Knowledge Center

Let’s begin by defining the term. Cash Flow is the net amount of cash and cash equivalents going in and out of a company. The cash inflows are the revenues or income generated by the sales of goods and services, the cash inflows from treasury optimization, and short and long-term borrowing. In summary, it’s the cash from operations, investing, and financing. The cash outflows are the money expended, typically described as recurrent expenses, debt service, capital investments, asset protection, and payments for goods and services received. In other words, if a company brings in more cash than it spends, it has a positive cash flow. The inverse, or a negative cash flow, would occur if the organization spends more than it earns.

The “why” is the organization’s purpose. In short, it is the driver, the motivator, and the reason entrepreneurs assume the risk of monetizing their vision (whether altruistic or for-profit). The “how” is the organization’s process defined in the mission statement. It describes the actions and methods to execute the organization’s purpose and how to monetize the entrepreneur’s dream. The “what” are the outcomes, goods, or services the organization generates. “Cash Flow” analyzes the organization’s effectiveness in realizing the “why.” The organization’s values represent the common beliefs binding the people driving the organization’s purpose.

Cash Flow analysis, as previously described, assesses the amounts of cash, the timing, the certainty of the source, and where these resources are spent. This represents one of the most important objectives of financial reporting allowing organizations to manage their affairs. It is essential to the organization’s liquidity, flexibility, and overall financial performance. The “why, how, and what” is often described as the guardrails of the organization.

What Are the Types of Cash Flow?

There are three types, and all describe cash inflows and cash outflows.

1. Investing Cash Flow for capital investment projects and other speculative assets. The revenues generated are based on reasonable price scenarios and the sales of goods and services forecasting. These inflows are used to assess the economic indicators (return on equity invested, payout time, etc.) generated from the efficient use of the outflows: Capital Expenditures (CAPEX), Operating Cost (OPEX), Cost of Money (financing), and the general burdens (taxes, licenses, royalties, etc.). Also, it is often described as the Cash Flow that has been generated or spent from various investment-related purchases or sales of speculative assets and securities in a specific period.
2. Financing Cash Flow is the net Cash Flow used to fund the organization. Corporate or self-financing is the average cost of funding the organization using all its financial sources. This may include the owners’ own money, issuing debt, equity, and paying dividends. This Cash Flow projection is usually a measure of the organization’s financial strengths.
3. Operations Cash Flow describes the money flow directly associated with the services provided and the production of goods sold now (associated with the organization’s “what”).

For all three types, the objective is the same. For long-term sustainability, the organization must generate more cash than it uses (i.e., positive cash flow). Therefore, Cash Flow planning is one of the tools required to analyze the organization’s “how” or processes. It also permits the company to evaluate its fidelity to the “why” or purpose.

How Can Cash Flow Analysis Assess Performance?

The principal indicator in cash forecasting for investors and owners is how much money or net income an organization generates. In my view, net profit is the leading indicator of performance. Cash Flow is different from Profit. Profit is a measure of organizational financial success or failure. It answers how much money it makes (net income) or loses (cash shortages) overall. Profit is best described as the money left after the organization has paid off all its obligations, calculated by subtracting the expenses from the revenues. Cash Flow, in conjunction with the organizations’ financials obtained from the: cash flow statement balance sheet or financial statement of profit and loss, is used by analysts to arrive at various metrics and ratios used by investors and owners to make informed budgeting decisions and recommendations.

The best-in-class organizations can only succeed if they generate enough cash inflow to stay liquid. We can use financial indicators to assess an organization’s liquidity level. The best way to think about liquidity is how quickly the organization can get cash. I prefer the Quick Ratio: the ability to pay short-term debt obligations with its most liquid assets. The use of ratios or Ratios Analysis is the method of quantifying an organization’s liquidity, operational efficiency, and profitability. At Cogent, we use three:

1. Cash Conversion Cycle^[1] (CCC), defined as Days Inventory Outstanding (DIO) + Days Sales Outstanding (DSO) – Days Payable Outstanding (DPO).
2. Days Cash on Hand^[2], defined as Cash on Hand / (Operating expenses – Non-cash expresses) / 365.
3. Liquidity Ratio (Quick Ratio) is a measurement that shows how much cash the organization has available to pay bills and debts. In addition to the Liquidity and Solvency Ratios previously described, other ratios are used (for example, Debt Service Coverage Ratio (DSCCR), Free Cash Flow (FCF), Lending Cover Ratio (CR), Unlevered Free Cash Flow (UFCF), etc.).

Let’s define some of the most frequently used terms:

• Debt Service Cover Ratio: DSCCR = Net Operating Income/Short-Term Debt Service. This ratio assesses the organization’s ability to meet its current liabilities with the cash it generates from operations. The pitfall is that the organization might have lots of money because it is mortgaging its future (ex., by selling off its long-term assets or taking on unsustainable debt levels). Another pitfall is when the profit is tied to standing account receivables and overstock inventory or is expending too much in capital investment ventures.
• Free Cash Flow. FCF = Operating Cash Flow – Capital Expenditures. This indicator shows the organization’s money left to expand the business after paying dividends or paying off debt.
• The banker’s preferred indicator is the Loan Cover Ratio: LCR = Free Cash Flow/Repayment Schedule. Banks are not in the business of repossessing assets. They are in the business of making money. It is recommended that the organization create reserve accounts to handle short-term liabilities and future fluctuations.

In short, we can use Cash Flow planning with the organizations’ financials to assess if we are meeting our purpose, the “why.” These tools are indispensable to making informed decisions and recommendations about the state of our process (the “what”) and the actions that are needed to reach the desired outcome of future cash flow management (the “how).

Good Supply Chain Management is the Backbone of Well-Run Back Office Operation Business Analytics.  

All the functional areas in an organization are essential to driving a well-run and profitable company. Sales and operations or services are what drives profitability. On the other hand, weak estimating, bidding, accounting practices, dysfunctional or non-existent human resource groups, inadequate purchasing efforts, poor logistics, etc., will make any profits you generate evaporate as quickly as earned. Consider that you do not have much value if you have a high-performance engine in great shape, but the electrical system is malfunctioning. The same is true for the different parts of an organization, but this paper focuses on the supply chain functions. 

The History of the Supply Chain.  

The term supply chain management is relatively new compared to the other terms describing traditional functional areas of a business. Keith Oliver coined the term “supply chain management” in an interview with Arnold Kransdorff of the Financial Times on June 04, 1982. Oliver is a British logistician. Oliver defined it thus: “Supply chain management is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. It spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption.”1 

This initial definition of Supply Chain Management has evolved since 1982 also to include the procurement process and demand. Some companies have even rolled customer service (ordering) and operations under the supply chain management heading because of the close relationship between the incoming materials and business operations. The logistics of material transformation into a finished product, whether manufactured goods or installation of various items at a job site, relate heavily to the supply chain process. The rationale for including customer service is that order takers must know inventory or product outage status to communicate with the customer promptly. 

Additional Supply Chain Activities.  

Although not universally accepted, these functions can be part of supply chain management: customer service, procurement, receiving & warehousing (incoming), inventory management, planning & scheduling, production, packaging, and logistics (movement of in-process and finished products), either within a business or shipping to a customer. 

The advent of integrated computer systems tied these supply management functions together and linked accounting and finance to the process. These systems provide an A-to-Z integrated supply chain operations system for business administration. 

Key Success Factors for Supply Chain Management by Functional Area. 

Customer service individuals are typically the first point of contact with your customers via e-mail, phone calls, or overseeing online ordering. Your customers must have a seamless and agreeable experience when they place their orders. The unpleasant experiences will far out-way the agreeable ones in a customer’s mind. You must have suitable electronic systems with accurate and up-to-date inventory management, including current inventory or backlog information, so your customer service people can communicate clearly and consistently with the customer. Some knowledge of the technical aspects of your products will help the customer service rep recommend products that will meet the customer’s needs. Quick and accurate responses will keep the customer returning even when you have backorder situations. Hopefully, the latter is not a common occurrence. Following up with the customers on outstanding questions when ordering or just letting them know their order’s status is also crucial to maintain good customer relations. 

Procurement & Supplier Relations 

The key factors affecting procurement success are systems that accurately reflect chain management, orders, inventory (inputs and finished goods), scheduling, production, and shipments (incoming and outgoing). The information from these systems indicates when and how much material will need to be purchased to keep manufacturing supplied with the right kind and amount of inventory. If manufacturing misses even a minor component, it could disrupt the logistics of the production schedule or even shut down production. It is essential to accurately enter all procurement information into the logistics and supply chain management system. 

Another success factor not directly related to well-functioning manufacturing systems is the price of materials purchased. Pricing needs to align with market dynamics and the volume of the products purchased. The best procurement people always have a good sense of the direction in the market for capacities, demand, and pricing. Successful strategies can be based on when to commit to long-term supply contracts with supply chain partners. Partnerships provide fixed or stable pricing when capacity and demand tighten for a material. Alternatively, if you believe the market is softening and demand/pricing will drop, you can reduce the price by not committing to longer-term supplier agreements. Both of these approaches are forms of hedging. However, remember you will never be able to win each time with hedging. The variables affecting supply and demand are unpredictable in the long run. 

Receiving & Warehousing (incoming) 

Receiving material into a warehouse requires properly checking the bill of lading to ensure that what is received agrees with the materials unloaded, quantities are correct, and none of the materials are damaged. The acceptable material is entered electronically or manually into the information systems for the accurate and effective supply chain strategy. Take proper follow-up actions for all discrepancies in material, quantities, or damaged material. 

Once obtained, the material must be moved to its appropriate location in the warehouse and adequately logged for logistics management. Receiving and quickly locating materials are the keys to success, along with properly issuing and recording the transfer of materials. 

A preferred way to ensure the items in the warehouse agree with the locations in the computer system is to use the 5S method. Everything has a place, and everything is in its place. Paint the demarcation lines on the floor for storing materials. Mark each location with a code that agrees with what is in the computer system, much like large big box retail stores do to number their isles. Common materials should have permanent locations. This approach does not suggest comingling non-like materials in the same section. You can have some areas designated as spillover locations. The material in a place like this and the site itself must be kept current in the computer system. 

Inventory Management 

For operations management, some manufacturing facilities separate functions into separate warehouses. For example, receiving (incoming materials) and shipping (outgoing materials) from the same warehouse may be divided into respective warehouses. Both approaches can work. Sometimes the separation is made due to the volume of inventories or required to reduce risk management regarding contamination or damage to the finished product. 

In either case, chain management and accurate inventory record-keeping are needed to support project management, manufacturing, and customer service. Also, missing or damaged inventory while being warehoused can cause disruptions in scheduling and delays or shutdowns of production. Further, damaged or missing finished goods will affect the customer directly if customer service has committed these goods to specific customers. 

Supply Chain Planning & Scheduling 

Bringing all of the functions noted above together is planning & scheduling supply chain activities. Supply chain planning needs accurate information in the systems to function correctly. Logistics management also needs to know how the product manufacturing details. From the bill of materials (BOMS), recipes, order of additions, machine process times, indirect materials or chemicals used in the manufacturing process, the relationship between any products and by-products from the production process to the amount and type of labor for each manufacturing process. The logistic analyst doesn’t need to be an expert in all these areas, as do the technical people, but they need to have a general understanding of them. 

In a manufacturing facility producing several products, some depend upon manufacturing other products. Only the most experienced people can keep the plant running and in balance without a planning and scheduling system. In this situation, somebody may make mistakes or less-than-optimal production decisions. Labor is another factor affecting the schedule. Other disruptions can be caused by a need for suitable materials, as mentioned above, or critical customers who force changes in planning & scheduling. The old saying “your emergency is not my emergency” does not always apply. 

Purchasing good supply chain analytics software can manage most of the issues mentioned above. They are called either Enterprise-wide Resource Planning (ERP) or Material Resource Planning (MRP). The ERP systems are more extensive and include the critical component of accounting & finance for profit management. Determine their effectiveness by the complexity level of your processes, the interrelationships of your products, the availability of qualified labor, performance metrics, and material reliability and availability. Successful supply chain planning and accurate scheduling support operations management to manufacture and ship all products promptly and meet deadlines.  

Production and Demand 

The production department follows the directions from the scheduler. The scheduler’s project management decides what products to produce and the time needed to complete each order. Communicate any deviations or delays immediately to the scheduler. New estimated completion dates are then input into the program, and the supply chain process is updated. The best way to keep on top of production and communicate appropriately with an organization and customers is to have daily production meetings with the scheduler and other lead representatives of the various departments. 

Enter the final production numbers into the computer system once complete. In a chemical or mineral processing plant, there will likely be small underages or overages in production. If the end product is unique to a customer, then customer service should see if there is the possibility of an adjustment to the original order so the customer receives all products produced. If the material produced is common to other customers, then any excess should go into the finished goods inventory control. 

This section on production is not extensive as it relates to supply chain management but does not diminish the importance of timely output for the production process to work smoothly. 

Packaging 

Packaging of the product is sometimes considered part of production or a shared function with warehousing. Ensure the right products are packaged in the proper containers and labeled appropriately on the container with the correct shipping documents. All of these instructions should reside in the computer systems. Any error with this could mean the customer rejects the product, and the sender must pay for return shipping. Additionally, errors of this degree often reduce the company’s credibility in the eyes of the customer. 

Logistics 

Logistics is a specialized discipline. There are many modes of transportation to ship products to customers. 

• Rail: Box cars (boxes or bags), tank cars (liquid, including gasses), hopper cars (dry material), flatbed cars (odd-sized items), refrigerated, etc. 
• Truck: Dry van, container (used for shipments by sea), tank (liquids, including gasses), hopper, flat bed, low boy (low riding flatbed for tall loads, refrigerated, etc. 

• Intermodal: Products loaded on systems described in the truck section above can be disconnected from the truck and loaded on a ship or a large cargo airplane. 
• Sea: Bulk Carrier (dry bulk), Container (Conexes), General Cargo Ships (bulk bags or loose-fitting cargo [not conexes], Reefers (refrigerated), Tankers (oil, gas, chemicals), Livestock, Heavy-Lift Ships (substantial items unable to transport in other manners), and Ro-Ro (roll-on/roll-off ships for vehicles)2 
• Air: all of the above within size restrictions. 

Incoterms® (international commerce terms) published by the International Chamber of Commerce (ICC) are internationally recognized terms for shipping. Variations in terminology for domestic shipping between companies shipping within the US can exist. If you do not recognize a supplier or customer quoted shipping term, get clarification since shipping costs and transfer of ownership of goods depend on these terms. By registering on their website, you can download free listings of current Incoterms, like the wall chart in Appendix A.3 

Overview of the Supply Chain Logistics. 

A QuickBooks system can perform many of the ERP or MRP functions described above. As a manufacturing company grows, it may outgrow the capabilities of QuickBooks and need to look at alternatives via an internet search. One should carefully explore capabilities that fit with their business, the software’s cost, time, and implementation. Unless a strong systems person is on your payroll, use consultants for proper execution. 

It is key with any supply chain management system that all departments communicate electronically and via meetings to drive success and positive profitability. 

Appendix A

A cash flow management brief history.

“Cash is King!” You probably have heard this old saying many times. Before there were ERP systems, computers, green ledger paper, balance sheets, profit & loss statements, and sales or manufacturing reports, business entities managed cash; cash in, subtract cash out and count what we have left at the end of the day. We now think of this concept as accounts payable and accounts receivable. This simplified cash management approach worked for thousands of years and led us to our modern business owner’s cash flow forecasting.

However, vendors or manufacturers over the millennium did not have complicated processes to manage future cash flow that heavily impacted their cash positions. In the past, it was probably as simple as do I have enough free cash flow to buy the goods or raw materials needed to meet the short-term demand for my products. For agrarian societies worrying about the weather and the next harvest was a more significant concern, but those issues were driven by nature of which they had no control. Planning for the next 12 weeks or next year was probably a nonsensical exercise for most of them.

In today’s world, many more variables can impact our business. Some we have control over, and some we do not. We also have much more information available for future cash flow projections, which is a necessity today for planning financing activities. Knowing the incoming and outgoing cash requirements beyond the current month can still be challenging, but it is a necessary exercise to build and maintain a healthy cash flow business.

Four key points for cash flow management. 

Four main components are important to effective cash flow management. Where you find this information within QuickBooks or other sources is in blue text.

1. What is your net cash balance(s) today (cash reserve)?

QuickBooks bank account(s) ledger(s), assuming you keep up with bank reconciliations in your system.

OR

Your bank account(s) cash balance(s) – – from your Monday morning opening bank account(s) balances

1. What is the value of the outstanding checks, cash receipts, and deposits that have not cleared the bank account(s)?

No need to identify if you are using QuickBooks bank accounts reconciliation. The balance already includes not-cleared checks and the deposits you have initiated.

OR

Cash outflow – Value of the outstanding checks and deposits not cleared through your manual bank reconciliation

1. What are your operating expenses and the cash value of your commitments to your suppliers, including materials, services, leases, and rentals? When are the amounts and payments due?

QuickBooks: Report/Vendors & Payables/Unpaid Bills Detail

1. What is the value of your outstanding cash and actual sales to customers that still need to pay? When are the amounts due to be paid by them?

QuickBooks: Reports / Customers & Receivables / Open Invoices

Is that all businesses need for managing cash flow? Yes and no. Yes, for small businesses, only planning for a week or two. No, if you take a more systematic approach to mid-term cash management. The current week + the next 12 weeks on a week-by-week basis is a good cash flow forecasting approach. (Similarly, cash flow projection is often forecasted for the next 12 months)

You also need to have reasonable estimates of the following:

1. Value of sales and their timing over the next 12 weeks. You have to develop an incoming cash flow stream from the payment terms offered to your customers. Use the pattern of historical payments from these customers for the 12 weeks. This data is not what is already in your QuickBooks Accounts Receivables.
2. Value and timing of any non-sales receipts expected week by week over the next 12 weeks. Again, these are not in QuickBooks, but these could be purchase rebates, tax or non-tax refunds, interest or investment income, etc.
3. New liabilities you expect to commit to for goods, materials, or services you need to buy to support the projected sales in #5 above. You must determine an operating cash flow stream to the vendors for these expenses weekly over the next 12 weeks. This figure would include normal inventory replenishments. Again, this is not what is already in your QuickBooks Accounts Payables.
4. Value and timing of any non-vendor payments expected week by week over the next 12 weeks. Examples include insurance, rent, leases, services, tax (federal / state / local), loan repayments, credit line repayments, credit card debt, capital investments, owner’s distributions, etc.

Small business resources – Cogent Analytics’ Cash Management System (CMS)

An excellent cash flow management tool to bring all of these sources and estimates together is Cogent Analytics’ Cash Management System (CMS). Unlike QuickBooks, CMS is based on Excel and gives you the flexibility to build a 12-week cash flow forecast quickly. Then you can easily update it on a week-to-week basis. You can then see week to week when your available cash becomes low or becomes excessive. With positive cash flow, you can pay any delinquent accounts payable, repay credit lines, or roll some money over to short or mid-term investments.

Looking into cash flow scenarios. 

Now What? Now that you have a good handle on your incoming and outgoing cash over the next 12 weeks, what should you do with it?

Many scenarios can occur during the life of a business when it is cash-rich or cash-poor, and the different degrees of these extremes over time. The following are scenarios and actions you can take in varying degrees. This is not a definitive list, but it should help you determine your own solutions based on your positive cash flow or negative cash flow situation.

Note: the following are recommendations for companies that have been in good standing with their customers and vendors for some time. Different approaches may be needed if you have not delivered to your customers on time or are consistently late in paying your vendor’s invoice. Other extreme circumstances could be if you have gone through a bankruptcy process and your vendors require advanced payment. Another is if business owners are in bankruptcy proceedings. In this case, the court will decide what expenses are payable and what happens to your cash flow. Adjustments to these recommendations below also have to be made if you need help with on-time shipments of materials necessary for your products or if these suppliers require down payments for orders.

The Trail from Concern to Bad to Worse

Concern Scenario and Possible Actions

Let’s say you have a minimum available cash reserve that you like to maintain for your business. This scenario is based on your experience staying above this level in normal economic times, and you know you will be able to pay all routine liabilities and a few occasional unexpected ones. Once you see that you are going to be at this minimum level for a few weeks during the 12 weeks and you do not see anything on the horizon that will change this situation for the better, then you need to invoice outstanding debts and collect aging accounts receivable invoices. Also, delay any non-critical purchases. These should be your normal monthly activities for proper cash flow management.

Look at your cash inflow and see if you can call customers who are slow to pay or often pay right at the end of their payment terms. Although you may value all of your customers, some are better than others. The better ones pay on time without the need for reminders. The great ones pay early without you asking. Don’t bother them. Let them continue with these practices.

The others can range from needing a simple late payment e-mail reminder to frank phone calls to collect on your sales. Turn over the worst ones to collection agencies. Some of these may be playing the game of waiting for your reminders, while others may really have a cash flow problem. These slow-pay or late payment customers are actively managing cash flow at your expense. It is always best to keep on top of them and keep the funds coming in. It is particularly important when you need incoming cash.

Look at your cash outflow to your vendors as well. Are you paying exactly on time or early? If early, then are you capitalizing on any early payment discount incentives? If not, why are you burning through your funds to pay early with no benefit? In this Concern Scenario, pay precisely on time. Consider giving up the early payment discount if you are getting into cash flow issues.

Resolve disputed receivables or payables, particularly if you think you are in the right and the settlement will be in your favor from a cash equivalent perspective. Sort them out.

Ensure your production people are ordering sensibly and controlling overtime. Order solely necessary materials and allow only needed overtime.

Look at delaying any unnecessary expenditures. Focus on the immediate business needs, but don’t create alarm in the organization.

Bad Scenario and Possible Actions

If your weekly cash flow projection shows your working capital will be close to zero in some weeks, and you have already taken the actions in the “Concern Scenario” above, then more deliberate steps are required.

Make calls and try to pull up payments from customers with whom you have a good relationship. Focus on those who have done the same to you in the past in delaying their payments. This approach is the give-and-take that often occurs in business relations.

If you are in a cash-on-delivery business, look at what you can deliver before the delivery due date. You should know your customers well enough whether you can do this without notice or if you need to make prior arrangements with them. Business owners can argue that you have a big order booked and need to free up warehouse space.

Look at the accounts payable cash outflow and see if you can stretch out paying suppliers beyond the payment terms. If you only need to do this for a few days beyond the due date, you likely do not need to communicate this with your suppliers.

If you buy a lot of raw materials, see if you can make consignment arrangements where the supplier maintains the inventory you will buy in a controlled system at your location, and you are routinely invoiced as you use the material. You own the material when it is invoiced and not when it arrives at your dock. The supplier then sends replenishments when their inventory reaches a specific level. Once in place, you can use this system in good times as well for you to reduce your working capital.

Stop ordering office supplies. If you ever walk around your business and notice what people have in their desks in addition to the office supply cabinets, you may be surprised by the inordinate number of pens, pencils, paper, staples, etc. Inventory what you have already bought. I’ll bet you can go for months without making normal order replenishments.

I know of one Fortune 100 company that even encourages employees who travel overnight on business to always take the complementary pens and notepads from their hotel room and use them back in their home office rather than using the company-purchased supplies.

Reduce overtime even more than before.

Actions that will support cash balances later in the 12-week CMS:

Like the cash-on-delivery scenario above, see if you can advance shipments on orders on hand to start the payment terms clock.

Let’s look at some tricks to managing cash flow. Delay inventory replenishment purchase, particularly where you have more than adequate stock for the next 12 weeks, and revisit this each week as you update your CMS. Only order items required to meet current or very firm expected orders or long lead items. Review orders with your key purchasing office and plant people in short team meetings daily. This review gives the organization a sense of urgency but does not make it look like the ship is sinking.

Renegotiate your payment terms on payables. The old 30-day terms are what suppliers want, but many have already accepted 45 days. Many large companies push their weight around and require 90 days or more because their suppliers rely heavily on their sales. You may not be able to extend them that far but consider negotiations.

Delay any expenditures that are not absolutely necessary.

• Forget about buying that nice new office chair that replaces one that is still quite functional or swap it out with a good one that is currently not used.
• New carpet? Can’t it wait?
• Do you need to order that new equipment that requires a down payment now? Consider leasing equipment.
• Fix the 100% owned delivery truck rather than buy a new one through a loan this month.
• Patch the parking lot potholes or repair that leak in the roof rather than commit to replacements at this time.
• Cut the grass and deal with the landscaping every two weeks instead of every week.
• DO EXPEND MONEY needed to keep your employees safe – ice removal or snow plowing, but see what can be done with your crew on straight time.
• Delay any distributions to you as a business owner. You may have loyal employees, but you will be surprised how nasty rumors get started from anywhere in the company, including the accounting department. Be a leader!
• We can recommend many more examples, but you get the idea.

Consider drawing on your credit line to meet required expenditures if you see this as a temporary problem.

Moving into a Worst-Case Scenario & Recommended Actions

Again, assuming you have already taken the possible actions above.

No overtime or bonuses.

Reduce those extra shifts you added in the good times down to what you require for ongoing orders. Also, SG&A staff too.

OR

Assuming you are not restricted by union rules, reduce the work hours across the board for hourly or salaried non-exempt people. Reduce salaries in the same proportion for salaried people, including your own. You are all in this together. Reductions must be in line with your expected shortfalls in cash.

In either of these cases, reorganize your people to get the required work done. Some will need to do double duty. Be present and supportive. Make sure they get what they need to get the job done.

AND

Develop a confidential plan to layoff workers and office staff beyond cutting out the extra shifts and overtime above. Layoffs are the beginning of cutting to the bone in the Worst-Case Scenario below. Determine your labor by the amount of payroll expense you believe you can handle with short- and longer-term cash inflows. The available cash intake from this plan may be substantially reduced compared to earlier times, and you need to be highly confident will occur. You can also build trigger points to implement in phases rather than take all actions at once. If you are non-union, keep your best and only those needed to keep the business moving.

If You are in the Worst-Case Scenario and Required Actions

Let’s say you are living day-to-day with your free cash flow and planning payments on payables based on the expected timing of projected incoming cash. You also took all other actions recommended above.

YOU ARE IN DEFCON RED – – PRIORITIZE!

Implement the headcount reduction plan you developed, as noted above.

Rank and prioritize daily actions to collect accounts receivable payments.

Clamp down hard on any expenditures people want to make. If you don’t think all of your people who can initiate orders understand the problem, move the approval authority up to you for all expenditures.

Talk to your customers about paying their invoices or following through with the agreements you have previously made with them as your available cash is deteriorating, but don’t alarm them to the point where they start sourcing your products from your competitors. You have leverage over those buying products unique to yours or if they are highly reliant on your products in a very tight capacity utilization or supply-strained market.

Rank, who is paid with available cash. Only make payments that are absolutely required. You are rationing your available cash flow:

1. Payroll (no OT or bonuses paid). You need to pay your workers on a timely basis. They are the lifeblood of your company.
2. Pay your taxes – payroll or otherwise. They are going to get their money one way or another.
3. Identify what material is absolutely required as well as those who are threatening to cut you off. Basically, if you are a big buyer from them and key to their business, you have leverage over them, and if you are a small buyer to them, they have power over you. Pay and ration your cash outflow according to these principles. Many suppliers will also welcome partial payments but communicate with them openly.
4. Renegotiate payment terms wherever you can. Negotiated payment terms are pretty much out the window in a DEFCON RED situation.
5. Negotiate to stretch out payment terms on operating expenses such as leases, rentals, loans, credit lines, insurance, etc. Renegotiate terms if you can.
6. See if you can delay utility service payments but pay them if this is not possible. You need power, water, sewer, trash or recycling collection, internet, and telephones to run the business.
7. Stop all unnecessary service. I know of situations where there were creative approaches to cleaning bathrooms, keeping the site-wide location clean, cutting grass, snow or ice removal (as mentioned before), light bulb replacements, energy savings initiatives, etc. Always come up with safe solutions.
8. If you have a silent financial partner or owner, pay them last. You also get in the back of the line for any special disbursements to yourself. Again, show leadership.
9. Do what you can to avoid bankruptcy. That is the last straw, and you lose total control of your business in that situation. However, if you don’t see the situation improving soon, consider declaring bankruptcy. Going further into debt with no way out is not a good situation either.

Communicate with customers, suppliers, and others as appropriate. Don’t hide in a clam shell.

Modestly Cash-Rich Scenario

Economic times are OK. Sales are meeting decent expectations, no anticipated over-the-top orders, and delivery of materials and cost of materials and services are stable—no major concerns around this for the foreseeable future. Your available cash flow from week to week is at or above what you believe is your minimum requirement to meet your short-term liabilities.

Stay on top of collecting accounts receivables and make payments on time to capture any early payment discounts. Pay your other liabilities on time. Also, pay down any credit line balances.

Be smart about cash flow management. Please don’t waste it but do carry on normally. Keep investing the money needed to keep the business going at the current level but be cautious about investing for significant growth if the economy could be stronger and the competition is intense. Recognize people with modest bonuses for outstanding performance. Take some money out for yourself as well, based on the business’s health. Be moderate on this, not overly aggressive.

Stronger Cash-Rich Scenario

Stronger growth in the economy is happening. Demand is increasing. You are working extra shifts and overtime to meet this stronger demand. The labor market is getting tight. Material prices are rising. Capacity is getting tight in your industry. Here is when you need to increase your prices to cover higher costs, but more importantly, the market will bear these price increases.

You should see more available cash over time if you manage your business well. Use some of the positive cash flow to pay off the credit line, pay off or restructure debt with much more favorable terms.

As these better times unfold, you need to develop a limited plan for expansion, either through adding more shifts, retiring old equipment, or buying new and more efficient equipment to utilize your space better and increase production capacity.

If things are getting really good, make preliminary plans to expand your site or to a new location where you can expand your market. If you need to improve your working capital position to improve your balance sheet in anticipation of adding new debt for expansion, consider factoring your receivables with a third party but negotiate a good deal.

Strongest Cash-Rich Scenario

Execute your growth plans. Follow through on the actions that can give you nearly immediate benefits for sales growth so you can use the idle cash to pay against the longer-term expansion plans. Use this time to move into regions where you need a stronger sales presence, and the opportunities look promising.

Always keep an eye on any developing headwinds in sales and adjust the plans accordingly.

The recap – better cash flow management. 

In closing, a company needs different approaches depending upon the direction of the economy, its markets, and the company’s evolution.

In addition to 12 weeks’ CMS, one thing not mentioned above is to have budgets for the P&L, Cash Flow, and Balance Sheet. You should do this for 12 months of the following year. It would help if you also forecast what you expect vs. what you budgeted for by month for the rest of the current year. As you improve with cash flow management and these tools, you should look forward to 3-year plans, including financials. Cash flow projections provide a good look into the future and set achievable goals you can track over time. Always remember that Cash is Still King.

Improvement is only possible with adequate control and proper data collection and analysis. I will explain why cash management and financial control are the prime contributors to any operational improving process. Many have described operational optimizations as the studies of operations, performance, efficiency, and effectiveness. But all efforts must be measured by how they impact the bottom line, and by the bottom line, I referee to the company’s cash position and net profit as shown in the profit and loss statement.

What we understand as cash management for financial control: Today’s corporate leadership, regardless of its industry, type, or size, every cash management solution must measure the cash inflows and outflows, vendors and employees pay, investment to manage, and financial data for internal control or to report to lenders or regulators. Cogent Analytics provides, implements, and trains our clients with cash forecasting tools that allow them to make informed decisions to generate account wealth. Having the proper controls in place is vital to monitor the effectiveness of the operations.

Treasury management, taking control over business banking financials. 

An organization requires treasury management and cash management. There are many ways to improve the treasury of an organization, and all of them positively impact the financials. Strong financials facilitate funding for the implementation of operational systems improvements. A balanced assets-to-liabilities ratio improves the probability of third-party financing and investor relations. Also, we review short-term fixes during your interaction with Cogent Analytics within the first week. For example, listing all short-term current liabilities, prioritizing by their respective fees, and establishing payment priority are some of Cogent’s many short-term fixes. 

Typically consolidating commercial banking debts reduces the overall burden of financial costs. Cogent assists clients with tools to improve the efficiency of a company’s use of working capital, the Cash Conversion Cycle (CCC) Review, and acceleration deliverables. The resulting review enhances the client’s operating capital by implementing process improvements to reduce the time it takes to sell inventories and collect payment while paying for supplies. Another example is using Cogent’s Cash Management System (CMS) in conjunction with a Zero Balance Account. A ZBBA proves effective and efficient use of on-hand cash. “The WAY:” Implementing successful treasuring enhancement processes generates additional revenue contributions to the bottom line and adds to the funding available for required operational system improvement.

A focus on monitoring liquidity. 

Clients are focusing on monitoring liquidity. Cogent Analytics has developed the Cash Management System (CMS) and the Wealth Budget / Profit Plan to assist clients in proper cash management. These two tools provide a twelve-week and twelve-month view of the organization’s cash inflows and outflows, including investment management. Generally, any improvement in an organization’s operational systems requires capital. The prime objective of the said investment is to improve performance and efficiency, always safeguarding companies’ cash balances. “The WAY:” Regardless of the size or complexity of a client’s organization implementing proper financial control on treasury and cash management lays the foundation for excellent performance.

Collecting account receivables. 

Before we worry about safeguarding cash, you must generate it by collecting the proceeds from selling products and services. Cogent assists the client with implementing the Account Receivables (A/R) Policy, developing Standard Operations Procedures (SOP), Training, and Implementation. The work begins with evaluating the existing processes. Review the controls associated with receiving and processing orders and contracts, generating invoices, recording the receivables, processing cash receipts, and monitoring collections. “The WAY:” Implementing the proper controls over the sales to collections process lays the foundation for wealth generation. Without cash, there is no funding, and without funding, there is no operational systems improvement.

Optimizing cash management and operational system improvements. 

The key to excellence in performance is optimizing all processes. This idea includes the one that clients generally disregard, the Accounts Payable (A/P). I am trying to remember, unsuccessfully, an instance where the A/P was equal to or less than the incoming payment schedule. The optimization of this process begins by reviewing the purchasing procedure, identifying the critical suppliers of services and goods, and establishing a payment priority. First paid are the ones that permit the client to continue to keep the doors open. Cogent offers to assist clients with implementing the Account Payables (A/P) Policy, developing standards, and training by implementing job-specific SOP. We at Cogent Analytics assist clients in composing an accurate and organized list of A/P with the payment schedule. Maintaining excellent relationships with your providers, especially during supply chain issues, will leverage your position. This influence impacts, among others, project execution as you implement your operational systems improvements. “The WAY:” Efficient project execution reduces capital expenditure, efficiently using available funding, improving your cash flow and net profit.

Managing cash outflow. 

Material planning, vendor management, inventory control, optimization, and many others are essential Cogent deliverables. Improving operational systems typically requires capital investment (CAPEX). The execution of said CAPEX projects requires adequate material control as part of the integrated project control cost and scheduled system. An effective strategy for engineering and procurement of said CAPEX projects is functioning with on-hand spare parts, consumables, and equipment currently in inventory. Use inventory control and optimization to satisfy customer demand and smooth market fluctuations. CAPEX project execution’s best practice is to use all on-hand inventory. Therefore, avoiding procuring new equipment and materials reduces the CAPEX project cost. Nevertheless, you will always have to procure new equipment and consumables. 

Give consideration to adequate material planning and vendor management, which are vital to production planning and optimization through collaboration with vendors, suppliers, and service providers. The operational system improving the CAPEX project will access and build in said procurement optimizations. “The WAY:” Efficient project execution reduces capital expenditure enhancing your cash flow and net profit.

The importance of financial reports in proper cash management. 

In regular accounting, closing and issuing company financial reports require discipline and rigorous scheduling, especially to comply with internal and regulatory reporting. Achieving financial control of your company’s cash management solution requires maintaining complete and accurate financial documentation. Most of the management tools available through Cogent require three years of sound financials: Financial statement analysis from balance sheet and profit and loss statements. In more instances than one, small businesses need cash management services to fix their books to allow the implementation of said tools. Managing your company effectively and efficiently requires the use of practical tools. 

During the discovery phase of Cogent’s evaluation process, the analyst assesses the need for an accounting review. As a starting point, I promote an initial Account Services Review (ASR) that identifies all issues. This process is a short but intense review that yields recommendations that the client can implement directly or, if requested, Cogent can fix. 

Typically, the ASR will review the chart of accounts, the systems and procedures, internal financial controls, commonly used reporting, and inventory management, among others. After review, the client gets an outline of the identified recommendations and associated actions required to ensure adequate and accurate financial reporting. Without financial management, you may be out of control. Typically, the bottom line of the profit and loss statement shows a false net profit, better known as “phantom profits,” which explains the lack of cash in your multiple accounts. “The WAY:” Efficient financial control enables operational system improvements.

Reaching positive cash management and operational system improvement. 

In conclusion, operational systems improvements are only possible with adequate business financial planning, cash management control, and execution. All CAPEX projects must have financial ranking and prioritization. Economic indicators (EJ.: ROI) typically determine the order of execution. Evaluation of processes and funding controls is part of yearly strategic planning and budgeting. Using Cogent’s CMS and Wealth Budget / Profit Plan will also facilitate the analysis of funding options. The best projects are self-funded, with the client’s resources or private or public funding. A financial institution often will not take the execution risk of any CAPEX project. They only fund projects with an established cash flow. Banking institutions typically limit the loan amount to your repayment capacity. Therefore, the client must provide or pelage his resources to secure the operational systems improvements. “The WAY:” Successfully improve your operational systems with financial control as the prime contributor

From funding for startups to an ongoing business, the principles of getting funded are the same; you must understand and explain how you monetize your dream. This article describes the basic options and steps to supporting your project and getting startup funding. Let’s begin by explaining what I mean by “monetize.” The business owner’s project needs to generate cash to become a viable business. Your ability to plan and execute your project will determine the funding source.

Create a business plan first. 

The first step in how to get series A funding for a business; you must describe your dream. I mean your vision, define your mission, and set the basis for your business plan. For you to become successful, you will address all the funding sources. Let’s begin by defining the audience and describing the standard startup funding options – capital for businesses. 

What are your startup funding options:

1. Self-funding: Funding one’s own startup lets you leverage your financial resources to support your business. Self-funding comes from turning to family and friends for capital, using your savings accounts, or tapping into your 401K.
2. Friends & Family: Typically, these investors are willing to invest between $10,000 and $150,000 of their finances because they trust and feel loyalty to the founders or are motivated by their startup idea. This type of early-stage financing is commonly referred to as a “friends and family” round.
3. Angel Investors: Angel investors are wealthy private investors focused on financing small business ventures in exchange for equity. Unlike a venture capital firm that uses an investment fund, angels use their net worth and are an ideal source of seed funding.
4. Grants.Gov.: A startup grant is how the government funds your ideas and projects to provide public services and stimulate the economy. A grant program supports critical recovery initiatives, innovative research, and many other programs listed in the Catalog of Federal Domestic Assistance (CFDA)
5. Private grants: Have no public or government affiliation. The grantor can tailor the requirements specifically to whatever the private organization deems appropriate. Private donations come from social clubs such as Rotary, Lions, nonprofits, private companies, and businesses.
6. Crowdfunding: It is a funding round method of collective financing commonly given online. In this case, the company receives small contributions thanks to friends, family, investors, and anyone who wants to invest money in exchange, most of the time, for rewards.
7. Small Business Administration (SBA) – guaranteed loans: The SBA guarantees incentives to lenders, mostly regional banks, to work with local small businesses, but it can still be hard to qualify for SBA 7(a) loans. Lenders generally require a good personal credit score (690+), two or more years in business, and solid annual revenue for you to opt for a 7(a) loan. Typically, SBA provides +/- 75% of the funds.
8. SBA investment programs: A Small Business Investment Company (SBIC) is a privately owned and managed investment fund licensed and regulated by SBA. An SBIC uses capital, plus funds borrowed with an SBA guarantee, to make equity and debt investments in qualifying small businesses.
9. A venture capitalist (VC) investment provides young companies with capital in exchange for equity. New companies often turn to venture capitalists for series B funding to scale up and commercialize their products.

Preparing a business plan to present to investors. 

Regardless of the audience, it would be best to prepare a business plan. There are many internet aids to structure and guide you through the process, but the bottom line is that the decision to invest is made on the project’s capacity to generate cash, positive cash flow, to be more specific. Therefore, a model, typically an excel model, is used to describe the return on your investment (ROI). The mode: requires the capital to be invested (CAPEX), the operating expense (OPEX), the sourcing of materials and services, and market & pricing forecasting. In my experience, price forecasting is the most sensitive and difficult to document. Therefore, use industry-reputable price sourcing. Your price assumption impacts your financial indicators.

The business plan should address all risks associated with the project. It is a general recommendation to prepare a private/public offering memorandum for all funding sources besides family and friends. What is an offering memorandum? It is a legal document issued to any financial institution or potential investor defining your business’s objective, risk, economic, and deal terms. Think of it as a thorough business plan used by third parties to perform due diligence on your dream.

Business credibility. 

What are the pitfalls? Are you pursuing startup funding for an innovative new idea? Did you file, or are you waiting to be granted a patent? Protect your dream; this is your first step toward monetization. Your history of failures and success defines your credibility. Your business credit score takes into account your business credit card history, debt payment history, and the length of time in business. When you have no past, a startup must purchase credibility. Therefore, due diligence by reputable third parties defines your project’s credibility. Choose credible advisers: legal counsel, CPA, and auditor.

Three years of audit financials and tax returns for ongoing business will suffice. Be prepared to answer the question of the personal guarantee. Be sure that your wife/life partner endorses your intent; both of you must sign many diverse binding documents making you liable in case of default. If you, as the founder, are not willing to provide personal guarantees, walk away. If you do not believe in your project, why should a third party, like a banker, believe and extend external funding?

Beginning funding sourcing.

The best entrepreneur projects are self-funded, best described as the thixotropic effect. Like ketchup, once investors’ cash begins to flow, it pours. The market can and will identify money-making machines, and such good projects always find sponsors and funding opportunities. The initial trust and first seed funding are the most difficult. That is why most projects are self-funded and sponsored by family and friends.

Most financial institutions will not take the execution risk. They will only fund a business loan with an already established cash flow, limiting business loans to the amount of your repayment capacity. Your project’s cover ratio measures your payment capacity. What is the cover ratio? It is the amount of free money available to pay the loan; financial institutions typically require an index equal to or greater than two times the amount of the amortization schedule. Please note that the bank is not in the real estate business; even if you have excellent guarantees, like your own house, they are in the cash business. Therefore, do not ask for more than your capacity to repay.

Finally, a few words about project financing: venture capital investors will condition their participation to the level of control you are willing to provide. Private VC requires total control, details reflected in the operating agreement. If you plan to become a listed company, the Security and Exchange Commission will regulate the rules, and pre-and post-listing, requisites. Small business owners may feel it is too early to consider going public, but most savvy investors will require you to outline an exit plan. Prepare for speaking to potential investors. When do I get my invested money back? Will you pay a dividend? How liquid will my investment be? These essential questions you must address, especially to family and friends looking to help out with startup funding.

In a time when labor shortages are at an all-time high, now is an excellent opportunity for hiring people with disabilities. Small business owners, HR staff, and those who need a person to complete a task in general let’s overcome the elephant in the room and look to utilizing more disabled people in search of employment. The stigma society still has today regarding employing people with physical disabilities has not changed much in the last few decades despite the progress people think we have made. How would I know?

As a person in their 40s, responsible for a family of 5, a past successful business owner, a restorer of classic cars and boats, a DIY enthusiast, an active outdoorsman, and a traveling consultant would you assume I am a paraplegic? I am.

Every so often, I find myself in a situation like any other person; I am first introduced to business through statistics on a piece of paper or requested by word of mouth or reference. This person, on paper, is very blessed with accomplishments in business leadership that most would be very proud of. I am fortunate to have a very low barrier to opportunities based on my life on paper. However, upon an in-person interview, I am often greeted with apprehension, uncomfortable body language, a general sense of surprise, and often visible disappointment by the other party. As a job seeker looking for an employment opportunity, I hear, “Oh, we did not realize you are in a wheelchair… .” Then the same person who was very excited and energetic on the phone and through email goes cold in person.

Instead of casting blame, shame, or guilt on anyone, I propose to move forward with a new perspective that can solve labor shortages while bringing organizational and individual growth. As an advocate for disabled workers, I can speak to success stories.

I have spent nearly half of my life disabled due to a low-speed motorcycle accident with a pothole that left me paralyzed below my shoulders. Despite this significant setback, all of my most meaningful accomplishments in life happened to me as a person with paraplegia – starting a successful business, getting married, having children, traveling countries, becoming a certified scuba diver, avid overlander, amateur snow skier, wakeboarder and more.

Disability, freeing your mind of limitations.

In fact, I would say that while my body became set back due to a disability, it freed my mind in a way that enabled me to overcome, persevere and outthink obstacles that I never overcame prior to being “disabled” due to my own self-imposed limitations and blind spots.

After my accident, I started a successful company that sold its proprietary products to six continents. As an employer, I was responsible for the well-being of those I was fortunate enough to employ. I was blessed to travel all over the United States, participating in and sponsoring many off-road 4×4 events and partaking in my wheelchair.

However, when my business or myself met with vendors, strategic partners, local governments, or even non-profits that we would want to give back to and sponsor at our meetings, people always assumed that I was not the owner or a person in leadership. This assumption was a humble lesson that I learned to use to my advantage as often people would be loose-lipped and reveal things to me they would not tell a non-disabled “normal looking” associates with which I had arrived. There were many times that after a break from a meeting or time to conclude, the parties realized that I, the man in the wheelchair, was the head decision-maker on whatever outcome we were deliberating. Often I observe visible shock from the other parties upon this realization.

Just one of millions – qualified candidates who have a disability.

Before I continue to go down this path of beautiful narcissism, patting myself on the back, I want to make my point: I am just one of the millions of physically disabled qualified candidates who are perfectly capable and eager to serve an organization. My point is that people still underestimate and place a stigma on hiring people with disabilities or working with the disabled despite today’s social culture and the Americans with disabilities act. I confess that as a younger man in my 20s, prior to being a paraplegic, I did not think twice about the abilities of a person who had a visible physical disability. Like many still do today, I assumed that there is some stereotypical task or role that a disabled person would be satisfied with, never knowing their background, skills, or abilities. Even worse, I assumed that person should not work and collect a disability check, that they would burden those around them, slowing people down. How backward thinking was I!

Of course, these assumptions are entirely wrong as I can look in the mirror as a person with a severe physical disability and a completely healthy ability to perform in the workplace. People with physical disabilities that cause them to look different or have to accomplish the same tasks in other ways are some of the most dedicated, humble, and long-lasting workers you could ever employ. Before even arriving at work, these people put more effort into getting to work than some pajama-wearing-social-media complainers put into their entire day.

Having a disability does not stop career exploration.

The disabled person who pursues career exploration and disability employment does not take the opportunities they are given for granted because, frequently, they are given far fewer than people around them who may perform at a level less than them. To be clear, any unemployed, disabled workers would qualify for a free check at the expense of Uncle Sam every month due to their “qualified disability.” Still, they are not happy taking a free check to trade their quality of life for poverty. The current annual income limitation for a disabled individual to be able to receive disability benefits at the time of writing this article is less than $15,000 per year. Though I do say this, there are still those severely disabled people who cannot and should not work at all. I am proud that we live in a country that provides for people to be able to survive, and there is nothing wrong with people who need help.

While operating my company, I was blessed to work with a large health group and non-profits for nearly ten years. While volunteering and then also working as a spokesman for some of these organizations, I can tell you that I consistently met people with more drive and determination to succeed than I did in any other group of people short of the military and veterans affairs. All be it, many of the disabled I have had the privilege to work with were also military. In these groups, positive energy and motivation were contagious. If you did not smile or feel more motivated about your life’s opportunities after being with these people for five minutes, you probably didn’t have a pulse.

Placing aside stigmatism for employee inclusion.

So where are these fantastic people, and why are we not hiring them? You can find these people through your local physical rehabilitation and vocational centers. You can find these people through groups like the wounded warriors and contact your local hospitals. Plus, you can find these people on linked in, on social media, and around you every day. But we are not hiring disabled workers for fear of them being different, a burden, or just us being plain ignorant. People are too inconsiderate not to allow a person the ability to earn an income for their family because they are uncomfortable seeing a person with a missing limb, etc. We believe in untrue stigmas about underperformance where employers think that because a person has a leg that shakes, the leg will stop the disabled owner’s mind from being as sharp as another person’s. Or fear of the people who take advantage of employers. For example, the bad-name ambulance-chasing lawyer who could threaten to sue us for a door that does not open correctly in our facility. Let me tell you, from decades of experience, the benefits of hiring disabled people with disabilities far outweigh the risk of any possible adverse outcomes. While it is true that human beings are human, thus you will always find people looking for a shortcut or how to be lazy in life. A disabled person sincerely seeking work and disability inclusion already weeded out those toxic traits for you just by persevering enough to show up.

Employer’s financial benefits for hiring disabled.

What gets even better is that hiring these motivated, qualified, and driven individuals often comes with financial benefits. In businesses I worked with frequently, disabled hires had higher work output, were more consistent with productivity, and were cheaper than their non-disabled counterparts due to subsidies often available through federal agencies. The Department of Labor, local, state, and federal programs, non-profits, grants, and even tax offsets through the IRS are available to employers.

Here are three current disability benefit credits and deductions available through the IRS website (taken directly from their website) that benefit a business for employing people with physical disabilities;

Disabled Access Credit

The Disabled Access Credit gives a non-refundable credit for small businesses that incur expenditures for the purpose of providing access to persons with disabilities. An eligible small business is one that earned $1 million or less or had at most 30 full-time employees in the previous year; they may take the credit every year they incur access expenses. Refer to Form 8826, Disabled Access Credit, for more information about eligible expenditures.

This credit pays the business for becoming ADA compliant if it has a facility that is not ADA compliant. Instead of spending your money widening a door or installing a ramp, let your hard-earned tax dollars pay you back and pay for it! Besides, ADA compliance is just common sense that every business must deal with whether you employ a disabled person, work with disabled clients, or not. Be smart and be seen as a proactive, inclusive leader to your community by correcting outdated and impractical building practices.

Barrier Removal Tax Deduction

The Architectural Barrier Removal Tax Deduction encourages businesses of any size to remove architectural and transportation barriers to the mobility of persons with disabilities and the elderly. Companies may claim a deduction of up to $15,000 a year for qualified expenses for items usually capitalized. Businesses claim the deduction by listing it as a separate expense on their income tax return. Also, companies may use the Disabled Tax Credit and the architectural/transportation tax deduction together in the same tax year if the expenses meet the requirements of both sections. To use both, the credit deduction must equal the difference between the total expenditures and the amount of the credit claimed.

Work Opportunity Tax Credit

The credit provides employers incentives to hire qualified individuals with targeted disabilities. The maximum tax credit ranges from $1,200 to $9,600, depending on the disabled hire and the length of employment. The credit is available to employers for hiring individuals from certain target groups who have consistently faced significant barriers to employment. This group includes people with disabilities.

This tax credit directly offsets a disabled person’s labor burden. It is literally like a discount for choosing to hire a person with a disability so that while your business employs the disabled person, they cost you less than any other person you could have hired to perform the exact same job description and productivity level.

Hiring qualified candidates from the disability talent pool.

So what does all of this come down to? What is it that businesses really need to consider in the hiring process? As an active consultant who is still on the front lines of business needs, who travels across the country seeing the struggles of labor shortages today, businesses, when searching for human capital, need not forget or stigmatize those who are physically disabled. Companies should consider the intrinsic and non-intrinsic incentives for hiring people with disabilities in their organization. Physically disabled employees are both a financial and inspirational benefit to your organization and to those who interact with them each day. Consider setting up a disability employment policy to enrich your organizational culture to support the community of disabled individuals. Never underestimate a thankful humbling example of a human being who appreciates each day and makes those around them more grateful, humbled, and driven!

Organizational culture is one of the most important aspects of any business. It helps keep employees happy and motivated to work and fundamentally impacts how people perform in the company. Whether starting your own company or joining an established one, having a clan culture that welcomes new ideas and promotes collaboration is crucial to success. Therefore, it’s essential to understand what organizational culture is and how to create an inclusive environment for your team. A company’s culture isn’t something that happens accidentally. It takes time and conscious effort to make a positive workplace culture that fosters creativity and encourages innovation among employees. However, many companies often struggle with creating an inclusive culture because they fail to recognize organizational culture change and what needs to happen within their organization in order to achieve this end goal.

What is company culture?

Company culture is the set of values, norms, and behaviors that define employee behavior within the organization. Employee behavior includes everything from how employees communicate to what hours they work. Every company has its own desired culture, which will differ from company to company. However, some companies have an overarching culture seen throughout the entire organization. When you think about how a company operates and what kind of shared values it has, you are essentially thinking about its hierarchy culture. This is because the current culture is largely influenced by leadership behavior and the values of the persons serving as its leaders. Thus, it is important to understand what makes up your corporate culture and how you can create an inclusive environment that welcomes diversity.

Creating a company culture that works.

When it comes to creating a company culture that works, the first thing that you need to understand is that it is a process. It is not something that a company can do overnight. It takes time to instill new values and create a more inclusive environment in an organization. However, there are a few steps that you can take in order to make this process a bit easier and more successful. One of the first things you can do when creating an ideal culture is to examine your company’s values. For example, you may have a company culture that celebrates collaboration, but certain values may conflict with this. If this is the case, you should alter specific values to create a more inclusive environment.

Exposing employees to different cultures and people within the organization is another important step when creating a corporate culture that works. When you allow employees to experience other cultures, they are better able to understand how to create an inclusive environment within their organization. Another thing that you can do when starting a company culture that works is to assign team-building exercises. For example, you could assign an activity where employee performance focuses on working together towards a common goal. This exercise helps break down barriers and open the lines of communication between different teams within the organization.

Support an all-inclusive organizational culture.

One of the most important aspects of creating a great organizational culture is to focus on inclusion. An inclusive clan culture is necessary for a healthy and productive environment, especially in a diverse workforce where people bring different perspectives and experiences to the table. Additionally, companies with more inclusive cultures are more likely to attract top talent because they offer a supportive work environment free from negative stereotypes and microaggressions. Moreover, inclusive workplace culture is essential for retaining employees. It can be difficult for a new employee to feel like they belong at work if the current culture isn’t welcoming to all. Also, according to a Gallup study, employees who feel included are 27% more likely to stay, while those who don’t are twice as likely to leave. That can have a significant impact on the organization’s overall productivity.

Team exercises build clan culture.

One of the best things you can do to build a strong organizational culture and clan culture in your organization is to assign team-building exercises. When you give team-building exercises, you are opening up the lines of communication and breaking down the barriers that may exist between teams within the organization. Another thing you can do when building a strong and inclusive culture is to assign regular cultural observations. When you do this, you are looking for specific behaviors that reflect your core values and what you want your organization to stand for. Yet another important thing that you can do is to assign a specific person within the organization to lead the company culture. This person could be a manager, director, or even a different position within the company.

Tips on how to create an organizational culture that works.

• Establish a positive-reinforcing environment for staff members. A positive environment means creating a place where everyone feels comfortable and safe, where they feel their work is valued, and where everyone can contribute in the most effective way possible. To do this, the company needs to set up clear policies about acceptable behavior, employee expectations, what they can expect from one another when working together, and how to handle complaints. It should also have a process for leaders dealing with any issues that arise. The company should also ensure that its employees feel supported by the people running it so they can perform at their best.

• Ensure diversity within your workforce is well represented in the organization’s decision-making processes, such as hiring, promotions, or leadership roles. Diversity within the organization should not just be seen as an issue of race or gender but include cultural differences such as age, ethnicity, sexual orientation, disability status, and more. The ideal culture is inclusive of different kinds of people who come from diverse backgrounds. You need to ensure that diversity is represented throughout the human resources and the organization’s decision-making processes, like hiring, promotions, and management roles, as well as in your recruiting standards.

Creating a new organizational culture does not happen overnight.

When it comes to the pitfalls of creating an organizational culture that works, there are a few things that you need to keep in mind. One of the first things you need to keep in mind is that you will not be able to create an inclusive and strong culture overnight. Organizational culture will take time and a conscious effort on behalf of everyone within the organization. Another thing you need to keep in mind is that you will not be able to create a “perfect” company culture. Perfection is something that is impossible to attain. You will need to keep many things in mind when creating a workplace culture that works, but the most important thing is to be intentional in your organizational behavior.

Company culture in the hiring process.

Another important thing you can do to express company culture in the hiring process is to ensure that you are looking for certain qualities in a new employee. When it comes to expressing employee engagement and company culture in the hiring process, you will want to make sure that you are looking for certain qualities that reflect the organizational values you uphold. For example, if one of your core values is to celebrate collaboration, then look for candidates who are collaborative. You may also want to look for candidates who engage in the community and are ready to give back to the organization. Another thing you will want to keep in mind when trying to express shared values in the hiring process is to make sure that you are hiring for a healthy culture fit.

The importance of a hierarchy culture.

Organizational culture is one of the most important aspects of any business for long-term stability and shared values. The company culture helps keep employees happy and motivated to work, and it also fundamentally impacts how people perform in the company. For success in a new company or an already established one having a culture that welcomes new ideas and promotes collaboration is crucial. Therefore, understanding what a healthy organizational culture is and how to create an inclusive clan culture environment for your team is essential. It takes time and effort to create an environment that feels inclusive and welcoming to all. It is also important to set up a cultural change process in an organized way so everyone can execute it effectively.

The current job market is challenging for both the candidate and hiring managers. There are more available jobs than qualified applicants, and the demand for skilled workers continues to outpace the supply. This imbalance makes it more important than ever for businesses – whether small, medium, or corporate – to have a recruitment strategy for recruiting top talent when hiring new employees. This article covers some of the most important considerations when hiring in the current economy.

Recruiting may take time in a hurting job market.

While the job market is improving, it’s important to remember that it’s still not as robust as it once was. More businesses are hiring, but they may not be able to hire as quickly as they do during a stronger economy. If you’re looking for qualified job candidates, don’t expect to fill all openings immediately. Recruitment might take some time. Salary expectations are higher than they’ve been in years, so it might be challenging to find a candidate willing to accept the salaries you’re offering. If you need to hire quickly, your recruiting strategy may have to be more flexible with your salary expectations. If you have a highly specialized position to fill, it might be a challenge to find qualified applicants. Once you do, getting a candidate on board and fully up to speed may take some time.

Transparency is key to recruitment strategies in the current economy. 

A potential employee wants to know exactly what they’re getting into and how their role, department, and company fit into the big picture. This strategy will help you attract better talent and reduce the time it takes to fill open positions. As you’re writing a job description, try to be as specific as possible. A clear job description will help your recruiting strategy attract suitable applicants and give you a good idea of the type of employee you’re looking to hire. When advertising a job opening, consider including questions in the interview process like, “Why are you interested in working for our company?” These recruitment methods help you get a sense of what the candidate knows about your business, giving you a better idea of their fit for the role.

Put the focus on the candidate’s experience to find a great fit.

The candidate experience is just as important – if not more important – than the hiring process itself. If a job seeker has a bad experience during the application process, they’re more likely to share that experience with others. This damaging exposure can lead to a negative reputation for your employer brand, making it more difficult to attract and retain top talent. Keep the candidates’ experience in mind as you design the recruitment plan. How can you make the recruiting process as seamless and easy as possible? What can you do to help candidates feel that their experience was positive? When hiring, it’s also important to consider what your potential employee can offer your company. While the candidate may be an excellent fit for the role, they may not be a great fit for the company. You want to ensure you’re hiring people who match your candidate persona and company culture. Qualified candidates who are a good fit for your company are more likely to stay with you for the long term.

Hiring managers need to be realistic in the job posting.

When hiring in the current economy, it’s important to be realistic about what you can offer. If you’re looking to hire new staff but cannot offer competitive salaries, that’s okay. You can still find suitable job applicants with a creative recruitment strategy. Candidates are often more interested in working for a company they enjoy working for and a manager they enjoy working with. If you’re able to provide those things, you can find great employees even if you can’t offer the highest salaries in the market. If you’re able to provide an attractive benefits package, that can help you attract and retain top talent. In addition to salary considerations, you want to make sure you’re offering a competitive benefits package that helps you attract the right candidates and keep them happy once they’re on the team.

An effective recruitment strategy is selective in the hiring process.

Once candidates begin applying for open positions, it can be tempting to interview all prospective employees. After all, you have to fill those positions, right? While it’s okay to be a little bit selective, you don’t want to be too picky. You want to make sure your recruiters are interviewing candidates who are a good fit for your company and the position. During the interview process, you want to find qualified candidates for the job and whom you feel you could grow with. Candidates who are a good fit for your company are more likely to stay with you for the long term. If you have a large number of applicants, consider hiring a talent acquisition recruiter. These specialized recruiters help you narrow down the candidates through a recruitment funnel process, making sure you’re interviewing the correct applicants.

While it’s okay to be a little picky about the candidates from the talent pool, you don’t want to be so selective that you lose out on excellent candidates who aren’t able to make it to the interview. Make sure the hiring manager has a policy in place for no-show interviews. It’s essential to be consistent so that candidates understand the consequences of missing the interview. If the majority of candidates are missing interview appointments, you may want to evaluate your interview process and ensure there isn’t something you need to change. If you have a large number of no-shows, it might be worth setting up a virtual recruiting scheduling tool to make it easier for potential employees to find an interview time that works with their schedules.

Use recruiting efforts that support your company culture.

The best candidates are likely to be the ones who are already passionate about your company. The best way to encourage this is to foster a company culture that encourages current employees to get involved and excited about what the company is doing. This recruitment process means having regular company-wide meetings to discuss upcoming projects and initiatives. It also means offering your current employees opportunities to get involved with the company outside the office. Activities could include things like a company happy hour or group outings at local businesses. It’s also important to keep your company in the headlines. If you have a large and engaged social media following, make sure you’re using those channels to talk about what you’re doing and why you do it. If you’re hiring, make sure your promoting virtual recruiting efforts for open positions in the public space of social media channels.

Hiring in an ever-changing economy can be challenging.

The economy is always changing, but hiring in the current economy is more important than ever. You want to ensure you’re hiring candidates who are a good fit for your company. You want to make sure you’re transparent about your hiring process, and you want to make sure your employees are doing everything they can to promote your company. Keep these tips in mind, and you’ll be well on your way to hiring great staff members for your business. And remember, hiring new talent doesn’t have to be a difficult process.

The Happy Hour Concept

Have you ever wondered why bars have Happy Hours or restaurants have early bird specials? Why would anyone want to discount their food or drink offerings and make less money for a period of time? Is it out of the goodness of their hearts or perhaps as a community service?

Quite simply, it is a way to attract customers when business is typically slow or to entice new customers to try you out. What can we learn from this common practice for our business? While there are easier parallels with business to consumer types of retail enterprises, there are definitely applications to even pure Business to Business organizations.

The practice of making a product or service more attractive than usual is a tactic to attract customers that might otherwise go on with their normal routine. It can also make the barrier to trying something new less intimidating. By creating a reason for customers to come into your business when it is typically slower, you can leverage your day-to-day offerings as well as obtain new customers that can result in repeat business. In the case of being unfamiliar with you and your offering, it can lower the barriers to trying something new. This could take the form of ‘new customer discount’ or a percentage of your first order. However, this only gets people ‘in the door.’ It is then up to us to provide value that they are willing to pay the full price for.

Understanding Customer Value

Every business should look at the value that an average customer brings to their business over the lifetime of that customer. This is known as the ‘lifetime value’ of our customers. A person who comes in each weekday to buy a cup of espresso spends $5 per day, $25 per week, $100 per month, or $1200 per year. These numbers tend to get our attention more than a $5 cup of Joe. If a customer’s lifetime value is $6,000, what are we willing to do to get them into our establishment regularly? What if that value is $60,000 or $600,000?

The ‘happy hour’ concept is a way to fill in less busy times and to get people to consider trialing your value proposition. Once you establish your value, they are willing to stay longer, buy more, and come back more often. A more recent variation of this technique is known as a ‘rewards program.’ This is the practice of tracking a customer’s business and rewarding them for more frequent or more valuable patronage. It started in the airline and lodging industries but has progressed to your local ice cream shop and hardware store. More sophisticated companies utilize complex customer relationship development and management technologies to further define and cater to a customer’s unique buying patterns and individual tastes. The promise of a ‘reward’ is the hook by which you begin to gather this information.

Business Challenges During Times of Uncertainty

If your business has survived the recent global pandemic, chances are you are in a position to grow. Many businesses that were barely making it before faced too difficult a mountain to climb and closed up shop. Those of us who survived, have evolved or continued to have something of value to offer. The current priority for most businesses is expansion or business development. How do we attract more customers? How to we provide more value to our existing customers? How do we keep our existing customers from going somewhere else?

In any difficult time, discretionary expenses such as marketing and promotion are easy targets for cost reduction or avoidance. However, in our current economic recovery, we must all consider how to expand our businesses, not merely continue to exist. Now is the time to launch new marketing and promotional strategies. Now is the time to begin to add new products that will be of interest to our existing customers. Now is the time to evaluate how our customers get to us and to strengthen or existing channels, but also evaluate adding additional channels.

Do your customers find you on the internet, map programs, social media or rating apps? Do you proactively manage your profile on these platforms? Once they find you, does your digital presence reflect your current messaging and is it relevant? Does your website, social media, and traditional media have a consistent look and feel? Is it easy to find what you are looking for or be motivated to take action once you encounter it? Does your website collect visitor data called ‘cookies?’ Do your social media interactions direct people to your website with actionable promotion? Are you collecting potential customer data into a searchable format with ‘affinity groups’ identified? This is the role of a Customer Relationship Management system.

Customer Relationship Management systems can be as simple as a list of phone numbers, emails or addresses that are collected during the sales or research phase. Most of our businesses have this information buried in a system somewhere, however, we do not evaluate it, hone it, or use it. If we do not collect this valuable information today, we need to start! We are not recommending the abuse of this information by creating SPAM. However, it is prudent to simply use this information to make potential and previous customers aware of your changing offerings, new products, or promotions.

Social Media Opportunites

As far as social media, do you encourage your ‘satisfied customers’ or raving fans to tell their friends? Do you encourage or initiate interactions post sale to gain insight into their experience? Do you promote product or project ‘selfies’ or ‘unboxing’ with your customers? Do you seek influencers in your particular sphere of customers who would be willing to try your product and provide their honest feedback? Many influencers are willing to ‘try’ your product and provide a shout out, provided it meets or exceeds expectations. Are you partnering with ‘like’ and complimentary businesses who sell too similar or the same customer types? Are there industry or user group associations you might get involved with? Have you considered ‘sponsorship’ where exposure of your brand could provide supporting or introductory touch-points?

Does your product need assembly or installation instructions or additional explanation of its differentiation in the cluttered marketplace? Have you considered setting up your own YouTube channel to organize, store and provide these bits of information that might help your customer choose your product or service over another? Do your suppliers have such a site that you could provide easy links to?

The bottom line is that promotion and discounts such as Happy Hours, discounts, social media shout outs, and more are the tools you need to expand your business. While traditional media advertising and exposure have their place, are you using all of the tools at your disposal to grow your business? Do you have a child, nephew, or other person who is engaged in these new media that can help direct your efforts? There are many ‘experts’ out there, but a word of caution, choose wisely. Whatever you do, make sure you have proper measurements in place to quantify the impact of various tools, and determine the return on your investment. Bring Happy Hour to your business today.