Don’t be that customer: the one vendors are always tracking down and negotiating late payments with. When your business is growing or struggling, on-time payment to vendors is the last thing on your mind. But on-time bill payment, accurate accounts payable tracking and vendor relationships can be just as crucial to your business’s future and bottom line as revenue and happy customers.

You are focused on generating revenue, collecting your receivables, and getting product or services out the door. Paying an overdue invoice to your bookkeeper or landlord may not seem like a priority or a big issue. If you are tight on cash, you may hold off responding to a couple of emails to wait for inbound revenue. If you don’t say anything, your vendor may not notice and you get a little extra time to fund the payment, right? Not quite. There are three big problems with this stance.

First, there is the legal issue. An account payable is a contract to pay. And on time payment is part of that contract. The contract or invoice states the time limit you have in which to pay a vendor—anywhere from due on receipt to 30 days for most small business vendors. This contract is a legally binding agreement; if you don’t pay, they can sue you.

Most vendors have a specified period of time they wait before legal action. Legal action can include sending the invoice to a collections agency, which negatively impacts your credit or a letter from their counsel requesting payment and threatening court involvement. Excellent communication and timely accounts payable management is a good way to prevent legal action.

Second, there are monetary penalties. Legal action is not the only negative outcome. Many contracts, especially utilities and rental agreements, have penalties for late payment. These penalties can add up to significant sums over time. Especially when funding it tight, it's critical to keep a clear picture of accounts payable and any late penalties.

I’ve had many clients that have received notices of overdue bills and had no idea they were behind on payments. Keeping track of what you owe and when it is due is essential. If you or your accounting staff are crunched for time, try using an automated bill entry system like Bill.com. There is nothing worse than paying late fees—not because you didn’t have the funds, but because you weren’t tracking the billing cycle accurately.

Third and most important, is vendor relationship management. If financial and legal action isn’t enough to persuade you to keep an eye on accounts payable, then let’s talk about something a little more personal: relationships.

Here is the dirty secret about your vendors; they are human, and they have businesses to run just like you. You would do anything for that client who writes sizable checks and pays Johnny-on-the-spot, wouldn’t you? Your vendors aren't any different.

You might move your Johnny-on-the-spot up in priority for deadlines and special last minute requests—quicker return to your business on your time investment, right? You might give them a larger credit line because you know they will pay on time. A good vendor will not provide poor customer service, but consistently late bills may be the difference between good customer service and the larger line of credit you need in a pinch.

Good relationships with vendors are essential. Your vendors are the key to your growth.

If you pay bills on time or explain (and apologize) when you don’t or can’t, you are far more likely to get that favor when you need it. If there isn’t a cash crunch and you are simply busy, then it is time for you to invest in better accounts payable management options. The stretch order that’s beyond your credit limit for a big event or a reduced price on a one-time large order is much more likely to be approved for a client in good standing with the accounting department. That's the hard truth.

Side Note: If you ask a vendor for a favor and notice hesitancy where you expected enthusiasm, check your day's payable record with that vendor. Late payments may be negatively impacting the relationship. Or you can ask the vendor what your record for payment is. There is a good chance they are tracking your late payments very closely.

For an assessment of your accounts payable management email blair@relieffinancialconsulting.com for a consultation.

Small businesses are incredible places to work. They offer plenty of opportunity for additional responsibilities. For those multi-taskers, for those who get bored when there isn't enough to do, there is always something you could be doing, another hat to put on or fire to put out. But be wary of the job descriptions and make sure you understand the full responsibilities of these multi-hat positions. 

For small business owners in growth mode, people placement is critical. It’s not just about finding the right person for the business's current challenges, but piecing together the right skill sets for the team as a whole. 

Small businesses are saddled with another unique challenge. Sometimes they need a COO and a financial analysis expert (CFO) but have the budget for one of the two. Since COO is the daily firefighter and executor, that’s the obvious first hire. 

When unable to hire two full time people, many business owners strive to find a two-in-one employee. COO + Marketing, or COO + Finance. Depending on the stage and complexity of your business, this can work. 

But have a bit of caution. Usually, a two-in-one employee is a bit of a myth, or if this employee is genuinely multi-talented, expensive. Often, it’s more like one and a half people in one. With one strong skill set and one less robust skill set. There are great COOs with scaling and operations expertise who can handle some bookkeeping or number tracking. There are some CFOs who can execute daily operations. 

Hiring a person with the wrong expectations for their true skill set usually ends in heartache. The employee is stressed by the tasks they are not prepared for or do not have time to complete. And the employer ends up with a mess to clean up when they finally cut the cord. Usually it is a matter of a bad skills match-up rather than a bad employee, but the results can still be extremely painful to clean up.  

It’s important when interviewing candidates to identify their stronger skill “half” and determine if you need to hire fractional support or find another team member with the skill set. Another option is to hire a less expensive person to help support the other half for the skill set. For great COOs, a part-time bookkeeper/analytical Fractional CFO combo can be a great way to make sure the daily business is executed, fires are put out, AND bills are paid on time with clean books to review at the end of each month. 

How can you tell an employee is struggling with multiple rolls? There will be early warning signs of missed deadlines and incomplete reports. Sometimes there is an easy solution, a bookkeeper or administrative assistant for a few hours a week can be a huge asset at low cost. A simple solution like this can save an otherwise good hire from a bad result. Identifying problems early can also save money later on cleanup work and late fees. 

If you, as an employee, find yourself in this situation, speak up. If you are being asked to do two jobs and one would be better served by some fractional support, suggest hiring support as a way to improve efficiency. It will probably save your job in the long run and may save the company as well. 

The conclusion for business owners is that the skill sets for two positions may not be possible in one person. But this doesn't mean your business has to forgo expertise or that certain tasks must be left undone or constantly completed late. With some careful thinking about the whole picture of skill sets your company needs, you can piece together the right team with a combination of employees. Hiring two fractional people or one full time and one fraction versus one person may seem like a lot to juggle. But think of it this way: you are diversifying your risk. If that 2-in-1 person doesn't work out or drops one of the two balls he or she is juggling, how does that affect your business?

For further tips on how a financial team should be structured and a description of roles and responsibilities for financial team members, see my post on how to structure a financial team or email me at blair@relieffinancialconsulting.com

I will admit it: I am a huge fan of machine learning and new technology. Especially in finance and accounting. More, better, and quicker information means better decisions for business owners. I'm not a first adopter of machine learning. Forms of the technology have been around for decades, but I hope to be an enthusiastic one for this next phase. Gone are the days of data entry and manual AP checks.

I know many are still using printed checks, some grumbling over the annoying processes of loading the printer with checks and announcing to the entire accounting department not to print anything until you say. It's a tried and true process. That can take hours of time. First, the checks are approved, then printed, then sent to management for signatures, then they are enveloped, addressed, stamped (heaven forbid you don't have a postage stamp) and sent. The checks arrive in the mail and are deposited at some point in the future. Between three and five business days after they are put in the mail. Sometimes checks are lost in the mail, old addresses are used, or someone “fat fingers” an address. 

The days of manual AP, and frankly the ability to “fat finger” any data entry—I believe—are, thankfully, at an end. With automated AP processing systems like Bill.com that allow you to send all invoices to a billing or AP email and have them automatically entered into your accounting system, the future is here. Once the bills are entered into these online systems, you merely approve bills for payment (I recommend a two-tier approval), then schedule payments online. Turning hours of work into minutes. Old addresses are impossible because the client sets up a profile on their end and fills in their own information. ACHpayments are an even easier option. 

Suddenly, we've moved an entire department of AP workers into one person funneling invoices to an email account via forwarding and scanning paper invoices—and to one person approving legitimate payments, scheduling payments, and sending final approval to management who can easily approve even when traveling. 

I'd love to hear what automation systems you are using for your business or what new technologies your machine learning start-up is building. Please send me an email at blair@relieffinancialconsulting.com. 

  Working capital is the thief in the night that steals the cash you thought more revenue would leave in your bank account. 

Growth is good. I don't have to convince you of this - bigger is better is a key underpinning of the US economy. More business means more cashflow, means less likely to fail, right? Not always. 

A larger business doesn't necessarily mean more cash. Wait, your telling me if I grow my business I will have LESS cash? Often this is true. Why? Where is the money going? It's fueling growth. It's not just a matter of more debt payments, cash expenditures etc. for your new facility, location or R&D, though. 

The key cash killer of most growing businesses is working capital. Working capital it allusive because it isn't a a clear cost. It isn't part of your Profit & Loss Statement and it probably isn't a KPI (metric) that you are watching. 

Working capital is the thief in the night that steals the cash you thought more revenue would leave in your bank account. 

How does this thief steal your cash? It's all about timing. 

I worked with a client recently who was at a loss for where her cash was going. "I'm growing, I have more revenue than I did last year, more customer traffic, yet I still don't have cash in the bank, where is it?" She was building her dream, but also drowning in it. 

Watching the cash in her bank account, praying for enough cash to make payroll every month. "It's in this room" I told her, looking around the beautifully appointed well stocked building. As her business had become more "successful", as revenue went up, she bought more inventory to impress and delight her customers. She had boxes of spare product in a back room. She did not ever want to run out of something a top client wanted. Customer delight was her goal and ambition. And on that front she was doing an incredible job. 

But the cost of paying for goods 15-45 days before she sold them, then waiting 15-30 days for payment from credit card companies after customer purchases was killing her business. She had to buy the product (with cash) on average 45 days before she received any cash from her customers. She was consuming all the cash she generated, plus some she was borrowing from a bank to buy more inventory.

The money she needed to start paying down debt and increase her own pay was sitting in her back room. It was sitting on her shelves insuring that her very best customers didn't have to wait to purchase any item they wanted. But was the cost of their delight too high? 

In this case I would argue yes, because the cash crunch was killing her business. More inventory, meant more time on the shelves for each item. This increased the time between when she paid her vendors and when she received cash from customers. More inventory also meant less cash, more debt. And high interest rates meant an increasing debt balance that at her current payment rate meant falling deeper into debt. 

The "working capital gap" has killed many many growth companies. The "gap" is the time between when you pay your suppliers (including debt service, inventory and even payroll) and when you receive money from your customers. If you can shorten that gap, sometimes just a little bit, you can change the cash equation and possibly even save your business.

Relief Financial can help you set up processes to improve the cashflow of your business. Please email blair@relieffinancialconsulting.com for more information. 

Growing your business is exciting. Nearly every small business owner I have spoken to says they would never go back. 

The concept of fundraising tends to dampen this enthusiasm. Many entrepreneurs would rather walk over hot coals or spend months of sleepless nights hoping they can make payroll than talk to a bank or an equity provider. The books will be dissected. Painful, nit-picky questions will be asked about controls, reporting, timing. No one has time for that! 

Why not just wait until you actually need the money to fund raise? When you won't be able to make payroll if you don't bridge the gap or you are on the verge of a big expansion, but just need a small bridge loan. Then it will be worth those hours of cleanup and questions from information hungry bankers and investors. Why not just wait? 

Because the absolute WORST time to fund raise, debt or equity, is when you need the money. I know, it's counterintuitive. But if you wait until you need the money, you are too late. 

A fund raise takes time. It can take three to twelve months to raise capital. Timing depends on several factors, including:

• How your books have been put together
• The volume of transactions in your business
• The risk tolerance of the bank or equity provider to your industry
• Finding the right partner and best terms for your busines can take time

IS MY BUSINESS READY?

For A Loan: First, your financial books are consistent, timely (books are closed 2-3 weeks after month end), there is historical data (going back two to three years), and everything is in the format the bank is looking for. 

Second, you have answers to all their questions within a day or two of request. In this ideal situation, the banker can put together a package, run it by his boss, ask you a few more questions, go to the committee, ask you a few more questions and finally get the loan approved by his or her board. Once the loan is approved it is time to draw up the paperwork. This can take several more weeks. All of this before the first check is written. 

For Equity: Many of my clients assume equity is easier. Equity is more risk tolerant, so venture capital and private equity will be easier to raise than debt, right? Unless you are raising money from Uncle Phil, who trusts you implicitly, has the ability to easily write a check, and who already knows your business inside and out, it's not.

Uncle Phil knows you, knows your story, the milestones you have achieved, and the commitment you have to this business. Ms. Smith or Mr. Doe at XYZ ventures do not know you or your business. They often have not met you until you consider raising capital. It takes time to build these types of relationships. They will ask 100 questions not because they think your business is a bad business. They may be very excited about your business, but they do not know you or your business - yet.

It can take months, even years, to build up trust with an equity partner. It is never too soon to get in front of equity partners. Talk to a few about your business, ask if it is a good fit for their fund, if not, ask which fund it might be a good fit for. Find people that are excited about your business. Take the time to find well-funded, supportive, investors that will stand with you if you hit a road bump. Trust goes both ways. There is nothing more destructive to a business than a bad partnership with a capital provider. 

If you need help preparing for a capital raise, never hesitate to call. We can do a preliminary assessment on whether you are ready to approach debt or equity investors. Then provide additional steps to improve your fund raise. Please email blair@relieffinancialconsulting.com for more information. 

Have you ever thought: "I know my business, I should be making more money on the bottom line, what's going on?" You are not alone. This is an age-old complaint from every business owner, no matter the size. But the big guys have a team of financial advisors and bean counters - surely you need all those people to get the kind of insights they have. 

This is false. It is a myth. You have something the big guys don't have. You are a lean organization, not complicated by massive corporate overhead and giant departments covering everything from HR to Paper Acquisition Specialist. You're advantage is you know your business inside and out. You are the key strategy specialist and the operations coordinator, you don't have to call in a team to tell you what's going on down in printing - you just replaced the ink in the printer.

But you don't have to everything alone. There are tools to help you figure out your business's financial situation without a CPA, MBA, CFA, CFO or any other acronym. If you are strapped for cash and worried about what's being spent within your organization – try using a free online tool. Mint.com is a wonderful personal finance tool, it is also a wonderful general finance tool. Go ahead, plug your business bank accounts, loans, company credit cards, etc. into a Mint account. Set flags to email you when a big ticket item is purchased or a budget hit for the month. You can even set alerts for large deposits - Mint.com can tell you when you get paid. 

Over the last ten years, it has become so much simpler to start a business. I remember my first website in 2001, I am embarrassed admit it, but the background was black and the text was neon. Not in a good way. Thank you modern technology.

Don't limit yourself to a beautiful website. Run a beautiful company on the inside and the outside. 

As your business grows, you may need part time HR advice or advice in areas like finance and operations. Understanding where your business is going and what your chances of surviving the roller coaster are is essential. Your website helps you get customers, but who are they? Are they good or bad customers? Are there trends in your customer set? Who buys what? When do they buy it? How do you know? 

When you first start a business, it feels like the expenses keep mounting up. You need computers, work space, a phone number, email addresses, website, and what are you going to wear to a customer meeting? Once the revenue starts flowing, the pressure eases. Finally there is a something to stem the flow of money out of your pocket.

Then one day you realize the revenue number is bigger than the expense number. You are in business! You've done it, you've balanced the scales.

Now what?

Now it's time to look at where the money is coming from and where it is going. 

You have clients, i.e. revenue, but are they profitable? A first client can be the key to getting off the ground. As your business grows, though, you may realize the first adopters of your products aren't the bread and butter of your business anymore. They may even be the succubus. They take a lot of time, they take a lot of resources and while they have a positive gross margin - you may not be making as much on the bottom line as you planned.

Let's consider your business's expenses, are they the right ones? Do you need a bigger office space, a smaller one? A flashier one to impress clients or a cheaper, bigger one to hold the back office that just keeps growing? Maybe you are thinking about opening another location, but how will you finance it? How many locations can you reasonably open at a time?

When you get beyond your area of expertise. When you have that nagging feeling something isn't right, that you should be making more money or you wish you knew more about your business. It may be time to call in a part-time CFO or Small Business Financial Planner. Their job is to help you sort through your stack of current and future bills and get to the bottom of financial sinkholes efficiently. Their job is to provide you RELIEF when you need it, for as long (or as short) as you need it.  They may seem like just another expense item, but bringing in a financial advisor sooner can save you multiples of that expense. It could even save your business.

I know what you are thinking: "stop right there, numbers are not beautiful, they are block symbols on a page with 10 different shapes - BOR-ING". In fact I, a person who has been obsessed with spreadsheets since she was 11 years old, AGREE WITH YOU. 

Difficult to Interpret Financial Statement

In a business context they can inspire change within an organization. They can give direction, promote good practices and prevent the nights of cold sweat that surround a low profit month.

Numbers on a page without any context are hopelessly frustrating. But those numbers, when represented in a visual format that makes sense, can not only be beautiful, but inspiring.

Numbers Can Be Beautiful

Once numbers are organized into a picture - they can be easily grasped. Worrying can be limited, cold sweats can be averted - you can finally breathe and remember why you became an entrepreneur in the first place.

You can focus on inspiring your customers, driving growth and promoting change. 

Let me help you make that vision a reality. 

More on the numbers ("financial statements") behind your business.