BY: Benjamin L. Swanson
As a working father, with as many commitments outside of work as I do at the office, I value my time. In a society that constantly requires more of your time it can be difficult to balance a career or business with family life which is also more demanding every day. I know I am not the only one who feels this way. Add to that volunteering, community events and projects, or hobbies and the hours in the day become even more precious.
As a Business Banker with the State Bank of Cross Plains I come in contact with a variety of customers, business owners and other professionals who are dealing with the same issue. With a major in economics my natural tendency is to address this issue by creating efficiencies. For me that means budgeting time for scheduling my week, processing paperwork, and doing a little writing, not to mention mowing the lawn. I’ve also been able to pair this perspective of generating efficiencies with some of the tools provided by State Bank to get some time back for my customers in several different ways.
You may be asking yourself, can my bank really save me time. The short answer is: Yeah, we can do that! Most small business owners are experts at getting the “work” done. Fewer are experts at managing funding needs for contract expenses, costs of goods sold, billing and receivables, and monthly operating expenses, all while continuing to bid new projects or contact new buyers for a product or service. Fortunately, you can use tools provided by the bank to help you create efficiencies in your cashflow cycle. What are you spending time on at your business and where else might you like to be spending that time?
This conversation is easiest with a start-up business when I can have a customer outline their business plan and challenge some of the unknowns with options the bank can provide to help. For instance;
- How are you funding your contract expenses?
- What are you intending to use for a billing process?
- What purchases do you intend to use your business credit card for, and how does that relate to the limit that you will need?
These questions may not take priority when putting together a business plan, but if overlooked they can create some big time demands for any small business. Some of these questions may be overlooked by a seasoned business owner. In that case the question isn’t what am I doing wrong, but how can I create more efficiencies for my business? When that same conversation is approached in this way by an seasoned business owner it allows the banker to offer some considerations that focus on efficiencies and profitability.
Let’s consider a business line of credit. Yes, it is comforting to know you have funds available in case of emergency, but what if you could regularly use those funds to pay for the up-front costs of new sales contracts? The immediate result is that the funds you would have otherwise used will remain in your operating account to be available for use elsewhere. This could be to acquire additional assets, or maybe enter into another contract sooner than you would have been able to do otherwise (saving time). Either option would have a direct impact on your bottom line (increased efficiency). The discipline here involves repaying the funds drawn on the line when the payment for the original contract is collected. This both minimizes your interest expense and allows for your line to be available again the next time you encounter up front expenses.
Continuing this line of thought, have you considered using your line of credit to replace a business credit card that regularly carries a balance? An appropriately managed line of credit will often cost half the interest expense of a credit card. Depending on the types of purchases you use the credit card for, this may be another viable option to create efficiency with your line of credit. It isn’t always appropriate, but it can be particularly effective for seasonal businesses or businesses that regularly enter into 90 day contracts.
Another specific example would be how you handle billing your customers. If you are using QuickBooks or another software program that allows you to track expenses and revenues as well as customer and project information, this is a great practice that creates many efficiencies. But have you ever considered using a digital portal on a company computer? Your merchant service provider can offer you this option which could automatically generate monthly or quarterly bills, as well as allow your customer to set up automatic regular payments with you. How much time could you save if you didn’t have to enter a regular monthly bill into your system for your customers? Could you use that time to prospect new customers, generate more widgets, or maybe even mow the lawn?
There are many business owners that diligently adhere to best practices, but the dynamics of operating a business are fluid. It’s easy to miss opportunities that create efficiencies to save you time and positively impact your bottom line. It’s also evident that some truths of doing business remain constant. Time is money. Cash is king. Most of these ideas aren’t new, but the question remains, when is the last time you reviewed the management of your cashflow cycle with your business banker?