The Focus On offers insight from local executives into some of the challenges each Utah industry faces. In this installment, Business Connect hears from individuals within the broad Financial Services industry.

Optimize Cash Flow

Mark Marshall
CEO, The Accend Group

“Optimizing cash flow in high-growth companies may sound simple, but in my experience people don’t fully understand the negative impact a poorly managed invoicing process can have on a company’s return on investment. To solve this problem, be prompt and communicative.

Most companies are sloppy about invoicing and tend to put it in a pile and wait until later. Do invoicing immediately. Everybody complains about how slow big companies are to pay, but make sure you’re doing your part to ensure that the process is started correctly and quickly.

Also, always follow up within days of sending an invoice. This allows you to establish relationships with those in charge of paying bills and to know early on if there are issues to be resolved before the invoice due date. This will also significantly decrease bad debt expenses.”

Plan Before You Spend
Steve Smith
President and CEO, Finicity

“As of March 2008, the Bureau of Economic Analysis determined that America’s personal savings rate was a whopping 0.2 percent of disposable income. In many cases, the actual rate is closer to zero or even negative. Seen in this light, it’s not hard to understand why so many are ill-equipped to deal with rising food and fuel costs and the other negative impacts of a slowing economy.

One potential benefit of the downturn has been an increase in the use of online personal finance tools during the last six months. Online money management systems bridge the gap between tracking expenses to actually changing spending behavior. Finicity’s Mvelopes is one such example. It is based on the envelope money management method, where cash is divided across physical envelope categories (groceries, mortgage, etc.). This ‘virtual’ envelope system ensures that users always have sufficient means to address the unexpected. Another benefit is the unified view of monthly expenses, which helps most users find areas of excess. They are then encouraged to take that extra money and pay down debt and contribute more to savings.”
 
Money Strategies for Your Business
Steve Grizzell
Managing Director, InnoVentures Capital Management

“Entrepreneurs typically know that they need some capital but they often don’t know about the types of capital available. Aside from the traditional means (bank loans, angels or venture capitalists, lines of credit, equipment financing, asset-based lending and factoring), InnoVentures is a provider of venture debt. Venture debt is expansion capital for businesses that have limited collateral and cash flow, yet have some sales and customers. InnoVentures focuses on providing loans ranging from $100,000 to $750,000. One of the biggest differences between venture debt and traditional debt is that the borrower also provides some stock to the lender.

An additional resource is Funding Universe, which helps secure the right type of capital for your business from any of the sources that I have discussed here including angels and venture capitalists. Many of the local angel groups’ Web sites provide good descriptions of their funding so look into those resources as you gather information to develop the best financial strategy for your company.”

Are Your Accounts Profitable?
Kent L. Thomas
Founder, CFO Solutions

“Imagine landing an account with the potential to double your annual sales in just a year or two. Even though the buying manager was a tough negotiator and kept pushing back on discounts and pricing, your salesperson assures you that you will still make money on this account. Your business begins to build its inventory, people and technology infrastructure to assimilate the expected growth and to meet the customer’s demands.

Everything is great, right? Not so fast. Everything is great assuming you really know your costs and that you have priced the contract correctly. But how do you really know?

This is the exact experience we had with a profitable and growing company a few years ago. The CFO Solutions’ team was engaged just before the company landed this account. We implemented a new accounting and MRP (Materials Resource Planning) system for the company, set up reliable accounting procedures and helped them hire a full-time controller. The customer and product profitability analyses indicated that when all direct costs were included, the gross profit margin on sales to this customer was less than 10 percent. That meant that if the incremental rent, inventory, payroll and technology costs were considered, the company was losing money on each sale it made.

Luckily, our client was able to invoke a 90-day termination clause and walked away from the new account.”