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cash flow

How your small business can survive and thrive with these cash flow tips

Keeping your business cash flow alive is one of the most difficult challenges for small business owners and entrepreneurs. It can define the life or death of your business. Handling these savvy tips can help you plan your cash flow during the whole year.

A healthy cash flow can help your business survive and thrive.

Michael Lewis, a former business executive and financial blogger, does not sugar coat things when he says, “owners who cannot efficiently manage their cash flow are almost certain to fail.”

Every day new entrants throw their hat into the ring of entrepreneurship. And every day several die off. Many of these entrepreneurs, after spending considerable time fine-tuning their business plan, find themselves scratching their head, wondering why their company, with its innovative product or service, suffered such a fate.

In a great many cases, the answer is easy: cash flow.

“Cash flow is the lifeblood of a business and critical in its growth,” according to entrepreneur and marketing communications consultant Caron Beesley. “With money tight and bank loans hard to get, a cash-strapped company can easily be pushed to the brink.”

The lesson that entrepreneurs must master immediately is that a business cannot operate very long when cash outflow exceeds cash inflow. Every business, particularly a startup, must zealously monitor its cash flow to prevent a serious business disruption. In business, cash is king and cash flow is priority # 1.

A significant percentage of cash-flow issues result because owners have not spent adequate time estimating the arrival of various revenue streams and balanced that against their need to pay certain expenses. Entrepreneurs must realize the critical importance of calculating accurate cash-flow projections to address day-to-day activities. Owners who don’t thoughtfully estimate their cash flow for an upcoming period (the day, week, month and quarter) place their business at serious risk.

From Day 1 businesses must track and manage their cash from the time that they must pay vendors, employees and others to the time that they collect from their customers. Doing anything less assures near certain failure. The following tips can help business owners ensure that their cash flow is managed well and not placing the business at risk of failure:

  1. Create a Budget.

Business owners should sit down to thoughtfully estimate expected cash inflows and outflows. Factors that to consider include the sales cycle, terms and discounts provided customers, industry delinquency rates and other factors that may affect the timing of incoming cash.

Similarly, it is necessary to estimate expenses and other cash outlays. This includes the timing of the purchase of equipment, raw materials and supplies. It also includes the schedule for payment of salaries, taxes and other day-to-day expenses. SCORE, a national nonprofit support group for small business owners, provides a free budget template that business owners can use to manage their cash flow.

  1. Monitor the Results.

Examining the budget should not be an infrequent activity. On at least a monthly basis (but more frequently if warranted), the actual cash flow should be compared with the budget to work out the kinks in the system. If cash inflows are less than anticipated, figure out the reason for the shortfall. If cash outflows end up being greater than expected, understanding the cause is also important.

Once the reasons for the budget variances are determined, the business can make the necessary corrections, either to the budget or the business plan or both.

  1. Have a Plan B.

Regardless of the amount of time and energy a business owner devotes to creating a budget, unexpected events can suddenly crop up, wreaking havoc on even the best cash-management system. During such times, the business might need to rely on a contingent source of cash to keep the operation running until things return to normal.

Typical sources of contingent funding include lines of credit, personal assets and friends and family. Business owners should have a Plan B lined up well before the funds are needed.

For example, a business owner who plans to borrow funds to cover a cash shortfall should have the loan or a line of credit in place well before the cash is needed. Allowing a cash-flow disruption to occur before applying for a loan is asking for trouble as most banks will hesitate to lend money to a business in distress.

Even if a bank were willing to extend a loan, few financial institutions can underwrite and approve a request in less than a month. By then, the business may have already failed due to its inability to cover its cash needs.

  1. Bill Quickly.

cash flow

A key element of cash flow management is controlling the timing of funds coming in and going out. It may be customary, depending on the industry, for a business to extend credit to purchasers. For example, customers may be extended a 30-day period to furnish payment. Every time this type of transaction occurs, it places a strain on the business. While the buyer need not provide payment for 30 days, the company must continue to meet its financial obligations.

The easiest tactic for a business to pursue is to bill a client immediately. Businesses that make sales on credit must ensure that the invoice is delivered within 24 hours of the transaction. Furthermore, companies should track their invoices and send reminders before the payment-due date. Businesses that delay invoice delivery will likely receive their payments late due to the processing time required by the buyer. Business owners should consider delivering invoices by email to ensure rapid and certain delivery of billings.

To alleviate the pressure created by credit sales, a business should implement tactics to accelerate payment. A common technique includes providing discounts to buyers who pay their bill within 10 days. Buyers with sufficient cash to make their payment will be willing to forego availing themselves of the payment period in exchange for a discount.

Every business owner dreams of making a big sale. Unfortunately, businesses that make big sales on credit are often put under duress because they may then require the purchase of additional inventory. In such instances, business owners should consider making the buyer provide a down payment against the purchase so as to relieve the burden on the company’s cash flow.

You might be interested: 5 Cs bankers ask for small biz loans post-Recession

5.Timely Payment Policies.

A sound cash-flow management strategy calls for rapid collection of invoices and timely payments. This means that the business should not pay its bills ahead of time — or late. The company should pay its bills when they are due. This ensures that its cash is working hard.

To the extent that the organization is flush with cash, business owners should ask for a cash discount at the time of a purchase instead of buying on credit. The offer of a cash payment may entice the seller to offer a discount. This can be especially beneficial in cases of big-ticket purchases where a discount can be meaningful.

 

Feast or famine? How to keep your cash flow working for your business

Are you in control of your small business cash flow?  Michael Lewis, a former business executive and financial blogger, does not sugar coat things when he says, “owners who cannot efficiently manage their cash flow are almost certain to fail.”

Business cash flow

Every day new entrants throw their hat into the ring of entrepreneurship. And every day several die off. Many of these entrepreneurs, after spending considerable time fine-tuning their business plan, find themselves scratching their head, wondering why their company, with its innovative product or service, suffered such a fate.

In a great many cases, the answer is easy: cash flow.

“Cash flow is the lifeblood of a business and critical in its growth,” according to entrepreneur and marketing communications consultant Caron Beesley. “With money tight and bank loans hard to get, a cash-strapped company can easily be pushed to the brink.”

The lesson that entrepreneurs must master immediately is that a business cannot operate very long when cash outflow exceeds cash inflow. Every business, particularly a startup, must zealously monitor its cash flow to prevent a serious business disruption. In business, cash is king and cash flow is priority # 1.

A significant percentage of cash-flow issues result because owners have not spent adequate time estimating the arrival of various revenue streams and balanced that against their need to pay certain expenses. Entrepreneurs must realize the critical importance of calculating accurate cash-flow projections to address day-to-day activities. Owners who don’t thoughtfully estimate their cash flow for an upcoming period (the day, week, month and quarter) place their business at serious risk.

From Day 1 businesses must track and manage their cash from the time that they must pay vendors, employees and others to the time that they collect from their customers. Doing anything less assures near certain failure. The following tips can help business owners ensure that their cash flow is managed well and not placing the business at risk of failure:

  1. Create a Budget.

Business owners should sit down to thoughtfully estimate expected cash inflows and outflows. Factors that to consider include the sales cycle, terms and discounts provided customers, industry delinquency rates and other factors that may affect the timing of incoming cash.

Similarly, it is necessary to estimate expenses and other cash outlays. This includes the timing of the purchase of equipment, raw materials and supplies. It also includes the schedule for payment of salaries, taxes and other day-to-day expenses. SCORE, a national nonprofit support group for small business owners, provides a free budget template that business owners can use to manage their cash flow.

  1. Monitor the Results.

Examining the budget should not be an infrequent activity. On at least a monthly basis (but more frequently if warranted), the actual cash flow should be compared with the budget to work out the kinks in the system. If cash inflows are less than anticipated, figure out the reason for the shortfall. If cash outflows end up being greater than expected, understanding the cause is also important.

Once the reasons for the budget variances are determined, the business can make the necessary corrections, either to the budget or the business plan or both.

  1. Have a Plan B.

Regardless of the amount of time and energy a business owner devotes to creating a budget, unexpected events can suddenly crop up, wreaking havoc on even the best cash-management system. During such times, the business might need to rely on a contingent source of cash to keep the operation running until things return to normal.

Typical sources of contingent funding include lines of credit, personal assets and friends and family. Business owners should have a Plan B lined up well before the funds are needed.

For example, a business owner who plans to borrow funds to cover a cash shortfall should have the loan or a line of credit in place well before the cash is needed. Allowing a cash-flow disruption to occur before applying for a loan is asking for trouble as most banks will hesitate to lend money to a business in distress.

Even if a bank were willing to extend a loan, few financial institutions can underwrite and approve a request in less than a month. By then, the business may have already failed due to its inability to cover its cash needs.

4. Bill Quickly

A key element of cash-flow management is controlling the timing of funds coming in and going out. It may be customary, depending on the industry, for a business to extend credit to purchasers. For example, customers may be extended a 30-day period to furnish payment. Every time this type of transaction occurs, it places a strain on the business. While the buyer need not provide payment for 30 days, the company must continue to meet its financial obligations.

Its raining money cash flow

 

The easiest tactic for a business to pursue is to bill a client immediately. Businesses that make sales on credit must ensure that the invoice is delivered within 24 hours of the transaction. Furthermore, companies should track their invoices and send reminders before the payment-due date. Businesses that delay invoice delivery will likely receive their payments late due to the processing time required by the buyer. Business owners should consider delivering invoices by email to ensure rapid and certain delivery of billings.

To alleviate the pressure created by credit sales, a business should implement tactics to accelerate payment. A common technique includes providing discounts to buyers who pay their bill within 10 days. Buyers with sufficient cash to make their payment will be willing to forego availing themselves of the payment period in exchange for a discount.

Every business owner dreams of making a big sale. Unfortunately, businesses that make big sales on credit are often put under duress because they may then require the purchase of additional inventory. In such instances, business owners should consider making the buyer provide a down payment against the purchase so as to relieve the burden on the company’s cash flow.

5.Timely Payment Policies.

A sound cash-flow management strategy calls for rapid collection of invoices and timely payments. This means that the business should not pay its bills ahead of time — or late. The company should pay its bills when they are due. This ensures that its cash is working hard.

To the extent that the organization is flush with cash, business owners should ask for a cash discount at the time of a purchase instead of buying on credit. The offer of a cash payment may entice the seller to offer a discount. This can be especially beneficial in cases of big-ticket purchases where a discount can be meaningful.

 

social media sales

5 Reasons sales and social media work better together

social media sales

If you follow me on LinkedIn or Twitter you know I am fairly active on social media. Since the days of Compuserve and Egghead Software I have been an advocate for technology and the tools that create a competitive advantage in business.

Notwithstanding my obsession, anyone involved in business development – regardless of the industry – that has not included social media as part of their business development strategy, does not get it!

Research has shown that the use of social media has a significant positive effect on sales. Salespeople using social media experience 78% greater sales than similarly situated salespeople not using social media. With these numbers I cannot understand why salespeople would even think of balking at social media.

The following are five reasons why every salesperson and business development officer should implement a well-thought-out social media strategy.

  1. Social Media is a Workhorse. Successful salespeople work long hours. Colin Powell has said “There are no secrets to success. It is the result of preparation, hard work, and learning from failure.

A salesperson’s typical day begins with responding to emails, writing proposals, working prospect lists, making phone calls, attending mixers, presenting at conferences, driving for miles, flying for days, etc.

But no matter how driven and dedicated a salesperson may be, eventually there is a need to call it a day and recharge the batteries.

Unfortunately, business today is global and it crosses time zones. The Deal waits for no one – no matter how many hours per day a salesperson puts in. That’s where social media comes in. With social media, a salesperson can remain engaged and not skip a beat – even while sleeping in a different time zone or on a different continent.

Well-executed sales strategies make use of social media to create and maintain professional profiles that can provide needed information and convey knowledge, experience and competency. The use of a well-crafted social media profile accompanied by well-developed content, gives the prospective buyer the information needed to place the salesperson on the short list for follow up or to begin the sales process.

  1. Social Media Validates. Years ago I heard someone say “the Internet is the new resume.” Then a couple years later I heard someone say “Google is the new resume.” Today, most will agree that social media (and LinkedIn, specifically) is the new resume.

In my experience, nearly every business development meeting is preceded by or followed by the prospect visiting LinkedIn to validate information. Savvy buyers know that LinkedIn houses the resumes, expertise and accolades of over 300 million professionals worldwide. With this many professionals in one place, LinkedIn is without question the new resume and worthy of inspection before inking a deal.

It is in every salesperson’s best interest to maintain not only a social media presence, but also a presence that projects the message the salesperson is attempting to convey. The social media profile must be impressive and appropriate. It must not only validate the salesperson – it must bring the prospect closer to closing the deal.

  1. Buyers Are In Control. Sellers are no longer in control. Buyers tend to do their research before making a purchase, with the average consumer viewing more than 10 pieces of content prior to making a purchase.

This means that buyers no longer rely on the information provided by sellers. Whether the transaction is business-to-consumer or business-to-business, buyers are doing their homework by visiting social media sites and digesting available content to support the buying decision.

Salespeople must make themselves easy to find if they stand a chance at closing the deal. In the 1950s a bank robber named Willie Sutton was asked why he robbed so many banks. His answer: it’s where the money is! Today, salespeople must ask themselves a similar question. Why create a social media presence? It’s where the buyers are!salary reviews, salary reports

  1. It’s a Sharing Economy. Savvy salespeople know the power of “going viral.” The Internet has turned ordinary entrepreneurs and salespeople into overnight success stories as a result of social media’s ability to easily and quickly share information. The ability to share information on social networks means that anyone with a little creativity and some luck can become the next millionaire or billionaire!

Social media’s success is built on its ability to share information. Visit any social media profile or view any video, photograph or other form of content on social media and you will see the buttons that encourage sharing of the information. Social networks encourage buyers and potential buyers to share information about the product or service.

Salespeople that make use of social media create the ability to turn prospective and actual buyers into advocates/evangelists for the product/service. Instead of being a sales force of one, salespeople can potentially activate hundreds, thousands and even millions of people in getting the word out.

  1. Content is Not King. Many believe that content is king. I don’t. I believe that content is a king maker.

Social media makes salespeople accessible 24X7. Through well-crafted content found on Web sites and through social media, salespeople can create a trail of bread crumbs leading potential buyers straight to the seller.

Content is any information that can be housed on the Internet. This includes videos, podcasts, photos, articles, whitepapers and any other piece of information that can be retrieved by a potential buyer.

The power of content is its ability to inform and influence prospective buyers. Some prospects prefer videos to view the features of a product or service. Others prefer whitepapers containing technical specifications. Others prefer infographics that provide snapshots. Social media sales strategies

Each prospect has his/her own preferences. The key for any salesperson is to develop content in different formats that provide the information that prospects seek before making a purchasing decision. A salesperson that fails to create and maintain such content gives the advantage to competitors that incorporate content as part of their business development strategy.

Getting back to the opening question: why am I all over social media? Because it’s where the sales are. Ignoring social media gives the competition the advantage and turns potential buyers into the competition’s advocate – not mine. That’s a pretty god reason to be on social media.

 

Ten Thirty One on raising 2 million in Shark Tank money

Today Show resident Halloween expert and Ten Thirty One Productions (TTO) CEO Melissa Carbone on set before joining Kathie Lee and Hoda.

Today Show resident Halloween expert and Ten Thirty One Productions (TTO) CEO Melissa Carbone on set before joining Kathie Lee and Hoda.

By Jesse Torres

The last scariest news in zombie fads, zombie walks, zombie videogames, zombie movies, and zombie-you-name-it has landed on Melissa Carbone, owner of Ten Thirty One Productions, who walked out of the Shark Tank program with Dallas Mavericks owner Mark Cuban’s $2 million in exchange for a 20 percent equity stake in her entertainment company.

The latest obsession in escaping reality, zombies, has gained public interest in different parts of the country while generating profits to the Hollywood and Wall Street fat cats’ pockets worth around 5 billion dollars in DVD sales, video games, comic books, novels, costumes, merchandise, conventions and even zombie art, NBC News reports.

Carbone, who is the winner of the largest Shark Tank deal in the show’s history, shared with me the key characteristic of a true entrepreneur during a KCAA Money Talk interview last week.

“The biggest bridge between those that succeed and those that don’t is simply activation; people who activate win,” Carbone said.

“Everyone on the planet has ideas,” she continued. “Everyone has an idea for something. A lot of people have amazing ideas, million dollar ideas. But if you don’t activate on them, they go nowhere. They become nothing. And it does not even matter that you had an idea.”

Consultant Rasmus Lindgren echoed a similar sentiment on his blog, “You need to take action and do stuff. Nothing ever happened from just thinking or talking about it.”

“Two traits most commonly identified across successful entrepreneurs are innovation and motivation,” Kara Finnegan wrote on Big Think. “Innovators bridge the gap between ideas and action.”

But as Robert Kiyosaki points out on the Rich Dad blog, success requires more than action for action’s sake. “Lots of people take action and the result is that 9 out of 10 new businesses fail. There is more than just action required to make you an entrepreneur.”

Kiyosaki urged entrepreneurs to have a clear vision of what they aim to achieve and a strong mindset so that they won’t be deterred by the first sign of trouble.

MelissaCarbone_MelissaMeyer

Ten Thirty One Productions CEO, Melissa Carbone and Creative Director, Melissa Meyer.

Fear and deterrents prompt some prospective entrepreneurs to view activation as too risky. Fear of failure scares them from acting on their billion dollar idea.

“Making a mistake is not a bad thing,” entrepreneur Neil Patel declared on the Quick Sprout blog. “You actually learn from those mistakes, which helps you make better decisions down the road.”

Indeed, as author Bruce McDaniel explained in Entrepreneurship and Innovation: An Economic Approach, “entrepreneur” was used in France in the 18th century to describe the very act of risk taking.

“Entrepreneurs do what they do because they want to, because they believe they need to, because they feel something must change, because they know their actions are required to make that change,” Larry Robertson stated in A Deliberate Pause: Entrepreneurship and Its Moment in Human Progress. “They believe they simply have no choice. Their conclusion is ‘if not me, who?’”

The following three tips can help you take action on your ideas and overcome the fear that may be holding you back.

  1. Do the right amount of research.

“The larger knowledge you have about the specific topic related to your action, the larger self-confidence you will have,” consultant Dragan Sutevski wrote on the Entrepreneurship in a Box blog. “If the knowledge for the specific problem that needs to be solved with your entrepreneurial activities is larger, the solution will be much more easier.”

Shark Tank contestant Carbone founded a horror-based immersive entertainment company after receiving a jaw-dropping number of trick-or-treaters at her horror-themed home one Halloween. If she could get hundreds of visitors to her home with some creativity, how much traffic could she drive if she put in professional time and effort?

According to Carbone, she spent several days researching the concept and within a very short time frame launched an enterprise that yielded a $2 million investment from Shark Tank’s Mark Cuban.

“To succeed as an entrepreneur, remember to guard against making critical decisions based solely on emotion without considering relevant information,” Entrepreneurship.org has advised. “Analyze the situation, make the decision, and take action with confidence in your decision-making and planning abilities.”

  1. Don’t fear failure.

“Brains are overrated when it comes to achieving great results,” Lindgren wrote.Focus on doing and building things of value. Most mistakes and changes are more often than not easily fixed.”

Successful entrepreneurs know that success doesn’t necessarily reward the smartest or most intelligent. Success comes to the action taker. Successful entrepreneurs are smart enough to know a good idea when they think of one and sharp enough to put together a strategy that works.

They may not qualify as brain surgeons or rocket scientists but they know how to execute plans, get things done and beat Einstein to the punch.

Carbone encouraged risk taking, saying, “Don’t be afraid to fail as long as after the failure you reflect and try again.”

  1. Act promptly.

“Activate when you have the idea because if you have the idea today and you do not activate today, I guarantee somebody else is going to have that idea tomorrow and maybe that person will activate,” Carbone said.

Have you ever watched an ad or found a product at the store and said, “Hey! I thought of that!” OK, so you did think of it. But so did someone else. In the world of entrepreneurship, having a great idea only gets you so far. You must act on it or lose to the competition.

5 Cs bankers ask for small biz loans post-Recession

bankers ask for small business loansAfter the Great Recession of 2008, the lack of sources for borrowing money has put many small businesses on hold or simply cleaned them out. The quest to borrow money to sustain operations or build inventory has been a lost battle for startups and those less than two years in business. Here are some tips from Betty Reiff, Assistant Vice President Portfolio Credit Manager for the Sun National Bank Business Banking division to improve your chances to obtain access to traditional small business loans.

Banks still keep a tight fist on small business loans

In this tough economic environment, banks ensure that loans will be repaid by streamlining the application process and helping potential borrowers understand the loan requirements and their debt obligations. As an underwriter, Reiff believes the five Cs of loan evaluation have not changed but the order in which each one is evaluated has. She refers to capacity –or cash flow-, collateral, capital, conditions and character.

  1. Capacity or cash flow requirements are placed at 1.2 times the amount of the requested loan. If $100K is the amount requested, Reiff needs to see approximately a monthly cash flow of $6000 net income –after interest and depreciation– to approve the application.
  2. Collateral is another tough requirement that only has not eased but increased since the Great Recession. “We expect the borrower to pay down 25 to 30 percent towards the purchase of a real estate property while working capital tops 80 percent of accounts receivables under 90 days,” she said.
  3. Capital is the amount banks require small entrepreneurs to invest in their own business, and how much they would invest at the time of the request. The bank should not be the only source of funds.
  4. Conditions –the capacity of the business to deal with current economic climate as well as any Nature or man provoked disaster need a sustainable plan and a small business should be able to provide one in those circumstances.
  5. Character talks to the personality and disposition of the borrower used to be a very important factor in the lending process but with a changing economy, banks’ ability to extend traditional finance has lessened. Even if the small business owner has been a bank client for many years, character will not change a “no” to a “yes” in the underwriting process if the cash flow and the collateral are not strong factors, according to Reiff.

Did you have a bankruptcy due to a nasty divorce? Tax liens or judgments because of a family member’s long-term care? Partners that left you running on empty? All the information that will appear on your credit is viewed with better eyes if explained in anticipation.

“Not all negative information is bad news if the underwriter can see you handled the situation properly. It might even help the borrower in certain cases.”

Most importantly, do not hide any information. Reiff “googles” her clients and their businesses trying to confirm stories and situations. “With all the public information out there, it is hard not to find what you are looking for. Better to tell everything up front and see if the item can be overcome than have the underwriter discover something and wonder ‘What else don’t we know,’” she concluded.Business Handshake

 

General small business loans 7(a): amounts, fees & interest rates

The specific terms of SBA loans are negotiated between a borrower and an SBA-approved lender. Find out what provisions apply to all SBA 7(a) loans. (At the SBA corner)

 

(A version of this article appeared on May 2013 @VOXXI.com)

Empanada Fork booth

Empanada Fork makes a mark for Latina entrepreneurs

Hipatia Lopez with Empanada Fork

Hipatia Lopez with Empanada Fork

By Hipatia Lopez

Hola, my name is Hipatia Lopez! I’m the inventor of a kitchen utensil that works as a pastry press known as the “Empanada Fork.”

Empanada Fork? Yes, because it makes “fork like” impressions on the dough to seal the edges. Fabulous!

My “idea” began around the kitchen table during the holiday season when my family and I were making 100 empanadas. I remember complaining about how long this last step was taking.   I literally could not get this “idea” out of my mind and envisioning how it would look. I found an architect who helped me with perfecting the drawings to make it come to life on paper. I decided to go forward and began the patent process, which took about one year for the approval.

Once I got my first shipment of the “Empanada Fork” utensil, I started contacting anybody that would listen to me. Of course I had some bumps in the road but once I got past my first rejection then I felt unstoppable!

I got contacted by a QVC broker who wanted to enter my product in an inventor’s contest. I was grateful to be part of that experience and having QVC as an avenue for my product was amazing to me. It has helped me a great deal, especially since I am a startup and have limited funds for advertising. I believe anything in life is attainable but you have to work for it.

My product is now sold through online stores such as QVC, Uncommongoods, and Mexgrocer. It is also available in stores over at LEBRON Restaurant Equipment & Supplies in NYC and Kerekes Bakery & Restaurant Equipment in Brooklyn, NY.Fork_dough_New

If you are thinking of starting your own business or would like to know more about the process of how I did it, I encourage you to contact me!

Also, if you’d like to carry my product in your business or use it for your business, you can request an order by visiting www.empanadafork.com

Twitter: @Empanadafork

Facebook: Empanadaforkutensil

 

Did you like this story? Would you like to be featured on LatinasInBusiness.us with a FREE PROMO? Contact Susana@latinasinbusiness.us/ and tell me about your business, products or cause! (Limited time offer.)

SIGN UP NOW AND RECEIVE YOUR OFFICIAL BADGE TO OUR LIBizus COMMUNITY!

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small business insurance, Latina small business,

Better safe than sorry with appropriate business insurance

small business insurance, Latina small business,Every business needs some type of insurance coverage to protect its assets and be covered for potential liabilities. Finding the right type of insurance your specific business needs, and the types of insurance available is a conversation to have with your insurance agent or broker. Your agency can also advise you on the exact amount of insurance you should consider purchasing according to your business size and volume.

Here are some basic insurance definitions the Small Business Administration (SBA) recommends for small businesses and their definitions.

General Liability Insurance

Business owners purchase general liability insurance to cover legal hassles due to accident, injuries and claims of negligence. These policies protect against payments as the result of bodily injury, property damage, medical expenses, libel, slander, the cost of defending lawsuits, and settlement bonds or judgments required during an appeal procedure.

Product Liability Insurance

Companies that manufacture, wholesale, distribute, and retail a product may be liable for its safety. Product liability insurance protects against financial loss as a result of a defect product that causes injury or bodily harm. The amount of insurance you should purchase depends on the products you sell or manufacture. A clothing store would have far less risk than a small appliance store, for example.

Professional Liability Insurance

Business owners providing services should consider having professional liability insurance (also known as errors and omissions insurance). This type of liability coverage protects your business against malpractice, errors, and negligence in provision of services to your customers. Depending on your profession, you may be required by your state government to carry such a policy. For example, physicians are required to purchase malpractice insurance as a condition of practicing in certain states.

Commercial Property Insurance

Property insurance covers everything related to the loss and damage of company property due to a wide-variety of events such as fire, smoke, wind and hail storms, civil disobedience and vandalism. The definition of “property” is broad, and includes lost income, business interruption, buildings, computers, company papers and money.

Property insurance policies come in two basic forms:

(1) all-risk policies covering a wide-range of incidents and perils except those noted in the policy;

(2) peril-specific policies that cover losses from only those perils listed in the policy. Examples of peril-specific policies include fire, flood, crime, and business interruption insurance. All-risk policies generally cover risks faced by the average small business, while peril-specific policies are usually purchased when there is high risk of peril in a certain area. Consult your insurance agent or broker about the type of business property insurance best suited for your small business.

Home-Based Business Insurance

Contrary to popular belief, homeowners’ insurance policies do not generally cover home-based business losses. Depending on risks to your business, you may add riders to your homeowners’ policy to cover normal business risks such as property damage. However, homeowners’ policies only go so far in covering home-based businesses and you may need to purchase additional policies to cover other risks, such as general and professional liability.

One final suggestion: Find a broker or agent that speaks your language of preference and explain them your needs. It always feels better to trust someone who knows in detail the way we conduct business in our community and, at the same time, is familiar with the US law requirements to protect your business and your livelihood.

Do THIS to keep your business cash flowing!

Business cash flow

By Jesse Torres

Michael Lewis, a former business executive and financial blogger, does not sugar coat things when he says, “owners who cannot efficiently manage their cash flow are almost certain to fail.”

Every day new entrants throw their hat into the ring of entrepreneurship. And every day several die off. Many of these entrepreneurs, after spending considerable time fine-tuning their business plan, find themselves scratching their head, wondering why their company, with its innovative product or service, suffered such a fate.

In a great many cases, the answer is easy: cash flow.

“Cash flow is the lifeblood of a business and critical in its growth,” according to entrepreneur and marketing communications consultant Caron Beesley. “With money tight and bank loans hard to get, a cash-strapped company can easily be pushed to the brink.”

The lesson that entrepreneurs must master immediately is that a business cannot operate very long when cash outflow exceeds cash inflow. Every business, particularly a startup, must zealously monitor its cash flow to prevent a serious business disruption. In business, cash is king and cash flow is priority # 1.

A significant percentage of cash-flow issues result because owners have not spent adequate time estimating the arrival of various revenue streams and balanced that against their need to pay certain expenses. Entrepreneurs must realize the critical importance of calculating accurate cash-flow projections to address day-to-day activities. Owners who don’t thoughtfully estimate their cash flow for an upcoming period (the day, week, month and quarter) place their business at serious risk.

From Day 1 businesses must track and manage their cash from the time that they must pay vendors, employees and others to the time that they collect from their customers. Doing anything less assures near certain failure. The following tips can help business owners ensure that their cash flow is managed well and not placing the business at risk of failure:

  1. Create a Budget.

Business owners should sit down to thoughtfully estimate expected cash inflows and outflows. Factors that to consider include the sales cycle, terms and discounts provided customers, industry delinquency rates and other factors that may affect the timing of incoming cash.

Similarly, it is necessary to estimate expenses and other cash outlays. This includes the timing of the purchase of equipment, raw materials and supplies. It also includes the schedule for payment of salaries, taxes and other day-to-day expenses. SCORE, a national nonprofit support group for small business owners, provides a free budget template that business owners can use to manage their cash flow.

  1. Monitor the Results.

Examining the budget should not be an infrequent activity. On at least a monthly basis (but more frequently if warranted), the actual cash flow should be compared with the budget to work out the kinks in the system. If cash inflows are less than anticipated, figure out the reason for the shortfall. If cash outflows end up being greater than expected, understanding the cause is also important.

Once the reasons for the budget variances are determined, the business can make the necessary corrections, either to the budget or the business plan or both.

  1. Have a Plan B.

Regardless of the amount of time and energy a business owner devotes to creating a budget, unexpected events can suddenly crop up, wreaking havoc on even the best cash-management system. During such times, the business might need to rely on a contingent source of cash to keep the operation running until things return to normal.

Typical sources of contingent funding include lines of credit, personal assets and friends and family. Business owners should have a Plan B lined up well before the funds are needed.

For example, a business owner who plans to borrow funds to cover a cash shortfall should have the loan or a line of credit in place well before the cash is needed. Allowing a cash-flow disruption to occur before applying for a loan is asking for trouble as most banks will hesitate to lend money to a business in distress.

Even if a bank were willing to extend a loan, few financial institutions can underwrite and approve a request in less than a month. By then, the business may have already failed due to its inability to cover its cash needs.

  1. Bill Quickly.Its raining money

A key element of cash-flow management is controlling the timing of funds coming in and going out. It may be customary, depending on the industry, for a business to extend credit to purchasers. For example, customers may be extended a 30-day period to furnish payment. Every time this type of transaction occurs, it places a strain on the business. While the buyer need not provide payment for 30 days, the company must continue to meet its financial obligations.

The easiest tactic for a business to pursue is to bill a client immediately. Businesses that make sales on credit must ensure that the invoice is delivered within 24 hours of the transaction. Furthermore, companies should track their invoices and send reminders before the payment-due date. Businesses that delay invoice delivery will likely receive their payments late due to the processing time required by the buyer. Business owners should consider delivering invoices by email to ensure rapid and certain delivery of billings.

To alleviate the pressure created by credit sales, a business should implement tactics to accelerate payment. A common technique includes providing discounts to buyers who pay their bill within 10 days. Buyers with sufficient cash to make their payment will be willing to forego availing themselves of the payment period in exchange for a discount.

Every business owner dreams of making a big sale. Unfortunately, businesses that make big sales on credit are often put under duress because they may then require the purchase of additional inventory. In such instances, business owners should consider making the buyer provide a down payment against the purchase so as to relieve the burden on the company’s cash flow.

5.Timely Payment Policies.

A sound cash-flow management strategy calls for rapid collection of invoices and timely payments. This means that the business should not pay its bills ahead of time — or late. The company should pay its bills when they are due. This ensures that its cash is working hard.

To the extent that the organization is flush with cash, business owners should ask for a cash discount at the time of a purchase instead of buying on credit. The offer of a cash payment may entice the seller to offer a discount. This can be especially beneficial in cases of big-ticket purchases where a discount can be meaningful.

 

 About Jesse TorresJesse_Torres

 Jesse Torres has spent nearly 20 years in leadership and executive management posts, including executive management roles at financial institutions. In 2013 the Independent Community Bankers of America named him a top community banker influencer on social media. He is a frequent speaker at financial services and leadership conferences and has written several books. He hosts an NBC News Radio show called Money Talk with Jesse Torres.
Follow @jstorres or contact  Jesse@JesseTorres.com