Alexandra Levit's Water Cooler Wisdom

Essential Basics of Cash Flow Management

Cash-flow management involves close monitoring of cash flow, which is the amount of cash being transferred into and out of a business. 

If your organization has positive cash flow, it means that the amount of cash available at the beginning of a period (opening balance) is less than the amount at the end of that period (closing balance). In order to remain in business over an extended period of time, an organization must maintain positive cash flow.

I talked to two experienced owners—Brandon Harris, president of content marketing agency NUMedia and Christine Yaged, chief product officer of finance information portal FinanceBuzz —to share their most critical cash-flow management tips.

1. Stay within your means.

Even if your business is growing rapidly, if you don't practice healthy cash-flow management, you can dig a deep hole from which it's difficult to emerge.

"It's easy to find yourself in credit trouble, missing payroll, taking on expensive loans that further your debt and, eventually, declaring bankruptcy," says Harris.

 

 

“It's your job to make sure you can cover your bills so that all stakeholders are satisfied and things are running smoothly," says Yaged. “Otherwise, you'll severely disrupt business operations and spiral from there."

2. Avoid scaling too quickly.

Sustaining positive cash-flow management can mean being patient with your organization's growth, holding off on expansion plans and tempering your excitement about the business's potential.

“Be careful not to overextend with too many early hires and a bunch of credit card debt," says Harris. “Build your war chest organically, and you'll thank yourself in the long term. I've tried the fast, hard money route, and the stress on your business and your life is simply not worth it."

For more where this came from, head over to the AMEX OpenForum.

Securing a Business Loan for Your Established Organization

There is a great deal of advice for securing a business loan for a company that's just getting off the ground. But what's less frequently discussed is what an owner should do for financial help long after the initial setup.

For many owners, a business loan might mean the difference between surviving and having to abandon the organization. To get to the bottom of this issue, I spoke to Duran Inci, co-founder of marketing agency Optimum7, and Dan Robbins, chief operating officer of skincare company OC Facial Care Center

Applying When Your Business Is Doing Well

Inci and Robbins both have business loan experience. Inci obtained a Small Business Administration loan as well as a separate credit line for his consulting business.

“I wanted to have options in terms of growth, additional marketing, hiring and scalability," he explains. "I believe that businesses should start looking for loans not when things are going bad, but when things are going great."

 

With the common saying “Banks lend when you don't need it, and don't lend when you do" in mind, Robbins applied for a loan while his business was in good shape.

“We'd been paying in cash for store expansion, inventory and all other business aspects," he says. “But last year, I heard [a judge on Shark Tank] suggest taking out loans while holding cash so you can protect your ability to pay interest and keep the the loan afloat, and I immediately changed my way of thinking. I realized that if something bad was to happen and I had no cash, it could destroy our business."

Convincing Banks to Take a Chance

As a result of the recent financial crisis, many banks have gotten stricter about how and when they lend. “You're much better working with a local or smaller bank with which you already have a relationship," says Robbins.

Many lenders will want to review your business model.

“Banks want to be sure you have the ability to pay back or you have collateral," adds Inci. “They are very specific about the terms as well. At the same time, if you have good revenue and decent financials, it's not hard to get a business loan."

If an owner decides to pursue a business loan, what should they be prepared to do to convince financiers? Both Inci and Robbins say that demonstrating transparency to the lender, with the help of a good accountant or bookkeeper, can help.

“Your cash flow and the profitability of the business should look good," says Inci. “Furthermore, the debt to income ratio should not be alarming. If you feel like the terms and/or interest rates are high with private lending, SBA loans are better in this respect. However, you should expect higher initial fees."

On the whole, business loan interest rates are comparatively low.

“If you can take out a loan now and save your cash flow and profit, it's better," says Inci. “Additionally, building that lending relationship today will be more impactful later when you might actually need the loan."

For the rest of the piece, head over to the AMEX OpenForum.

Exploring and Closing the Middle Skills Gap

As the chair of DeVry University’s Career Advisory Board, I’ve been talking about skills gaps a lot recently. Usually, I address either the technology skills gap or the soft skills gap specifically, and I’m usually referring to graduates of four-year institutions who are pursuing careers in the business world

In reading my veteran HR thought leader Sharlyn Lauby’s new book The Recruiter’s Handbook, however, I was alerted to an entirely different type of skills gap: the middle skills gap. According to Lauby, the middle skills gap is defined as those jobs that require more than a high school diploma but less than a four-year-degree. Some industries affected by the middle skills gap are finance, manufacturing, telecommunications, healthcare, and retail, and the jobs themselves range from entry-level administrative positions to highly specific operational roles.

Digging Deeper Into the Middle Skills Quandary

Why is the middle skills gap a problem? “At the heart of the issue is an oft-discussed anomaly: while millions of workers remain unemployed and an unprecedented percentage of the workforce report being underemployed, employers across industries and regions find it hard to fill open positions,” said the report by Harvard Business School, Accenture, and Burning Glass Technologies.  “A first, essential step to closing this gap is to differentiate between the vast array of middle skills jobs in order to concentrate on jobs with three important attributes: they create high value for U.S. business; they provide not only decent wages initially, but also a pathway to increasing lifetime career value for many workers; and finally, they are persistently hard-to-fill.”

Lauby recommended addressing middle skills gaps by gaining information that allows you to bridge where your workforce is today with where you want it to be in the future. Specifically, Lauby suggested the following action steps for hiring managers and recruiters:

Pay attention to what’s happening in your geographic area and industry

What’s happening on a global or national stage might not pertain to your region. Your industry could also be affected by external factors other types of organizations aren’t facing. Anyone in the position of hiring needs to know their unique market conditions.

Find credible sources of information

If you’re going to cite sources for a trend or solution, they need to be from trusted authorities. You don’t want your CEO questioning your business case.

For more where this came from, check out the DeVryWORKS site.

4 Must Have Strategies to Retain Your Best New Talent

According to a 2017 CareerBuilder survey of 2,250 U.S. hiring managers and HR professionals survey, companies lost an average of $14,900 on every “bad hire” in the last year, and it's a common mistake — nearly three in four employers (74 percent) say they've hired the wrong person for a position and that half of these bad hires have quit within the first six months of employment.

When asked how a bad hire affected their business in the last year, employers cited less productivity (37 percent), lost time to recruit and train another worker (32 percent) and compromised quality of work (31 percent).

The survey also illustrated that while the cost of hiring the wrong person can be high, the cost of letting a good worker go is even higher. CareerBuilder’s survey respondents cited the average cost of losing a good hire as $29,600. As a workforce and HR consultant who has worked on retention strategies with dozens of organizations, I’d like to share five recommendations for keeping your best people.

Acclimate Them to Your Culture Early

The moment an offer letter is extended, the new hire experience starts. However, some organizations fail to communicate with candidates between offer acceptance and start date, and this is a retention mistake. Based on 15 years of working with employees, and especially younger ones, I’ve learned that the most important thing organizations must do to retain new hires is to get them involved in the culture immediately.

If an employee starts a new job and feels lost, they may feel like they didn’t make the right decision, and keep interviewing. If a better opportunity arises, a new hire that doesn’t get a positive first impression right away may not wait around. For this reason, I advise organizations to launch a comprehensive onboarding initiative that starts the minute the offer is extended and mixes face-to-face and virtual components to connect new employees to the company they’ve joined.

For the rest of the piece, check out the DeVryWORKS site.