitor your company’s financial health. Identify your company’s key performance indicators, or critical success factors. These indicators must be SMART, an acronym for specific, measurable, achievable, relevant and track-able. They typically relate to sales to key customers, accounts receivable collections, cash balance, raw material deliveries, and sales backlog.

A flash report can be designed to monitor these indicators on a daily basis and to evaluate your actual performance against the turnaround plan. It should be shared with key players in your company so everyone understands and has a sense of ownership so that you have a team-approach in achieving your goals.

As for your receivables, here are resource links: Are Accounts Receivables a Problem? and How to Ease Debt-Collection Headaches.

The textbook I use in teaching finance to non-accountants is “Finance for Non-Financial Managers” by Gene Siciliano.

Use these tips and you’ll increase your odds for a good return on your marketing investments.

From the Coach’s Corner, here’s a quick tip on sharpening your axe for repeat business:

Use the Golden Rule. How many times have you said you’re tired of spending money at companies who have employees who take your money and say “Have a nice day,” but fail to smile and say “Thank you”?

Or they seem indifferent toward you? My research shows that consumers stop buying from a business about 70 percent of the time because they feel they feel taken for granted. Customers will go elsewhere and not bother to complain about the lack of respect. Incidentally, employees are consistent. If they are indifferent to customers, they treat their fellow workers the same way.

So if you have customer-service employees and your profits are down, you can bet your company needs to improve team morale and customer empathy.

Additional resource links:

You Can Creatively Manage Your Cash Flow 7 Ways — If you’re taking the pulse of your business, of course, the first thing to consider is your cash flow. If your cash flow is poor, you feel poor because you can’t pay the bills nor can you use money for what you’d like to do. Your image can also suffer with vendors or with customers, if you don’t manage your cash flow.

Accounting / Finance – Why and How to Determine Your Break-Even Point — Uncertainty can kill hope in business. Best practices in management mean having the right information to alleviate uncertainty in business. For that you need the right tools. One important tool – know your break-even point (BEP). A BEP analysis should be an integral part of your financial planning.

To Cope with Rising Costs, Review your Pricing Strategy — Increased costs weigh heavily on the bottom line. If you’re being pressured by costs, it’s probably time to review your pricing strategy.  You’re not alone. No business is immune from rising costs in fuel; rent or real estate; labor; health insurance and ObamaCare; marketing; and equipment. Lest not you forget all the taxes.

15 HR Strategies to Improve Your Business Performance — Studies show many employees are dissatisfied in their workplaces. Employee dissatisfaction, of course, will adversely affect a company’s performance.

Secrets in Motivating Employees to Offer Profitable Ideas — Savvy employers know how to profit from their human capital. Such knowledge is a powerful weapon for high performance in a competitive marketplace. Furthermore, there’s a correlation among excellent sales, happy customers, and high employee morale.

 You can’t do today’s job with yesterday’s methods and be in business tomorrow.


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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.





Image courtesy of jscreationzs at www.freedigitalphotos.net


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