A small business’s cash flow is, not surprisingly, dependent on cash. That’s why late-paying clients can be an incredibly frustrating challenge for a small business owner. It not only ties up money you need to pay your own bills — trying to get clients to pay can become a real time drain. In fact, a study found that small business owners spend an average of 1.3 days a month chasing down money that’s owed to them.Continue Reading
- Increase sales (particularly those involving cash payments).
- Increase prices especially to slow payers.
- Review the payment performances of customers with sales force.
- Become more selective when granting credit.
- Seek deposits or multiple stage payments.
- Reduce the amount/time of credit given to customers.
- Money required for bonuses comes from profit which belongs to shareholders. It should only be invested in bonuses if it will increase shareholder wealth and/or financial security.
- If bonuses are distributed too widely among employees, the individual bonuses are invariably too small to act as profit motivators.
- Small bonuses for outstanding performers are inadequate rewards that probably act as demotivators, and do not motivate continued high performance.
- Bonuses should be at least 10 percent of an employee’s annual salary, and preferably much higher, if the bonus is expected to motivate continued high performance again next year.
- Bonuses distributed to most employees as the ‘same percentage of annual salaries’ become an entitlement after two years and do not motivate high performance.
- Firms cannot continue to pay out large bonuses unless they generate high profits in most fiscal years.
- Executives, managers and other key employees such as chief engineers, principal designers and business developers have greater impact on a company’s success than employees performing roles at lower organizational levels, so naturally they will be eligible for bonuses, and their bonuses should be larger than many other employees.
- Outstanding performers’ income packages should include a market-related salary, the opportunity to purchase shares in the company, and an outstanding incentive bonus.
- An out-of-date business culture can mask unacceptable productivity levels and dangerous marketing problems, both of which contribute to reduced profit and small or no bonuses.
- Some employees believe that they are already working very hard (input) and should receive a bonus when, in reality their performance level (output) is less than adequate.
Studies show that many Business Owners are not reviewing their Financial statements … WHY? It’s because they do not understand all of the financial terminology.Continue Reading
Here is a glossary of terms regarding various business ratios.
Measures whether or not the firm has enough resources to pay its debt over the next 12 months – formula:
Current Ratio = Current Assets ÷ Current Liabilities
Acceptable ratios are between 1.5 and 2 – below 1 the company may of issues meeting its short term obligationsContinue Reading