Beginning October 4, 2010 in the Training section of the powerful Veretekk System there will be the filming of the MLM Boot Camp. Anyone with a Silver or Gold Veretekk System will be able to come and watch this event and learn how to build a product launch. This will be taped and the Boot Camp will be sold later, but you will be able to come and watch at no cost. If you don’t have a Veretekk System just go to http://seniorcitizeninternetmarketing.veretekk.com and sign up for a FREE Silver System.

What you will learn:

• You will learn how to put together a system that will enable you to generate quality leads.
• You will learn how to develop a Product Launch for a specific product and launch it.
• You will learn how to use the Veretekk System and it’s assets to develop products and services.
• You will gain knowledge that I have spent hundreds of dollars for over the last 7-8 months to learn.

After we film the Product Launch, of the MLM Boot Camp, it will cost to get it. The price will be somewhere in the range of $200-$500 and the only way to get it at no cost is to join my MLM Company Send Out Cards on my Team. Everyone who is a member of my team will have access to this information at no cost. So if you are interested in this unique, transformational information you will want to show up for the filming. There will also be a Q&A session afterwards if you have questions as to product launches or any other related questions.

This will run for 8 weeks with one module being filmed each week. There will be NO RECORDING! You miss it and the only way to get it is to pay for it when it comes out, or join Send Out Cards on my team. [I am only posting this info here on the Unemployed site, It will not be published anywhere else nor will I send it out through a Bully Pulpit. If you are already in Veretekk you know what that means.] So check the Veretekk Training calendar for the dates since they might be subject to change. You know in the Movie Biz things sometimes don’t run on schedule.

See you at the filming and the after party’s.

Dr. Raymond Jewell, Economic Coach
Business Mentor Systems

Cash Flow Problems are caused by:

1. Too much inventory.
2. Too much salary to owner or too many withdrawals by owner.
3. Doing business with customers who are slow paying or who do not pay at all.
4. Overhead too high.
5. Too much debt.
6. Under-capitalization from the beginning
7. Unexpected casualty or occurrence
8. Employee theft or embezzlement
9. Excessive purchases of fixed assets and capitalized costs.
10. Operating losses
11. Paying bills too quickly
12. Selling prices too low / Not knowing what your product or service costs.

Take a look at this list.  Which area do you think is your biggest cash burner?  Even if you do not have a cash flow problem you should assess your risks in all of these areas.  If you do have a cash flow problem you should assess which areas are burning the most cash and work to address it.  Over the next few pages in this free report, I am going to write about each of these 12 areas, identify the risks and suggest ways to mitigate those risks so that you can work to alleviate or prevent cash flow problems.

Part Time CFO Boston MA

A great Ski retailer in Massachusetts, Roger Buchika once said, “the less inventory you buy the more money you make”.  What Roger meant was that too much inventory can put you out of business quick.  As a matter of fact the biggest mistake retailers make is over buying.  Over buying can surely cause cash flow problems and too much inventory poses a significant risk to the business owner.  Too much inventory not only kills retailers, but it also kills distributors who overbuy and manufacturers who overproduce.  There are plenty of tools available that one can use to forecast inventory requirements more efficiently.  Today’s operating systems have inventory forecasting tools that will allow you the opportunity to see where the overages are.  Every area you have an inventory overage poses a risk.  I am of the opinion that the best solution to an inventory overage problem is to price to move it as soon as possible.  It makes no sense to sit on it when you can turn it into cash (no matter how small) and reinvest in fresher faster moving inventory.

Here is an example:

I once had a client in the distribution business and because of a promotion that did not meet sales expectations the company was sitting on a 7 year supply of Product A inventory.  Promotions that do not meet sales expectations are common and no one should be kicking themselves for taking a shot on a promotion even though it did not work.  However, when a promotion does not work and results in an inventory overage one should work to address it immediately.  We got an offer of $15,000 for Product A that had an inventory cost to my client of $60,000.  At regular prices he could sell that inventory for $100,000. My suggestion was to take the $15,000, reinvest it in fresh fast moving inventory.  Fresh inventory was turning over 8 times per year at a 40% profit margin.  My client thought that if he could sell 15% of the Product A inventory at regular prices he could make the $15,000 in cash flow that he was being offered today and still have the rest of the inventory to sell.  This was true, but it would take one year to do it based on the slow moving inventory turns of Product A.  By taking the $15,000 today and reinvesting it in fresh, faster moving inventory that turns 8 times per year we would have generated an additional $200,000 ($15,000 / 0.6 reciprocal of 40% margins x 8 turns) in cash flow that year.

So as you can see from this example, because of the inventory turnover of the more productive inventory it pays to cut your losses and get rid of the slower moving inventory.

Business Forecasting

This one hits home the hardest.  The business is doing well and as a result the owner increases their personal life style.  Not necessarily too extravagantly, but more than the business can afford if there is a downturn in business.  While the business is doing well the business is not really feeling the effects of the additional salary.  Furthermore the owner feels entitled to a larger salary as they probably took a smaller salary while they were building up the business.  This larger salary may even be market value when compared to the effort and work performed.  This is all true and all understandable.  The problem comes when the business has a downturn and the owner cannot adjust their salary to a lower level primarily due to an increased personal life style.  Furthermore, if something happens in the personal life of the owner and they need money, many times they take it from the business.  This puts pressure on the cash flow of the business.

Unfortunately, there is only one way to manage this kind of situation and it takes discipline to do it.  The first thing to do is determine a conservative and consistent salary amount.  When good years occur take a bonus.  That way when bad years occur the business is not strained due to the owner’s salary.

It has to be the business owner who needs to show the discipline and to be responsible for their business.

CFO Consultant

Lot’s of my clients continue to do business with customers who are slow paying or who do not pay at all.  Sometimes they do it because they know the customer personally.  Sometimes they do it because the customer has been with them for years.  Sometimes they do it because business is bad and they need to keep people working and they will do anything to get business.  Whatever the reason it is a bad business practice to do business with customers who are slow paying or do not pay at all.

Here is an example:

I once had a client who did business with many of his long time customers who always paid slowly.  When I first went to the client’s office they had $150,000 in over 90 day receivables from these slow paying customers out of a $250,000 total receivable balance.  These customers were even slower to pay than previous history, but since they were long time customers no action was taken.  Times were tough and these customers knew by blowing off my client’s bill nothing would happen.  I immediately put all of these customers in collection and we refused to do business with them in the future.  Some of these customers still came back to us and paid COD.  Overall, collections improved dramatically.

There is no rule of thumb to determine when a customer is slow paying.  It is different for every business and the business owner needs to determine in a policy how many days past due is considered to be a slow paying customer.

Establishing a system of collecting accounts receivable so that your receivable strategy is consistent and timely is critical to successful collections.  Here is an example of a strategy that if applied consistently and timely will lead to successful Accounts Receivable Collections:

Assume an invoice with terms of net 30 days

Between the 35^th and 40^th day contact the customer.  If the customer is a customer you know pays within 30 to 40 days based on a history that you have with that customer then do not contact until the 40^th to 50^th day.

If customer does not return your call or you were not satisfied with the customer’s answer then send a 10 day Demand Letter, requiring payment within 10 days or the account will be put in collection.

If not paid by the 11^th to 15^th day then put the account in collection.

I always use a collection agency that has a legal staff so that if the account is not collected using traditional collection methods legal action can be taken right away with the same staff that did the original collection and is familiar with the case.  I only do business with collection agencies that take no more than a one-third fee and have a legal staff.  Once again the key to the collection process is consistency and timeliness.

Interim CFO

In most businesses the largest part of their expense base is Rent, Payroll Advertising and Insurance.  Focusing on managing these expenses will provide you with the biggest bang for the buck.

Rent- Business owners think it is impossible to re-negotiate the rent because you have a lease, but the landlord does not want to lose a tenant, especially a commercial tenant where they would have to do another build out and/or deal with the cost of vacancy.  Most landlords understand cash flow problems because many of them have experienced cash flow problems themselves through real estate downturns.  What I found to be the best way to negotiate with the landlord is show them your financial statements and show them what concessions you need in the short term based on the financial position of your business.  Then show the landlord how you are going to pull through the difficult times and how his rent concessions are necessary in order to pull through.  Be as open as possible.  If you have to, you can add the concession money to the back end of the lease or you can add another year to the lease as a way to give the landlord something for the concession.

Payroll – There is usually always a way to cut payroll, whether it is by laying off employees or reducing employee hours.  Certainly you work to keep your “A” players and let go the inferior workers.  In retail, another strategy to cut payroll hours is to change the store opening and closing times so there is only one eight to nine hour shift.

Advertising – I don’t like cutting advertising, but there are ways to cut advertising without making a dramatic impact on sales.  If you have been tracking what works for you, then of course you will know what to cut by eliminating the advertising that is not working.  Other ways to cut is by reducing sizes of ads, changing from 4 color to 2 color printing, developing more of a web presence using search engine optimization strategies or doing more 10 second cut-ins on the radio versus 60 second spots.  If you have not been tracking your advertising then you must make difficult, uneducated choices as to what to cut.

Insurance – Start with health insurance. Get quotes from 4 health insurance providers.  What I found is that although rates are basically the same, you will find one creative provider who will figure out a way to cut your Medical Insurance cost to the lowest possible amount.  You may also have to reduce the employer paid portion and put more of the cost burden on the employees.

Get quotes from 4 commercial insurance providers.  Commercial insurance carriers get very competitive and usually sharpen their pencils on General Liability insurance policies.  If you have an umbrella policy, reassess the need to continue it.

Here is an example:

I had a client in the construction business that had an umbrella policy that was costing them $17,000 per year.  However the only reason for the umbrella was to bid on huge commercial jobs.  The previous year they never won a bid of any of these large commercial jobs.  They were not even close.  Large commercial jobs were not the market that they could compete in.   Their sweet spot was mid range jobs that did not require they carry an umbrella.  We dropped the umbrella and saved $17,000.

Most business owners wait until there is a downturn in their business before they assess the size of their overhead.  Assessing the size of overhead should be an ongoing process no matter how good or how bad business is.  The key to managing overhead is to review your P & L every single month and if an expense is higher than it was the previous year you need to find out why.  The next step is to pick 3 expenses every month and get competitive quotes to stay on top of changes in price in the marketplace for that product or service.

Part Time CFO

I know I am not telling you anything new but debt will kill you.  This is another area where the business owner is going to think it is impossible, but if the debt is killing you it is time to renegotiate your terms.  The key is to have a good relationship with your bank/banker.  There is an old expression and it is “Feed your Banker”.  You should be feeding your banker both literally and figuratively.  You should be taking them out to lunch, but you should also constantly communicate to them about your business.  Your bank needs to understand your business.  They need to understand your business so when times are good they will understand your growth plan and when times are tough they will understand how you will pull through.  The confidence that you have in your business should be communicated to your bank so they have confidence in your business.  This is a process.  If you do not have such a relationship I suggest that you create one.  In the meantime, you need to go back to your bank or lender and renegotiate your loan.  Just like with the landlord you need to have financial statements with good reliable numbers.  You need to identify the key metrics in your business and show the bank your businesses strengths and weaknesses.  You have to be transparent and show the bank as much information as possible.  Areas to negotiate are interest rate reductions, increase in the number of years or interest only payments.  One trade off may be offering the bank a higher interest rate, but getting interest only payments in return resulting in lower overall payments.  Work with your bank to refinance high interest credit card debt.

First Step In starting A Business

I have never seen an entrepreneur (including myself) estimate cash required for a venture accurately from the first business plan.  The inherent optimism of being an entrepreneur automatically seems to dictate that cash needs will be underestimated.  The problem is that underestimating cash needs creates cash flow problems somewhere down the line.  Because entrepreneurs always underestimate cash needs, the search for money needs to be consistent and continuous.  However it is always wise to take the money you think you need and double it.  It is also wise to have a talented CFO on your management team to be able to conservatively determine cash needs.  I cannot over emphasize the need to overshoot your cash need projections otherwise you are almost certain to undershoot them.  Even if your cash needs are conservative you still need to constantly look for more money.  Since cash flow is the life blood of any business it is critical to make sure your cash supply is always right.

CFO Blog

No matter who you are and no matter what business you are in, something always happens in a business that you never expect.  By the way, something unexpected usually happens more than once.   This is why I have previously said that you need to constantly look for more money or make sure you always have available cash resources.  These unexpected occurrences can put you out of business and they are inevitable.  This is why your salary needs to be conservative; this is why you need to cut overhead, this is why you cannot withstand slow paying customers and this is why you have to take heed to the 12 items in this report.

Cash Flow Problems

Most business owners never think it can happen to them.  Someone they trust needs money and has figured out a system for stealing and embezzling.  It happens a lot more times than you think.  The key is implementing checks and balances and making sure one person doesn’t have too much responsibility.

Here is an example:

I had a client who really trusted their bookkeeper.  This bookkeeper did everything.  She did the entire bookkeeping job, made bank deposits, prepared payroll, recorded sales transactions, entered accounts payable, printed checks and prepared quotes.  She had no watchdog, there were no checks and balances and she did everything.  She just bought a new house and was having problems making payments on the mortgage.  It appears she overpaid for the house beyond her family’s means and did not want to go into foreclosure.  She understood that she literally controlled the company finances and the temptation to steal was building.  The owner had two companies of which one was dormant.  She began by writing extra payroll checks out of the dormant company.  No one knew as no one audited or oversaw the dormant company.  Then she got lazy and simply wrote checks to herself out of the main company.  The theft was discovered but not until several thousand dollars were stolen.

Sometimes the temptation to steal gets too great and people with weak characters give in to the temptation.  Never have any one person assume this much responsibility.  Have a professional financial person, like a CFO review the books at least quarterly and implement internal controls to prevent theft and embezzlement.

Solving Cash flow Problems