Collections Performance Measurement

For Entrepreneurs, collection of accounts receivable balances on a timely basis is an important contributor to cash flow. The faster the collections, the better the cash flow.

How do you measure your collection process? How do you know that it is working well and your company is continuously improving its collection efforts?

One potential metric is Days Sales Outstanding (DSO). If you calculate your monthly DSO and monitor the trend, you will see the efficacy of your collections efforts.

For more information, please contact Patel CFO Services at www.patelCFOservices.com

Ravi Patel

www.patelCFOservices.com

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Business Ethics

A few weeks ago I moderated a few sessions at Junior Achievement dealing with “Ethics in the Workplace.” The goal of these sessions was to expose 11th graders to the issue of business ethics as they graduate from high school and enter the workplace. During the sessions, we gave examples of unethical practices in business situations to enlighten the participants..

How many Entrepreneurs have a policy on Ethics in their companies? How do you deal with unethical situations?

Entrepreneurs should not only have a formal policy on business ethics and code of conduct at their company, but should also have periodic reinforcement of the ethics philosophy of the company. Leadership by example requires the management team to rigorously follow such policies.

Ravi Patel

www.patelCFOservices.com

AIG Bonus Issue – Lessons for Entrepreneurs

It is amusing to see the false outrage and hypocrisy from Congress and the President related to the AIG bonus issue. The focus is on bonuses of initially $165 million and maybe now to slightly over $200 million.  How ironic! The Congress and the President are spending billions, approaching trillions, of dollars – some for “pork-laden” projects.  Most of the spending that is supposed to be for stimulating or helping the economy is “iffy” at best. There does not seem to be any outrage over that! Instead, Congress is overreacting and passing retroactive tax increases to get the bonuses back!

Even for billions of dollars loaned to AIG there is no oversight as to where the money is being spent, rather the emphasis is on a relatively minuscule amount of bonuses; all for political grandstanding. Also, how about monitoring all the other billions of dollars that have been loaned to banks and financial institutions?

Entrepreneurs can learn from this fiasco.

  • Never overreact to situations where there is employee dissatisfaction or customer or vendor complaints. Analyze the situation calmly before taking proper corrective action, instead of taking hurried actions due to external pressure.
  • If you do have a serious situation, do not create a smokescreen and divert attention away from it to hide the real problem.
  • Do not focus on the small or minor issues in managing your companies; focus on the larger or macro issues for greater impact. Let your management team manage the details.
  • If you need to make a statement or message regarding any irregularities in your company, do it for significant issues not trivial ones. If you mostly emphasize minor matters, your employees or going to be dismissive of such gestures.
  • Be sensitive to the message that you send with your actions. If you are being austere or are having cost reduction programs, do not have bonuses or spending that is contrary to the current environment in your company. Having incentives is not inappropriate, but make sure that they are related to the right objectives and are perceived positively.
  • Of course, when you are borrowing a lot of money, do not spend it on bonuses or management extravagance. If contractual obligations are involved, renegotiate those for the long-term financial health of the company and goodwill for all stakeholders.

While the above sound obvious, sometimes we tend to lose sight of reality and the negative perceptions that are created.

Ravi Patel

www.patelCFOservices.com

How do you use your LOC?

Most businesses should consider having a Line of Credit (LOC) to manage timing fluctuations in their cash inflows and outflows.

How a business manages the LOC is critical for financial prudence and long-term financial success.

If the LOC is used for working capital needs and short-term emergencies, it is perfectly acceptable. However, use of the LOC for longer-term investments or funding continuing losses might lead to a financial disaster.

Be prudent and wise in the use of your LOC.

For more information, please contact us at Patel CFO Services at www.patelCFOservices.com

Ravi Patel

www.patelCFOservices.com

Innovator versus Executive Entrepreneurs

Entrepreneurs generally start businesses as they have ideas and expertise that they want to commericalize for profit. Some of these ideas are innovative and involve technological or biological advances of a break-through nature. Others might be related to new or proprietary ways of doing things.

Some Entrepreneurs might be innovators and they have a life long pursuit of developing something new all the time. However, they might not have the executive capabilities to successfully implement the business strategy to commercialize their ideas.

Entrepreneurs who are innovators at heart might want to bring in CEOs to help them achieve the business potential of their ideas. Clinging to the CEO role, while totally focusing on being an innovator, might leave the company short of meeting its revenue and profit potential.

Ravi Patel

www.patelCFOservices.com

Entrepreneur Hiring Expectations

As Entrepreneurs grow their organizations, they have to make key hiring decisions to fill critical management roles in their companies.

Sometimes an Entrepreneur has expectations of potential candidates that do not pan out. This is especially true if the Entrepreneur has performed the responsibilities of that particular position. In other cases, the candidate is hired and the Entrepreneur evaluates the hired employee’s performance against a standard that the Entrepreneur had once achieved.

While such expectations are acceptable for a high performance company, Entrepreneurs should be aware of the potential disappointment if their expectations are not met.

Instead of being disappointed when their initial high expectations are not met, I suggest that Entreprenuers hire the candidates that have the highest potential of meeting their needs and then working with them by providing training and mentoring to allow the hired employees to succeed.

That is after all “Doing the Right Thing!”

Ravi Patel

www.patelCFOservices.com

Focused Theme Programs

Many companies that I worked with had signature programs that permeated throughout the organizations. Such focused themes were TQM (Total Quality Management), Continuous Improvement, “Do it Right the First Time,” “Save a Dollar Today,” or even green programs such as “Recycle or Reuse.”

These programs reflect a focused theme of the CEO and could be for one year or ongoing. It galvanizes the company towards a single goal that all employees could be motivated by and participate in.

Entrepreneurs should develop such focused theme programs for their companies to achieve cohesion around a common, easily understood purpose that puts their personal mark on the organizations.

For more info, please contact Patel CFO Services at www.patelCFOservices.com

Ravi Patel

www.patelCFOservices.com

Entrepreneur Leadership by Example

We often hear the phrase “leadership by example,” but that is no where more true than for Entrepreneurs as they build their companies.

Generally when the company is just starting,  Entreprenurs show great leadership when they roll up their sleeves and are willing to put in the effort that they demand of their employees. As companies grow Entrepreneurs sometimes say one thing and do something else.

Entrepreneurs need to ask themselves certain type of questions as they become successful:

  • Am I still putting the effort that I am asking of my employees?
  • Do I watch what I spend while I announce cost reduction programs?
  • What am I am doing to improve the company when I am preaching on continuous improvement in my organization?
  • Am I cutting corners while I demand quality from my employees?
  • Do I exhibit what it takes to provide superior customer service when demanding the same from employees?

Answers to these types of questions will determine if you are providing leadership by example. If you are not, you should!

Ravi Patel

www.patelCFOservices.com

Tax Preparation versus Planning

Entrepreneurs must be working with their tax accountants to prepare the returns for the previous year. If the Accounting records are in good shape, this should be a relatively easy exercise. Effort in preparing and filing tax returns should not be of prime focus for Entrepreneurs.

Instead, Entrepreneurs should be spending more time and effort in planning for taxes.

The current government administration is keen on reducing the huge deficits that they want to create by planning to hike taxes on rich Americans. Successful Entrepreneurs are definitely in that category.

Entrepreneurs should spend time with their tax accountants planning a strategy for minimizing tax obligations. While successful Entrepreneurs can not avoid taxes, planning for the year might result in an optimal tax situation.

It is wise to pay heed to taxes considering that successful Entrepreneurs are potential targets.

Ravi Patel

www.patelCFOservices.com