Friday, July 31st, 2009
When planning cash flow needs for a new business, managers should take their best guess and then double it. Then they should plan to spend three times as long moving into a profitable mode. That way they’re less likely to be disappointed. The point: It’s sad but true that being a pessimist is probably more prudent than being an optimist when predicting costs and length of time to profitability.
Companies should borrow or set up payment plans with suppliers to pay for all of inventory—or at least part of it—and then actually pay for the inventory using funds received from customers paying their bills (otherwise known as paid off accounts receivable).
Tags: cash crunch, cash dynamics, contingency, payment plans
Posted in companies, management, merchandise, money spending, negotiationg | Comments Off
Thursday, July 30th, 2009
Most suppliers understand that no company can sell from an empty store. Therefore, most suppliers usually work out financing arrangements that take into account when the company gets paid by its own customers. In other words, most suppliers have come to understand that when their customers are paid, they’ll be paid shortly thereafter. Otherwise, suppliers know they’ll get the unpopular merchandise back anyway when the companies close down—and that’s the last thing suppliers want.
Success can lead to failure if you can’t master cash flow dynamics. If a company can’t keep up with the demand of its customers, it may need to scale down its expectations temporarily and hope to make the most of its growth opportunities later. If a company can’t keep up with payments to its suppliers, it should meet and negotiate, and maybe reduce its purchases in the future. Then it should establish better means of monitoring its cash flow and find ways to operate more efficiently.
Tags: cash crunch, cash dynamics, contingency, productivity
Posted in developers, finances, management, merchandise, negotiationg | Comments Off
Thursday, July 30th, 2009
No company can anticipate all contingencies with 100 percent accuracy. This is especially true for operations in start-up mode.
If the company pays cash for its inventory, it won’t be able to restock key products when it comes time. Too many businesses have backed themselves into this corner, suddenly finding themselves with all the wrong merchandise and empty spots on their shelves where their biggest sellers once were because they have run out of cash to pay for the restocking. The next thing to go will be customers and, eventually the business.
Tags: cash crunch, contingency, productivity, profit
Posted in merchandise, money spending, payments, taxes | Comments Off
Thursday, July 30th, 2009
The size, nature, and complexity of a business may indicate up to one, two, or three years of losses before the business starts turning a profit in new ventures. Managers won’t know for sure until they have some operations time behind them and have begun retool-ing based on what the market is really like, rather than on what they think it’s like. Once managers have an understanding of what customers think of their products and services, they can make more realistic predictions about expenses, income, and profitability to minimize the chances of getting into a cash crunch.
Tags: business, cash crunch, productivity, profit
Posted in customer demand, developers, finances, management | Comments Off
Thursday, July 30th, 2009
Businesses, especially new companies or old companies making forays into new enterprises, run the risk of sinking funds into the wrong end of the operation and then not having enough cash when it’s desperately needed. Adequately reserving for growth, especially during the early days of the business, is critical. It also helps to recognize the areas where cash can disappear without a trace.
No matter how prepared the business may think it is, unless it is operating in an area in which it has had years of experience—in terms of both the product and the market—the chances of anticipating the majority of risks that could come its way are remote. If managers hope for the best but reserve for the worst, they will find themselves in a better position when those cash-draining contingencies do arrive.
Tags: cash crunch, cash flow, productivity, profit, sales
Posted in accounting, banking, credit cards, financial risks | Comments Off