cash flow management – Cooper Mann Consulting

February 11, 2013

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?.

December 7, 2012January 3, 2018

Accounting Professionals Should Help Business Clients Help Themselves

Accounting professionals are being challenged as the perceived value of the services they traditionally provide to business owners is diminishing.

Where the accounting professional was once viewed as valuable and integral player in the development of periodic business financial reports and the preparation of the annual tax return, many small business owners are now realizing that this post-facto activity delivers limited value to them on a daily basis.

These business owners are more frequently turning to cloud solutions and online application services to provide them with constant access to the information they believe will help them manage their daily operations, and are often implementing the solutions without the knowledge or participation of their public accounting professionals.

Access to real time banking information allows a business owner to see activities relating to deposits and payments, yet fails to reflect pending receipts and payments. Anyone familiar with managing a checkbook understands this reality, and so do many small business owners, so they find ways to keep track of those undeposited funds and near-term receivables, as well as the outstanding checks for bills paid.

With a small business, cash is king, and managing the cash flow is often the greatest daily concern of the small business owner.

After the fact reporting and an annual tax return, no matter how accurately and professionally prepared, will not help the business owner manage their cash right now.

Business owners are seeking to obtain more frequent and in-depth information about their businesses, and are taking steps to obtain it.

Accounting professionals serving these clients, while facing shrinking profit margins on current offerings, are not stepping in to take advantage of the opportunity to regain their position as the adviser and consultant to the business client.

As a result, business owners are getting their “business intelligence” from other sources, even further diminishing the value of the accounting professional’s involvement.

Accounting professionals must recognize that highly useful and valuable tools exist now to help small business owners understand their businesses better, and which provide a level of education and guidance to help them make the various decisions they may face.

Rather than viewing these solutions as competitive to the value of the accounting professional, accountants should embrace and adopt the use of these tools with their clients, and evolve the professional practice to helping ensure that the information presented in those solutions is always up-to-date and accurate.

By using these solutions to help educate the client as to the variety of situations which may arise in the business, the accountant significantly increases their opportunity to identify new areas of service where they may deliver a higher level of tangible and ongoing value to the client.

Make Sense?

November 12, 2012

Managing The Purchasing Process: More than just expenses

When a business owner hears the term “expense management”, they immediately get a vision of traveling employees with piles of receipts and vouchers to be organized, accounted, and possibly reimbursed for. The image is fleeting, gone out of mind with no lingering thought, because this business owner does not have personnel who travel frequently, and does not have to deal with volumes of expense reports from employees. Expense management solutions aren’t anything this business owner is looking for.

Yet, what does happen every day is that equipment, materials, supplies, and services must be purchased to keep the business operation going. Calls are made to vendors, price quotes are developed, and purchase requests are typed up in Excel spreadsheets and piled on the owner’s desk for approval. The business owner rifles through the various requests, and brings in the bookkeeper to help work through the decision of which items to authorize based on current cash availability. Because the availability of working capital changes frequently with billings being sent out and receipts being deposited daily, the owner and the bookkeeper spend much of their time together figuring out which purchases to make and when. It is a continual and ongoing process, taking a lot of time and attention away from other important business matters.

Too often, thoughts of managing these efforts with more structure places the problem “in a box” and addresses only half of the issue – the purchase. While managing materials requirements and predicting when parts or supplies will be needed is one side of the problem, factoring those purchasing plans in to the cash requirements of the business, and having a meaningful and effective way to monitor current cash, expected receipts and purchase requirements together is essential. This ability requires that the payments management solution also address receivables in order to have the cash flow and availability information necessary.

Expense and purchase management processes generally involve three main steps: planning, tracking, and reporting. As the process involves planning, it suggests a proactive rather than a reactive approach to cash management and purchasing activities. By bringing together all of the critical data which describes “inflows and outflows”, the business owner has the information necessary to not only forecast (plan) cash requirements but to also understand the availability of working capital. Knowing ahead of time that traditionally slow paying contracts aren’t factored into immediately available cash is important, and being able to make adjustments to purchase schedules based on availability of funds is essential.

Expense reporting may not be a big part of the business, but managing cash flow and purchasing goods and services is, even in the smallest of enterprises. Make sure the business has the tools in place to help bring an additional level of intelligence to purchasing activities, and that those tools deliver the benefits of a structured (but not time-consuming) purchasing approvals and proactive cash flow management process.

For accounting and finance professionals, this is a highly valuable area of service you could be providing to your clients – helping to implement the tools and solutions which not only allow you to work in more depth with client businesses, but which deliver immediate visible and actionable benefit to the client. This is just one of the ways accounting professionals can work closer with their clients, and the benefit is delivered each and every day (not just at tax time).

Make Sense?

Is your purchasing and expense approvals process holding up your business? Read more…
Read more about using the cloud to extend “connectedness” beyond traditional boundaries
Read more about how there’s no fear and loathing in accounting
Read more about the pressure on accountants to deliver more value and intelligence to their clients
Read more about Data Warriors: accounting in the cloud

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

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

Share this:

Accounting professionals are being challenged as the perceived value of the services they traditionally provide to business owners is diminishing.

With a small business, cash is king, and managing the cash flow is often the greatest daily concern of the small business owner.

Accounting professionals must recognize that highly useful and valuable tools exist now to help small business owners understand their businesses better, and which provide a level of education and guidance to help them make the various decisions they may face.

Share this:

Managing The Purchasing Process: More than just expenses

Share this: