Monday, September 7th, 2009
Cautious investors often place stop-loss orders on their account. These orders sell out your shares should they decline by the amount of pain you anticipate you are willing to endure. Stop-loss orders are supposed to make an unmanageable situation manageable. Brokers encourage this as stock fluctuations inevitably trigger sales creating more commissions and spreads.
In a market break, the sell point may be much lower than the level you specify. For example, on a surprising corporate announcement, it is common for prices to gap down by $10 or more. Your stop loss may have only been down $2, but you will be sold out at the next trade, $10 lower. Of course, you always have the opportunity to buy back in again for more commissions and increasingly wide spreads. Stop-loss orders often lead to anger and frustration as an attempt to bring order to an unmanageable situation fails for you, yet enriches your broker.
Brokerage accounts also offer you a “parking place” for your cash. These are sweep accounts: money market funds that collect dividends and the change leftover from trades. In the old days, dividend checks and change were sent to your home and you had the onerous task of depositing them in your checking account. The sweep accounts are marketed as a great convenience to you. In fact, they are a great convenience to your broker as they gather your funds within short distance of the trading desk. Again, particularly optimistic types should have the dividends sent home. Maybe there is only $1,000 at stake, but would you rather have a new couch to lie on during the bear market or would you prefer to whittle it away in commissions, spreads, and poor stock picks?
Tags: fiscal problems, interests, manufacturers, methodology, mortgage, preserving cash
Posted in banking, budget analysis, business goals | Comments Off
Friday, July 31st, 2009
Most enterprises have something called a strategy. Invading armies have one. Football teams have one. In most cases, just having a strategy may mean the difference between success and failure.
More than any other enterprise, a business needs a strategy. Why? Well, just consider what you’re trying to do and what you’re up against. You’re trying to get a share of the dollars out there. You’re competing with businesses that provide similar goods or services, yes, but also with any business at all, because the amount of dollars is limited. You’re risking economic changes as well—not only downturns that could threaten your financial stability and growth, but also upturns that could favor competitors ready and able to capitalize on them, especially if you’re not prepared. Then there are the other dangers, such as the potential loss of vital financial support, a key manager, or a valuable employee. Then, toss in the reaction of customers, which might mean a lawsuit that could sap your resources and damage your public image.
So, every company is facing tough challenges. That’s why every company needs a strategy. That’s often the key to a company’s financial success. Without an overall strategy, you’re less likely to meet your financial goals.
Even if you’re not responsible for running your company, you must first grasp the overall concept behind what the top managers are doing, just to be able to properly manage any part of that company. If you don’t understand the strategy behind the company, how much can you help it succeed?
Tags: business plan, cutting costs, interests, preserving cash
Posted in business patterns, business strategy, companies, funds, negotiationg | Comments Off
Friday, July 31st, 2009
Looking for ways to decrease operational costs runs hand-in-hand with looking for new and better ways to manage operations. Can the sales team cut down on the number of personal calls by making regular telephone contact instead? In addition to saving sales call time and money spent on automobile wear and tear, the new approach might give a definite market advantage by allowing staff to make more frequent contact. Done correctly, this can translate into better service at a lower cost. Then everyone benefits.
Inventory can be a cash eater if it isn’t financed. The company should pay the interest required to finance the inventory and keep its cash at hand. The company may need it. To make this clearer: In buying a car, you might have the funds to pay for it in cash, but by financing it, you keep your funds available in case you need them for some situation where it’s more difficult to borrow money than to use your cash. Of course, the company should also better control inventory quantities, to minimize its cash investment.
Tags: cutting costs, interests, payment plans, preserving cash
Posted in business patterns, cash demand, companies, funds | Comments Off
Friday, July 31st, 2009
If cash flow does become an issue, it’s obvious that the company will have to change the way it’s doing business if
it wants to survive. Does that executive plant service still come in once a week to water the ficus and all the other office flora? As a manager, you may have to cancel the service, buy a $2.98 watering can, and start doing it yourself—or maybe just get rid of the plants altogether.
That may seem a little obvious, but it’s amazing how many businesses fall into comfortable patterns during good times and don’t see them as unnecessary frills when cash becomes tight.
Tags: cash dynamics, cutting costs, payment plans, preserving cash
Posted in business patterns, cash demand, customer demand, developers, online bank | Comments Off
Friday, July 31st, 2009
Beware of rapid growth. Many J companies have grown so fast that demand has outstripped their ability to pay for increasing inventory or improved services to meet the demand. Remember that demand is not cash. A company should not borrow too much on the expectation that, when it meets demand, it can repay the loans.
Preserving cash flow is one thing and improving market strategies is another. But sometimes the two can work hand-in-hand for even greater benefit. All it requires is a little better management thinking and a clear understanding of the challenges you face.
Tags: cash dynamics, contingency, payment plans, preserving cash
Posted in cash demand, companies, merchandise, online bank, taxes | Comments Off