4 Months and Still Going…
Multiple media outlets reported of the consistent 4-month uptick in SBA lending. Better yet, all signs indicate that this type of lending will continue to increase through the remainder of 2009. “I think it’s a continuation of the impact of raising the percentage that we guaranteed to 90 percent and the elimination of the fees to the borrower,” said Richard Temkin, U.S. Small Business Administration District Director. “And the banks’ credit requirements perhaps are loosening somewhat, though that seems to be a slow process.”
So, what does this mean for small businesses? This is an encouraging trend that hints that credit markets are starting to thaw from the deep freeze of early 2009 and that banks are increasing lending. For entrepreneurs who have been struggling for the past year, this is good news. Those who are fortunate to still have a traditional bank loan are more likely to keep it. Those of you thinking about starting a business and considering a SBA loan, might just be in luck. Overall, this is a positive sign that Michigan may have hung the “open for business” sign back outside its window.
Macomb Incubator Promises Progress for Small Businesses
The new site of entrepreneurship for Macomb County was unveiled on Monday in Sterling Heights and what a sight it was. After interacting with many of the 400+ business owners, professional service providers and dignitaries, it was clear that entrepreneurship in Macomb County is alive and kicking. At a time when negative press is running wild, it was great to see so many folks energized about what the future has in store for our region. Business owners were excited about being able to leverage the Incubators talent in the areas of sales introductions, marketing, finance, business coaching and business planning. It will be a valuable resource in moving entrepreneurship forward. Learn more about the Incubator
Keys to Managing Your Collections Process
In today’s economy it is more important than ever to focus on collections. When sales are slow, companies tend to focus on increasing business and securing new contracts, however it is important to stay just as focused on managing collections.
The popular expression “Cash is King” rings true. Sales don’t pay bills, cash does. While increasing sales is a critical part of building a successful business, if you aren’t being paid for your product or service, you are causing your business more harm than good.
There are some steps small business owners can take to manage the collections process and positively impact the bottom line.
Before you make a sale or enter into a contract, you should understand the value of your product and the competition. It is important to know your customer and your “customer’s customer.” It is important to be aware of end-users ability to pay your invoice. Can they honor the terms of the PO and will you only be paid after your customer gets paid? For example, if you are selling your product through a distributor to a large retailer, you will likely be paid once the distributor gets paid. When evaluating the risk, it is the distributor not the retailer who is responsible to pay the invoice, so you will need to look at the strength of the distributor. Balancing sales with collection is looking at risk versus the reward. As a business owner, you should ask yourself “how much am I willing to lose?” and “how many ‘good’ sales do I need to make up for the ‘bad’ sale?”
The internal collections process is often overlooked, but it is crucial that you establish a clear collections procedure for your business and stick to it. Be sure you know what you can bill for, when you can bill for it and where to send the invoice. Send your invoices in a timely fashion and make sure to get customer approvals or “signoffs” on your work. It is also important to make sure you have a purchase order before you start work. Too many invoices don’t get paid because there was no formal purchase order issued.
As with any other aspect of your business, communication is imperative. You should follow up with your customer’s Accounts Payable (A/P) department early. It is much better to be aware of an issue early rather than after the payment is not received as expected. Building a trusting relationship with your customer will keep the lines of communication open and increase the speed and reliability of repayment. Internal communication with your sales department can also be helpful, as they may be able to collect an invoice as they are making another sale.
Unfortunately, despite efficient processes and consistent communication, issues can arise. Note red flags along the way and respond accordingly. Some key indicators include slow payments, rush orders, change in payment form and excuses are signs that you may have a problem. When this happens, know your leverage points. If you can not negotiate a payment plan, be prepared to scale back work or human resources and file liens where appropriate. You can also consider legal action or collection agencies but weigh the costs against the benefits.
While you will likely not collect 100% of your invoices 100% of the time in your business, however, following these tips may make it easier to secure your firm’s most precious resource cash.
If you are interested in learning more about this topic, Mike Semanco and Candace Pavliscak will present “Improving Collections” on July 21, 8:30 - 10:30 a.m., at Walsh College, Troy Campus. Learn more
SBA Lending Jumps in May
Good news from the SBA this week - could it be? Encouraging information featured in a Crain’s Detroit Business article indicates that small business lending, specifically SBA 7(a) loans increased in May. Could this mean preliminary signs of credit markets thawing? Perhaps the American Recovery and Reinvestment Act is actually creating a degree of recovery and reinvestment. Only time will tell, but things seem to be looking up for small business lending this month. Read the Crain’s article
Time to Start a Small Business?
Over the past year, economists, finance experts and marketing gurus alike have debated the merits of starting a small business in a down economy. The opinions are as varied as the would-be entrepreneurs. This morning, Dave Ramsey, Good Morning America’s business contributor, offered some encouragement and insight on starting a small business. The biggest tip: for those who may have lost a job they didn’t enjoy to begin with, entrepreneurship may be for you. Watch the video
