Tag: business credit

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The Small Business Borrower | Biz2Credit

In order for regulation and legislation to work in favor of small businesses, it becomes essential that accurate and complete information be available for analysis. Too often there are details not recognized in the information used by various agencies to help guide policy and action, and particularly in the world of privately held small business, the quality of data is often in question. This is where structured accounting software and the public accountant come in to play, and where a difference can be made not only with the individual client, but at a higher level by facilitating more accurate data production to support various research initiatives, such as those sponsored through the SBA and the Fed.

Overall, these research studies highlight two things: the important role that financial institutions play in lending to small business owners, and the value of quality data sets in ascertaining financing issues faced by small businesses and their owners.

Charles Ou, Ph.D. | Senior Economist | Office of Advocacy | July 2009

With the availability of highly useful tools for monitoring various key performance indicators and metrics in the business (with analysis of cash flow being an essential part), business owners and their accounting professionals alike are able to use real business data to reveal not simply the trends in business performance, but to identify areas where direct action could improve results in one aspect or another. By paying closer attention to managing business finances and analyzing key aspects of business performance, the “discouraged” or “denied” business borrower may become a successful or (even more valuable) a non-borrower.

via The Small Business Borrower at Biz2Credit.com.

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Does Your Customer Data Support the Value of Your Receivables? | FundingGates blog

Does Your Customer Data Support the Value of Your Receivables? | FundingGates blog

Trade Accounts Receivable (AR) represents the credit a company extends to its business partners. AR is essentially an approach to financing customers’ business operations, using the supplier company as the lender rather than a bank or other source. Particularly when markets are slow-moving and cash availability is low, trade credit tends to be what keeps businesses in business. AR is a business asset (which explains why it shows up on the balance sheet), because it is something the business has that is of value. When the business needs to get a little of its own financing, should an approach using AR as the basis be a consideration? Is it even possible?

AR “financing” means that the business trade accounts receivable are the main consideration of the lender in providing financing, where the AR is either collateral for the loan or is a factor making the business eligible for the loan. There are many types of AR-based financing, and there are still more issues to think about before trying to use AR as a financing tool.

When it comes to other assets in the business, the information about them is probably pretty well-known. Physical assets in particular don’t leave a lot of question as to their value – at least in terms of what was paid for them and then depreciated over time. Other assets, like Accounts Receivable, are a bit more difficult to value. Realistically, the value of the AR may not actually BE the book value of the AR, because not all of that money may be able to be collected. Considering that companies fail or go bankrupt or experience other events which cause them to default on obligations, there is risk connected to the AR and, subsequently, a question of whether or not it makes sense to “leverage” that AR for immediate cash.

There is research out of the Columbia School of Business (among other sources) which discusses a condition called “information asymmetry”and how it may impact the business decision to use AR financing.

Read the rest of the article on FundingGates blog: Does Your Customer Data Support the Value of Your Receivables?.

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Lean and Mean – Improving Sales and Distribution Performance

Lean and Mean – Improving Sales and Distribution Performance

It is surprising that, even in this world of Internet marketing and online commerce, many businesses are operating at levels far below their potential.  Reliant upon people rather than information and process, these businesses are weighted down by their legacy approach to getting things done.  They throw money and personnel at the problem, adding more “fat” to the business and making sustainability just that much harder to achieve.  The right approach, and the mantra of all manufacturers and distributors, should be to work “lean and mean”, applying technology and business principles which support agility and improved process efficiency.

The center of lean business is in operations, and includes all aspects of the “order” processing and support systems.  From the point where an order is sought, to the point of order entry, and through to delivery and service – all aspects of the operation must be addressed for the business to achieve maximum success.  Innovating in operational areas, such as in order management and distribution, can help the business rise above others in the market and create a significant competitive advantage.

What becomes challenging for many businesses is the fact that years of working in established “silos” often makes it difficult to introduce the cross-functionality necessary to support lean operations.  It is not sufficient to simply suggest that the organization work collaboratively to streamline processes from order through to service and support.  Work groups and team members must work together and adapt to delivering process improvements, following through with the actions necessary to turn the philosophy into bottom line results.  Good support is required to keep customers, and a good product is necessary to support increased sales.  No aspect of the operation stands alone, so each is necessary to participate in making end-to-end improvement.  Additionally, back-office processes must be aligned to work collaboratively where required, supporting efficient operations rather than creating unnecessary bottlenecks or delays.

The key to developing a lean and mean, high performance operation is applying the technology and principles which translate into improved profitability and customer retention.  In many cases, the same solutions which create customer “self-help” capabilities are also solutions which can address similar needs for internal business users. Ultimately, the goals are elimination of redundant or error-prone processes, establishing the sharing and secure collaboration of information throughout the organization, implementing integrated systems which allow users to efficiently perform their particular tasks, and working cooperatively with others in the supply chain to maximize the real-time capability and efficiency.

Rather than continuing to utilize basic record keeping solutions, or accounting products which aren’t prepared to address the specific operational aspects of the business, owners and managers should be looking to the tools and solutions which will help them develop the framework to support improving operational performance, turning people knowledge into sustainable business profitability.

Make Sense?

J

Accountants and Small Manufacturers: Getting in Front of the Ball

There’s a lot more to accountability in a manufacturing or inventory-based business than simply keeping track of money in and money out.  Particularly in an economy when nobody can afford to build or stock products too far ahead of demand, it is essential that these businesses have a means to not only track and manage purchasing, manufacturing, distribution and stocking activities, but to understand conditions or trends which impact the flow of materials and cash through the business.  Read more…

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Finance and Accounting Support in Franchise Systems

Finance and Accounting Support in Franchise Systems

There has always been somewhat of a love/hate relationship between franchise operators and their franchisees. While many entrepreneurs elect to leverage a known brand, documented operating procedures, and combined purchasing power that is often a benefit of a franchise operation, the reluctance to open the books to the franchisor is sometimes based upon a fear that “big brother” will use the information to take advantage of the business owner. The two sides of the business model aren’t always operating in sync, even though a deeper level of finance and accounting process support might benefit both greatly.

Logic would suggest that both the franchisee and the franchisor would recognize the validity of sharing financial and business performance data for the benefit of the entire system, where benchmark data and performance comparisons can become the basis of tremendous business intelligence. But some franchisors, as their networks expand in size, find that their success in selling units begins to outweigh their concern for individual unit performance, and the brand value creates sufficient momentum to overcome a few bad business experiences. Especially in larger systems, the franchisors don’t often consider the benefits of providing back-office and accounting support for their franchisees, because they simply don’t feel they have to. That is changing to a degree, and reliance on quality accounting and financial data takes on entirely new meanings in an environment where franchising is increasingly more complicated and competitive.

High unemployment and low consumer confidence cause spending decreases which impact even the strongest of established businesses. With credit markets being as tight as they are and without qualify financial information to support the request, business owners are often unable to obtain the financing required to expand their businesses when required, to new locations or with additional personnel. The 2010 Franchise Business Outlook[1] suggested that, even as the economy starts to recover, franchised small businesses will continue to face these financing struggles. The forecast is for “a slow recovery with marginal increases in the number of establishments, jobs and output.”

Looking to Washington for help, a number of small business organizations, along with The International Franchise Association, are “calling upon Senators to include more provisions in new job creation legislation to help small businesses access credit.” [2] The fear is that if credit access for small business isn’t made available now, the best opportunity to create sustainable business and subsequent job growth will be lost. Reliance by small businesses upon credit is unquestionable.

According to the IFA, “the depletion of [SBA loan] funds last fall is proof that the SBA programs were, and continue to be, critically important for our nation’s creditworthy entrepreneurs”. However, without sound business accounting and provable data, even the most business savvy entrepreneur may find their business “unbankable” and must therefore rely upon personal credit guarantees to support business growth.

Possibly the strongest point in the argument for franchisors facilitating accounting and financial management assistance to the franchisee centers on Item 19 of the FTC and state Franchise Disclosure Documents (FDD)/Uniform Franchise Offering Circular (UFOC). Item 19 is the Earnings Claim, which are estimates or historical figures detailing sales, expenses, and income a prospective franchisee might realize as the owner of a particular franchise.

The Earnings Claim is often considered to be the single most important factor in buying a franchise. As with purchasing any business, it is critical to have a realistic and supportable projection of sales, expenses, and profits earned. Particularly in a case where a potential new franchisee has no experience running a business, or no applied experience in that particular type of business, the earnings claim becomes the only guidance available. Unfortunately, the only source for this information is the franchisor itself, which often introduces doubt as to the veracity of the data. It is difficult to determine which could raise more doubt about the sincerity of the franchisor: using unverifiable data, or not providing an earnings claim at all.

When a franchisor elects to provide services to their franchisees, such as back-office accounting support or financial management oversight, then the opportunity to obtain data for the earnings claim, performance benchmarking, and royalties verification become realistic goals. Further, the ability to verify and substantiate the data can prove invaluable in a tough franchise market where buyers want good, verifiable information, and Item 19 helps sell units.

Offering accounting support to small business owners isn’t a new concept, but the technology to facilitate a truly seamless relationship has only become available in recent years. As Internet and Web-based application services emerged on the market, businesses flocked to them in order to gain the benefits of anytime, anywhere access to applications and data. However, the poor performance and lack of features left some business users without the tools they needed to handle all their requirements efficiently, so many returned to manual or local PC-based systems.

Secure remote access and application hosting services are a technology approach which adapts trusted and proven software and systems to a cloud-based, collaborative online working model. The server-based application model, which is essentially a hosting approach delivered from on-premises computers or offsite hosting infrastructure) allows the businesses to continue use of applications with the functionality required to support the business, but improves the IT environment by managing and securing the applications and data within the confines of the host. This eliminates the need to install or maintain applications on different computers and eliminates the need to have data copied or sync’d to different computers and devices.

A valuable aspect of providing secure remote access and centralized access to applications and data is the ability to then integrate with reporting systems designed to assist in the translation, analysis, and comparison of data from a single business to an entire franchise system.

Deploying server-based (hosted) computing models with remote and mobile capability means owners are able to retain their investments in software applications and processes while introducing new efficiencies and flexibility in their working models. The evident benefits are the ability to access information from any location, to have multiple locations work seamlessly together, and to allow outside accountants or other service providers to work seamlessly in the organization. Adding commercial hosting of the server expands on centralized management and administration with professionally-secured systems, greater predictability in ongoing IT costs and an improved ability for the business owner to focus on the business.

In summary, the franchisor market must look more closely at the fiscal management and reporting systems of their franchisees, and provide avenues to better-address access and support for accounting and bookkeeping responsibilities in order to gain credible performance data and useful benchmark metrics. Only through the ongoing participation of accredited accounting and financial personnel can the business financial data provide the information – and the insight – required to support aggressive business growth in this difficult economy.

The key is seamless integration, and the technology solution is the cloud-enabled model.

Make Sense?

J

[1] Report that measures the economic impact of franchising in the United States, prepared by PricewaterhouseCoopers (PwC), and commissioned by the International Franchise Association Educational Foundation. http://franchise.org/uploadedFiles/Franchise_Industry/Resources/Education_Foundation/2010%20Franchise%20Business%20Outlook%20Report_Final%202009.12.21.pdf

[2] Franchise.org Press Release http://www.franchise.org/Franchise-News-Detail.aspx?id=49246

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Accountants and Small Manufacturers

rollingballGetting in Front of the Ball

There’s a lot more to accountability in a manufacturing or inventory-based business than simply keeping track of money in and money out.  Particularly in an economy when nobody can afford to build or stock products too far ahead of demand, it is essential that these businesses have a means to not only track and manage purchasing, manufacturing, distribution and stocking activities, but to understand conditions or trends which impact the flow of materials and cash through the business.  Further, this understanding must come in a timely manner in order for the business owner to make decisions and take action when it matters most.  Unfortunately, many business owners find themselves “behind the ball”, constantly pushing to make forward strides, and often due to not having the information they need to make business decisions that matter now, today.

Why is it so critical for these businesses to have more and better information to help them make strategic decisions and answer daily operational questions?  In a word: connectedness.  The Internet has truly made the world smaller when it comes to participation with even the smallest of local businesses.  Globalization of markets has impacted manufacturers in significant ways, and these businesses (like so many others) must now be prepared to address the realities of global supply chains, outsourcing, and a remote or mobile workforce and market.  While many of the software solutions addressing the functional business requirements of manufacturing and inventory or warehouse management are “locally implemented” solutions, extending and integrating these solutions to address the new global and mobile paradigm may represent a significant expenditure in time and resources for the small enterprise.

Application hosting and web-based solutions have emerged to help businesses address the need to “modernize” legacy applications and enable greater levels of system management and access.  Introducing the applications into a centralized and remotely accessible environment allows the business to immediately deliver the necessary support for remote work and mobile access, and positions the system to facilitate collaboration within the business and with outside participants, such as outsourced bookkeepers, accounting and finance professionals.

These professionals can be instrumental in assisting their clients manage the change to new collaborative computing paradigms.  Where accounting was previously viewed as an after-the-fact process, accountability through detailed activity tracking and reporting is now a focus which begins at the front end of the business, and accounting professionals are finding far greater value in helping structure and manage this daily activity in order to deliver greater operational information and insight.  Rather than being the last people to know what is happening in the business, accounting professionals are recognizing that their ability to positively impact business performance requires getting “in front of the ball”, initiating process structure, data control and collection which ultimately results in better and more informed decision-making through better and more timely access to more meaningful information.

Businesses at all levels are realizing that new computing paradigms can ease the burdens of collecting and sharing information, yet most small companies need help in determining exactly how to approach this “enabling” of the business and systems.  While accountants are also experiencing dramatic change in how they do business, it makes sense for them to embrace the opportunity and recognize that enabling client systems will ultimately allow the accounting professional to work more closely and to deliver more tangible value to their client on an ongoing basis.  Online accounting approaches are no longer a fad but are the new reality supporting how many bookkeepers and accountants work with their business clients.  Extending access beyond accounting and bookkeeping systems, and incorporating support for operational and line-of-business solutions, is the next step which will bring the accountant closer to the client business, and position both to benefit from deeper collaboration and useful insight.

Make Sense?

J