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How to Double Your Retail Sales: Lessons from the Gift Shop Poopsie’s

How to Double Your Retail Sales: Lessons from the Gift Shop Poopsie’s

Meet Alana Turner, the co-owner of Poopsie’s, a quirky gift shop in Galena, IL. When Alana and her co-owner took over the business in 2010, they had about 5 employees.

But Poopsie’s has grown tremendously since then. Not only have they more than doubled their annual sales, but they also have an average of 15-20 employees.

In this article, we explore how Alana and her team achieved their impressive results. Specifically, you’ll learn:

  • How investing in staff training helps their store be more successful
  • The task delegation technique they use to improve staff productivity
  • Alana’s top tips for creating shoppable displays that drive sales

Let’s get started!

Investing in additional — and better-trained — employees

We’ve said it before, and we’ll say it again: Any retailer that wants to stay competitive needs to invest in their staff. Remember, your employees are the people who are doing the selling, so if you’re looking to increase sales, start by investing in them.

Alana and the Poopsie’s team understand this, and according to her, the investments they’ve made in their workforce have significantly contributed to their success.

“Our success is for sure partly because of our well-trained staff,” she shares. “We invest a great amount of time in training our staff to be the best personal shoppers (known as ‘Poopettes’) they can be. They are one of the main reasons customers travel hours to revisit us time and time again.”

Alana says that they use “multiple layers of training” for their staff, even before their first official day. The training is also continuous, so employees are always going through some form of coaching, no matter how long they’ve been part of the company.

As for how the training is implemented, Alana tells us that each Poopette is trained by management or a subject matter expert. Their education begins with written information on Poopsie’s policies and procedures, then they move on to educational videos on selling. From there, Poopettes go through hands-on training on the sales floor, where they shadow a manager or a top-selling Poopette for a day or two.

According to Alana, they also layer on new videos and additional written information about their products and services. Managers are trained on new and hot products every day and all year round.

The task-delegation technique that improved employee efficiency

Continuing on the topic of staffing, Alana says they were able to boost the productivity of their staff by having them specialize in particular tasks.

We “decided to move away from everyone being trained to do all tasks and move towards having certain staff trained to specialize in areas,” says Alana. “For example, instead of all staff helping with receiving every day in between customers, we now have one person that does 80% of our receiving for us.”

She continues, “This has helped cut down on errors and inefficiencies in receiving, which as we all know equals lost profits, and it has allowed the sales staff to focus more on selling to customers.”

“Some other areas we have hired specifically for are: cleaning, restocking, and displays, as they were all areas consuming a lot of our sales staff’s time. We still have these Poopettes trained to sell so they can service customers if needed, but when they are in the building their main focus is their task and the sales staff covers 90% of the customers.”

Why did they decide to do it? According to Alana, they started to catch employees doing other tasks when they should have been serving the customers near them.

“It’s not that they weren’t working hard; they just weren’t focused on the customer enough for us. So we started delegating certain tasks specifically to staff to tackle and it just took off from there,” she shares.

“We still, of course, keep all staff busy between times of customers, but we are more mindful about how involved the tasks we give out are. And all the big ones are assigned to staff who are not in charge of selling that day.”

How to buy and showcase merchandise

Alana also attributed their growth to the way that they’re using their space.“Our constant focus is on how we can utilize every usable square foot of our space to best fit the needs of our customers,” she says.

Doing that involves:

Buying products their customers can fall in love with

“We put a lot of energy and effort into providing above and beyond customer service to our customers, providing unique products and services that they won’t find at Target and other familiar stores, and also in presenting our products in ways that make customers think about the items differently. 

She continues, “a lot of the buying really does just come from within or the gut as they say. I’m just blessed that I’m fairly good at it. Though I do have to spend a lot of time looking through catalogs, emails, buying shows and etc to continue to find new, trendy and exciting products for our customers.”

Presenting those products in clean and shoppable displays

According to Alana, having “fresh, new, and clean” displays are critical. “Another important tip with displays is that the best selling zone is from the waist to the forehead, so you always want to be thinking through how you are utilizing that space in each and every display. Otherwise, you are letting dollars walk out the door!”

Alana says that displays that “are more boutique in style” work best for Poopsies. She says that in most cases, their sales tend to slow when they starting “massing out” their merchandise or packing items into tight displays.

The Poopsie’s team also knows which areas turn dollars the quickest, and they see to it that those displays are always in top condition.

The final piece of advice

When asked about any words of wisdom she’d like to impart, Alana focused on having the courage to try new things and take a little risk. “With all of the technology and instant communication surrounding us today, things change faster than they ever did before. So if you can’t try new things and be willing to change and change often, you will have a hard time thriving in the current retail landscape. You can probably survive but you won’t thrive.”

When to engage a debt collection agency

When to engage a debt collection agency

Most late payers don’t want to be bad payers

After sending thousands of emails and making thousands of phone calls, it probably won’t come as a surprise that the most common reason for late payment is your customer lacks the cash to pay right now. Offer them a workable payment plan and most times they’ll be back in your good books within a few weeks.

When does a good payer become a bad payer?

This is where a good accounts receivables specialist is worth every penny. Not only are they experts at coaxing your troublesome payers to lift their game, they also have excellent ‘bullshit detectors’ to know when your customer is acting in bad faith.

We typically know by the second or third phone call whether a customer genuinely wants to pay. That’s the benefit of having thousands collection calls under our belt – it gets much easier to spot the bad eggs and start a formal debt collection process earlier.

When should I use debt collection?

Statistically, the best time to send a customer to debt collection is before their account reaches 90 days past due.

Keep in mind if you gave them 30 day terms in the beginning, then they’ve already had use of your money for 120 days! So 90 days is ample time to follow a robust credit control process, leaving you with little doubt that debt collection is the appropriate next step.

Which debts should I send to debt collection?

Here are the key considerations for sending a debt to debt collection:

  1. Is the debt owing from the customer more than $500? Most debt collection agencies won’t consider collecting debts under this threshold.
  2. Is the debt disputed? Debt collection agencies cannot lodge a default against disputed debts, leaving legal action or the Small Claims Court your only remedies.
  3. Have you followed a good process? Have you sent email reminders and made some phone calls to try and resolve any issues and confirm the debt is not disputed? Is the customer aware that you’re taking further action that might affect their credit rating and cost them thousands in legal and collection fees?
  4. Can you on-charge collection and legal costs to your customer? Your terms of business should include a clause that allows you to pass on all collection and legal costs to your customer. If you don’t have this option then you might think twice about using a debt collection agency if you have to foot the bill.

Technology can help

Cloud-based receivables management software like Debtor Daddy makes it easy for any business to follow a great process and outsource parts of accounts receivables when the organisation does not have the expertise, time or resources to handle internally.

Try Collect today

Dream big: Making it easier to reach your financial goals

Dream big: Making it easier to reach your financial goals

Over 2,000 years ago, Aristotle said “ First, have a definite, clear and practical ideal; a goal, an objective. Second, have the necessary means to achieve your ends: wisdom, money, materials and methods. Third, adjust all your means to that end.”

We all have dreams, goals, objectives but more often than not, we struggle with the means and adjusting those means – particularly when one of those means is money.

Without a plan in place to adjust your means, it’s all too easy to see your money eaten up by small expenses, nights out and the odd treat. On their own these may not seem like big purchases at the time, but they can quickly add up to make a dent in your ability to save.

Over the next three blog posts, we’ll give you some tips and tricks to help you get there starting with the motivation for saving. Here are three tips on how to set your financial goal:

Make your goal big

If you’re going to dream, why not dream big? We’re not going to lie, there are times when saving is hard so make sure it’s something that you really want to save for. We’ve all heard of S.M.A.R.T goals (Specific, Measurable, Attainable, Relevant and Timely) but don’t forget to include a little bit of magic to make it worth it.

Make your goal personal

When it comes to financial goals, having a lump sum in the bank is great but giving yourself a reason makes it real. When you know what you’re savings for, it can help reinforce your willpower and motivation.

Change your focus from just saving a number each week to “getting debt free” or “holiday to Bali – travelling business class”. The more real and important you can make it, the better.

Write your goal down

According to a Dominican University of California study, people who wrote their goals down and did weekly updates were more likely to achieve them then those who kept their goals to themselves.

Writing your goals down makes them real and is the easiest thing you can do to get yourself started. Not into writing? No problem. Why not make a dream board to visualise what you want to achieve? Whether you chose words or pictures, stating a goal and visualising the end result can be a huge motivator.

Use simple tools to bring your goals to life – whether it’s your dream house, the trip of a lifetime or the latest iPhone – will help set you up with the motivation you need to start saving. In the next post, we’ll show you to start to form up your budget to get you there.

How to Refinance Your Business Debt

How to Refinance Your Business Debt

Many firms will decide to take on debt at some point, at different stages of growth and for several reasons.

What some business owners may not know is that a business loan they got in the past could be comparatively expensive in the present. This is one of the reasons you might want to consider refinancing business debt before it starts taking a toll on your cash flow.

Consolidating debts — what does it mean?

Refinancing business debt simply means combining multiple business debts into one. It could also mean replacing one loan with another. The fundamental idea behind refinancing is to swap expensive debt for more affordable debt in order to give your working capital a little boost.

Of course, applying for more debt raises concerns about affordability. But, the key thing is to find a facility with suitable terms and rates for your situation. Let’s take a look at three common reasons for refinancing business debt.

Why refinance debt?

There are three main reasons why you might consider debt consolidation: simplicity, savings, and safety.

With multiple loans in place, it’s hard to keep track of your monthly repayments. If you’re already using a tool like Float, things will be a lot easier, but you’ll still have to deal with several different lenders.

Simplicity

Perhaps, over time, your business has accumulated a number of different loans for different purposes. What if you could pay off all those loans with only one new loan to simplify your debt management?

Refinancing could give you one single monthly payment to worry about, and only one lender to deal with. With easier debt management, you can put your mind at ease and focus on what actually matters: running your business.

Savings

The most obvious reason to refinance is to save money. By refinancing debt, you may be able to obtain better interest rates or smaller monthly repayments – both of which will help you to boost your cash flow. Lower interest rates help you pay off the debt faster, whereas spreading the same amount over a longer term will reduce the individual monthly repayments.

It’s worth reviewing your debts regularly. Your business may be in a much better position now than when you first took out your loan. If so, you may be able to approach a wider range of lenders and access a lower interest rate than before.

Safety

The third reason is safety. Refinancing can help you improve your cash flow and have more working capital that’s not being used for expensive finance. This way you can slowly bring your business into a safer position.

Sometimes, businesses struggle and cash flow gets squeezed. This can feel even tougher when you’re trying to stay on top of a monthly payment. Defaulting on a business debt can lead to serious consequences like CCJs (County Court Judgments) or insolvency, and refinancing can help make things a bit more stable if you’re going through a tough trading period.

Case study: saving with refinancing

One of our customers, a nightclub in London, got into significant debt because of a tricky situation. With under two years of trading history and urgent refurbishment costs, the nightclub owner had to combine loans from different short-term lenders, which led to high repayments every month.

When the business had passed two years of trading history, more options opened up from a wider range of lenders, and the nightclub approached Funding Options for refinancing. We found them a refinance option that replaced the most expensive loans and saved them an incredible £14,000 per month in repayments. This way the nightclub was able to repay the refurb costs at a more manageable level.

Circumstances change

It’s important to remember that what may have been a good fit for your business before, is not necessarily a good fit for your business now. 

Using cash flow forecasting apps like Float can help you keep track of your business expenses. If you just started enjoying the benefits of Float, and still need to cope with old business debt, try adding different loan amounts and rates into your app to see how it’ll affect your future cash flow. This way you can prevent cash flow gaps and strengthen your trading position. If you’re not sure how to refinance your business debt, Funding Options can help you find the right fit for your situation.

Tricks used in Scams

Tricks used in Scams

Scammers use clever tricks to reel you in and get you to reply to their email or not hang up the phone. Most scams seem like genuine offers but they are carefully designed to trick you into giving away your money or your personal details.

How scammers trick you

Psychological tricks to make you feel obligated. A common trick is to use persuasive psychological tactics to make you part with your money. Some may offer a free gift or assistance to make you feel obliged to return the favour. Remember, you do not owe them anything so don’t be pressured into giving them something in return.

It’s hard to say no to friends

Scammers know that if they develop a friendly relationship with you, you will be more likely to listen to them and go along with whatever they suggest. Some join groups of people in churches or community groups and gain their trust. While the investment or offer appears to be going well, they can recruit new victims on the testimony of other people who are already in the scheme.

Scammers may threaten you

You may be contacted by someone pretending to be from a well-known organisation or government department who tries to scare you into parting with your personal information or money. They may threaten you with a fine, or say they will disconnect your internet, take you to court, arrest or even deport you.

Don’t be pressured by a threatening caller. Instead, just hang up and check whether their story is real by contacting the organisation using their contact details through an independent source, like a phone book or online search. Don’t use the contact details the caller gives you, or that they include in their email.

Scammers claim to be professionals

Scammers will say they are approved or associated with another reputable organisation or government agency to convince you of their legitimacy. They hope that, because you have heard of these organisations, you will trust them. They might also say they are a professional broker, portfolio manager or investment dealer. Even if they sound professional and have slick brochures and documents to send you, they are working to a carefully crafted script.

Warning: Scammers impersonating ASIC

ASIC has warned it’s Registry customers to be wary of scam emails that contain attachments or links to fake invoices. Read the media release. 

Persistent phone calls, text messages or emails

Scammers can call you endlessly or try to keep you on the phone for a long time. They present you with promises of wealth or opportunities lost if you don’t take up the offer. They will not take no for an answer and might ask you about your worries to reassure you. As long as they can keep you talking, you haven’t said no.

Don’t respond to texts or emails that ask you to click on a link, download an attachment or ask you to provide personal information (like account numbers or personal details). Attachments and links may contain a virus and infect your computer with malware.

Incredible offers of easy money

Scammers are clever at offering you incredible deals that promise great returns with very little or no risk. But if it seems too good to be true, it often is.

Fake websites

Many scammers create professional-looking websites to prove to you that their product is real and worth the money they want you to pay. They can also send links to these websites in fraudulent emails which look like they’re from your bank or another business you may deal with asking you to give up personal information.

Fake social media profiles

Scammers will create fake profiles using information they have stolen or made up. They may send you a friend request or message, then ask for money to help them with trouble they are having. They may know personal details of your friends if they have hacked their accounts and, if you accept their friend request, they could gain access to your personal information and steal your identity.

What scammers want you to do

Respond to them

Scammers will often approach a large number of people through email, phone calls, and text messages in the hope of receiving a response. A response could be as simple as answering the phone, responding to their text or clicking on an email link they send you. It’s important to be cautious of who calls, texts or emails you. It will often be someone you don’t know, but it could also be someone pretending to be a person whose name you recognise. 

Beware of unusual payment methods

Scammers may ask you to pay a fine or bill by unusual methods like gift or store cards, iTunes cards, wire transfers or bitcoin.

No government agency or trusted business will ever ask you to pay by these methods.

Commit to something early 

Scammers will get you to commit to something early in the discussion so they can use it to get you to agree to something else later. They do this to make you feel uneasy and defend your original actions. You need to tell them that just because you agreed to something earlier doesn’t mean you can’t change your mind about it later. 

Make a fast decision

Scammers often use the terms ‘last chance’ or ‘limited offer’ to make you act fast. They don’t want to give you any time to check if their offer is real before you commit to it. 

If you’re being pressured to act fast, don’t. Being rushed into a decision is one of the biggest indicators that you’re being scammed. 

How to Avoid Cash Flow Problems

How to Avoid Cash Flow Problems

Cash flow can be hard to get to grips with for any business; whether you’re growing, just starting out, or established. In fact, 82% of businesses become insolvent because of bad cash flow.

How to solve cash flow problems

Where there’s a problem, there’s a solution. Cash flow problems are no exception.

We’ve compiled a list of quick and easy ways to solve your cash flow issues.

Get paid on time

A large proportion of cash flow issues can be solved by getting paid on time. Late payments are the reason that 1 in 5 businesses suffer from cash flow issues.

Chasing debtors and tracking invoices can be time-consuming but there are apps out there that can automate the process for you, saving you time and money.

  • Shorten your payment terms

Research carried out by the Wow Company found that shortening payment terms meant an average decrease in the time it takes to get paid.

On average, reducing your payment terms to 7 days gets you paid within 17. Whilst, payment terms of 30 days get you paid in 35.

  • Split your bills

For most small businesses, paying off a large lump sum at the end of the month can wreak havoc upon their financial systems.

By requiring your clients to pay you in increments – maybe half upfront, and half after the delivery of the service – you will help with their cash flow and encourage faster payment.

  • Request deposits

Additionally, requiring a deposit can often go some way to improving your cash flow.

If you receive a deposit before providing your product or service you will always have some initial working capital to get the job done.

Manage which bills you pay

A better understanding of time-sensitive bills can allow you to make strategic decisions as to which bills you pay in which order. If you know that a certain bill needs to be paid before you get charged interest or late fees then it makes sense to pay it off early.

Equally, there’s less pressure to pay off a bill that isn’t time-dependent. Understanding which bills to pay and when can be a step towards solving your cash flow problems.

Apply for finance

The biggest mistake that small businesses can make is to apply for finance only when they need it. Though this seems logical, it’s actually more sensible to apply for finance before you need it.

Understanding what your loan options are and how much you need means that you can have money in place to cover a cash gap before it happens.

And applying for loans early can mean that you get the best rates, from the best provider.

How to predict cash flow problems

Knowing what to do to help prevent cash flow problems is one thing, but predicting them is quite another.

cash flow problems

Because crystal balls aren’t all that available (or reliable) here are some other ways to keep an eye on the future of your finances:

Cloud accounting software

Cloud accounting is no longer the new kid on the block. In fact, recent research into small businesses by Xero found that between March of 2017 and March of 2018 there had been a 46.8% increase in the adoption of cloud accounting software.

Time-saving and cost-effective, cloud software keeps all of your books in one place. And having access to all of your most important documents anytime, anywhere, is invaluable to keeping on top of your finances. You can read more about the kickass benefits of the cloud here.

Create a budget

Creating a budget can help you to understand the pattern of your cash. This can be done in a spreadsheet, and is most typically done in software like Excel.

Committing numbers to paper, or a computer screen, means that you’re more likely to stick to them. And sticking to your budgets is essential to maintaining a healthy cash flow.

If done habitually, your budgeting will become more accurate. And accurate budgets mean that you can begin to strategise more effectively.

Create a cash flow forecast

In order to understand where cash flow problems arise you need a roadmap for your cash. A cash flow forecast can provide you with exactly that.

Unlike a P&L budget, a cash flow forecast does not show you profitability. Profitable businesses can still have cash flow issues.

Traditionally, cash flow forecasts were created in spreadsheets. But now there are cloud-based software solutions that can help to create your forecast and keep it up to date. This can save you time and energy that you can use to focus on your business.

On average, Float can save you eight hours a month in time that would be otherwise spent manually inputting data into spreadsheets. Float populates your forecast with bills and invoices pulled through from your accounting software. Filling up your cash budgets with actuals allows you to see the reality of your cash.

Insight into your current and future cash position can allow you to better plan for impending cash flow problems.

Best and Worst Businesses for Cash Flow

Best and Worst Businesses for Cash Flow

No matter how inventive or simple your business model is, you can still have problems with cash flow. Here is a rundown of the best and worst businesses for cash flow.

The Best…

Retainer Businesses

A business that keeps its clients on retainer will have relatively stable cash flow in comparison to project-based businesses. Retainer contracts are often mutually beneficial to businesses and their clients. Whilst a business gains consistent work and revenue, a client has the certainty of investment when it comes to their own cash flow.

A retainer contract means peace of mind when it comes to working capital to cover your financial obligations. It also means that your cash flow is more manageable.

Most service businesses tend to work with a mixture of retained clients and with project work (more on that later). But it’s safe to say that keeping your clients on retainer is the best for cash flow.

SaaS companies

Companies that offer Software as a Service are some of the largest and most globally recognisable businesses and appear most frequently on lists such as the Fortune 500, and the Forbes Top 25. But bear in mind that these lists are measured on profitability, rather than cash flow.

With the founders of certain tech companies the subject of Oscar-nominated movies it’s fair to say the tech business is synonymous with success.

With internet-based delivery models, companies that deliver Software as a Service tend to incur less expenditure on raw materials than other business sectors. Fewer overheads, a low barrier to entry, and more opportunities to grow mean that tech companies tend to have good cash flow.

best cash flow businesses

Okay for Cash Flow:

Agencies

An agency is a business that provides a service on behalf of another business, or person. Whether you outsource support or materials, chances are your company can function with fewer overheads.

Fewer overheads mean spending less money upfront – which is good for cash flow – but agencies are often project-based. An intermittent inflow of cash may mean that your cash flow contains more troughs and peaks than a typical business.

Creative agencies are having to pay more attention to payment infrastructure to help with their cash flow. Reducing payment terms, turning to direct debit, and requesting half payment upfront in order to get paid faster are all ways in which agencies are getting paid faster.

Additionally, investment in a functional, and scalable tech stack provides cash flow solutions for agencies. Integrating multiple apps, networking on social media, and running a business remotely, can help with the lumpy cash flow that comes with project work.

Franchises

Franchise businesses have an advantage over other businesses in that they, particularly if they’re an offshoot of a recognised brand, already have a reputation. Owning a franchise can mean combining your business acumen with the (hopefully) positive reputation of whatever company you’ve taken on.

A franchisor’s brand is its most valuable asset. But with a high initial investment, it’s still a risk to get involved in a franchise. However, an entrepreneur opening a new franchise inherits an established business model which can mean a head start in terms of the business working.

And the worst…

best cash flow businesses

Restaurant industry

Your loyal customer base might think that your gastronomic experiments pay for themselves but it’s more likely that deliciousness comes at a price. It turns out that you can buy taste after all.

In fact, the number of restaurants that went bust in 2017 increased by a fifth. With nearly 1,000 insolvencies in 2017, compared to 825 in 2016, the plight of the UK restaurant business is being blamed on expensive overheads and increasing market competition. If the naked chef can’t stand the heat then the restaurant business is certainly not cushty for cash flow.

Unlike the flash-in-the-pan trends of quinoa or kale, delivery services seem to be causing a bit of a stir amongst restaurateurs. The restaurant business seems plagued with hurdles to overcome in order to run, and maintain, a healthy cash flow.

Seasonal Businesses

Seasonal business cash inflows and outgoings fluctuate throughout the year. Inconsistent incomings are the main reason that seasonal businesses are some of the worst for cash flow.

There are many reasons why your business may be seasonal. You may sell Christmas trees, gazebos, even swimming pools. Whatever the reason is, with temperamental cash flow you’ll need to factor that into your business management strategy.

Cash flow, as we discovered in a recent case study, needs to be monitored closely in order to survive the deluges and droughts that come with seasonal business. With inconsistent takings, it is essential for a seasonal business to keep track of its cash.

Property Developers

Property developers need to make a large initial investment and there can be a lengthy wait to see the returns. However, after the initial payout and the following hard work you’re left with a large sum of money to start the cycle all over again.

By definition, the property business is capital-dependent and cash flow poor, particularly for business owners that have no additional income. This is why, until they’re flush with cash, property developers tend to work two jobs in order to keep their development job afloat.

Cash flow for property developers is a game of cat and mouse. With times of cash droughts and alternate times of capital saturation, cash flow can be hard to keep on track.

In conclusion…

Ultimately, any business can fail. But monitoring your cash flow can be a definitive means of preventing business insolvency. With intuitive and visual cash flow forecasting provided by Float, you can make money troubles a thing of the past.

Sign up for a free trial with Float today!

Or, to find out how Float can help your business become a cash flow champion, sign up for one of our free webinars!

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5 Essential Business Costs Not to Skimp On

5 Essential Business Costs Not to Skimp On

If you are a startup owner or entrepreneur, it is no secret that you may be working within a tight budget. The ability to make pennies stretch is an important survival skill.

However, some of the most common money-saving strategies could end up being more detrimental to your business in the long run. What may save you money today could potentially cost you more tomorrow. Below we have collated five areas of your budget where cutting these business costs could be the end of your new business.

Hiring Talent

It is important to look for employees with different skills to yours that complement your own, while driving the business forward. Although it may be tempting to pay the minimum wage in order to save business costs, if you have great talent you may want to consider paying them fairly. If they are indeed a valuable asset you will compensate them accordingly. Not only does this save you in employee turnover, but it also saves you money and time later on.

Marketing

It does not matter how great your business offerings are if potential customers do not know about them. Successful businesses have strong marketing plans that identify its target markets and outlines strategies for reaching them. And while startups may be inclined to decrease their marketing budgets to save cash, the reality is that insufficient marketing will hinder your business growth.

Startups should really be aiming to increase their marketing communications with their customers. Seeking out new customers and encouraging existing ones to buy from you again will translate to a healthier balance sheet later.

Technology

Having the right frameworks in place earlier on can help in efficiency and productivity in the future. If you want to be big, think big. By having technology now that can streamline processes, you can build the solid foundation your business needs to grow steadily. Take for example inventory management systems, it may be more affordable at the beginning to simply have spreadsheets and enter things in manually, however this scope is limited and does not take into account the growing structure of your business. If you invest now, in streamlining business processes, you can save monumental amounts in the way of time and money.

Another vital component of your business is your website. You should never skimp out here. First impressions matter and due to the way in which we search for new offerings primarily online, it is imperative to have a professional looking website that quickly conveys the right message to potential customers.

Accounting

Accounting may feel like another huge unnecessary expense when you are getting your business started. However, a great accountant can actually save you money by making sensible financial decisions, finding tax breaks and filing your tax returns correctly.

Insurance

One area where you definitely do not want to skimp on is business insurance. While it may be rare that an accident or disaster can hit a business, it absolutely does happen. Small business owners should invest in business insurance. By paying a monthly premium, startup businesses can protect their companies in the events of a robbery, fire, lawsuits and more. Additionally, insurance covers product and customer liabilities, as well as the actions of your employees.

Entrepreneurs and startup owners are constantly trying to ascertain what business costs are necessary and which ones can be cut from the budget. We have discussed five areas where not to skimp. By having these areas in mind, you can increase your startup’s chances of success.

5 Ways to reduce debtor days

5 Ways to reduce debtor days

Or, in other words, when a customer makes a purchase from you, they will have a set amount of time to pay you. All businesses have debtor days, and all at varying time frames. If you allow too few days for people to pay, then you may find that it becomes a deterrent, where people decide not to buy from you. However, then there are some people who decide to buy form you knowing the cannot pay and can end up not paying your business at all.

A business’ debtor days can make a big impact on your business and how employees and other bills are paid. Even if you are a small or medium-sized enterprises (SME) owner, it is imperative that you understand how debtor days affect your daily operations and what you can do to shorten those days.

Calculating Debtor Days

The right amount of debtor days will depend on your business and your cash flow. Most SMEs use a formula to calculate how many debtor days they should allow for payments. The most common formula is: (Trade receivables / Annual credit sales) x 365

For example, if a business has $55,000 trade receivables and $455,000 annual credit sales, we get 44.12, So your consumers would have 44 days to pay their invoices.

Reducing Your Debtor Days

Be Clear on Payment Terms
Be clear about payment terms. The receipts and invoices you give to consumers are incredibly important and valuable. They should break down the costs and make it clear when payments are due. An invoice can clear up any confusion among consumers so make them as clear and concise as possible.

Offer Incentives
Many businesses will offer small discounts for those who pay early and up front. Getting the money all at once and in a hurry is often worth the slight discount you will have to afford your customer, and it can be a great motivator for getting that invoice paid quickly.

Charge Late Penalties
Charging an additional late fee is becoming increasingly the norm in business. Having a penalty for being late can also be a strong motivator to pay invoices on time. Outline your late payment charge on your invoice so your customers are aware of it.

Track Invoices
Your accounts department needs to have a sound method of tracking invoices, detailing which ones are still outstanding, paid in instalments and not paid at all. They will also be in charge of administering early payment discounts as well as late fees, so it is imperative to have a sound system in place.

Follow-up System
Create a follow-up routine. Even some of the promptest customers forget payments from time to time, so introduce a timely follow-up routine that reminds customers when payment due dates are coming up. Send out reminders at different periods, depending on how long your debtor days are.

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Financial Mistakes To Avoid In Your First Business

Financial Mistakes To Avoid In Your First Business

After spending months thinking about it, you finally decided to quit your 9-5 job and start your very first business. You think that this will be a win-win situation for you because you get to do what you love and be your own boss.

After spending months thinking about it, you finally decided to quit your 9-5 job and start your very first business. You think that this will be a win-win situation for you because you get to do what you love and be your own boss. That enthusiasm is a great start, but do you know how to take care of your finances? How you manage your finances can either make or break your business in the long run.

One of the reasons why you’re starting your first business is because you want to earn a profit. This is your very first business, and you want to be very careful with how you spend your money. Aside from keeping track of your expenses in the business, you should also take note of some financial mistakes you should avoid making. These will serve as your financial don’ts when running your very first business:

1. Don’t mix your personal and business finances

While it can be tempting to have one bank account for both business and personal finances, don’t do it. You’ll only end up making personal purchases with your business’ money and vice versa. You won’t know how to assess your business and personal financial health separately. You need to create this psychological line so you’ll know which expenses should be credited from what account, without affecting the other.

2. Don’t immediately make big purchases for the business

You’re excited to open your doors, and you may have been looking into office or shop space, and thinking about hiring someone to build a website for you. Yes, these can be an investment in your first business, but since you’re still testing the waters, don’t go into that direction just yet. Make use of resources available to you for less. Perhaps test your business hypothesis by running it from your home, and build a basic website using Squarespace or Wix. Slowly grow your business first before you purchase any of those big ticket items.

3. Don’t make a large personal purchase

Having a business doesn’t mean you’ll automatically be financially successful in the coming years. You’re still new in the industry, and you should expect that there will be several bumps along the way. That’s why it’s never a good idea to make large personal purchases such as a house or a car while your business is still starting. You might have the money to pay for the down payment, but how can you pay the remaining amount if your business has financial emergencies? You don’t want to be placed in a situation where you’ll have to choose between paying for your house or car over financing your business for its daily operations.

4. Save for lean times and emergencies

You might think that since your business is still new, the only thing you should worry about is getting as many customers as possible. A word of caution – being new and small in business makes you more prone to financial emergencies. You’ve started something that you’re still unsure if people will actually love. That’s a risk, and this risk entails money from you. If you don’t have sufficient savings to cover your business during these times, this might be bad news for you. While you’re busy working on your product or service, don’t forget to also think about of how you can save for financial emergencies. We’d recommend keeping at least 3 months of overheads in cash in your business bank account.

5. Set a clear budget & forecast for your business

It’s essential that when you start your own business, you have a clear budget as well as a forecast of your cash flow. A profit and loss budget is your financial plan for what you are going to sell, what it will cost, and what overheads you will need to pay, including interest. It shows how much profit or loss the business is planning to make each month. 

A cash flow forecast is a plan of when cash will move into and out of your business. You need to have a cash flow forecast as well as a P&L budget because your payment terms might mean that your company is profitable, but your bank balance is in the red. A forecast won’t tell you if you’re profitable, but you’ll have a much better understanding of what your bank balance will be and what you can afford to pay for. 

You need to plan exactly how much you should spend on your business every month, without compromising other areas. You don’t want your personal bank account to be paying for all your business renovations, right?

For more information on setting budgets, check out this article on the difference between a budget and a forecast.

6. Don’t try and do it all yourself

All of the day to day tasks associated with running your business, keeping customers happy, and managing your finances can be overwhelming, especially if you’re new to managing a business. To minimise your stress and avoid making the wrong decisions early on, hire an accountant or a bookkeeper to keep you on track. These people have years of experience in business, and their inputs will be valuable in your own business.