If there is one thing that a business always seems to want, its more cash!
This was highlighted in several seminars we attended last month. Whether companies want to borrow more from the banks (PriceWaterhouseCoopers SME Boardroom Round Table 2010) or raise money from issuing shares or franchising (Capital Raising Conference 2010) three arguments were consistently raised:
(1) Businesses always need to raise more cash;
(2) Banks and investors are becoming harder to find and harder to deal with;
(3) Whether you are a bank or investor - the quality of the management team and the financial records are the major factors in any decision to provide more cash.
But are these three statements true...or are they just modern (post-GFC) myths? Unfortunately, the situation is not so "black and white". In fact, only one of the three above statements holds true in all situations. Can you guess which one?
Our April and May newsletters will therefore be focused on the subject of getting more cash! And we'll break some myths along the way. You'll also see how your business can improve your chances of fund-raising success.
Of course, our newsletters will give a good introduction to this valuable topic - and Part Time Professionals can then introduce you to over 280 contract accountants and CFO's who are experts in this field simply by phoning 1300 79 1946. Could a part time or contract accountant help your business?
Our CFO Network Members have had experience helping Australian companies raise hundreds of millions of dollars. Give us a call to find out how they can help your business.
Every business I talk to seems to want more cash. Whether it is to fund new investment, provide additional working capital, undertake research and development or acquire another business. There is always a need.
When seeking this cash, two main sources are usually considered - borrow from a bank (overdraft, loan etc) or bring in an investor (sell some shares).
However, both banks and investors bring their own costs and demands. And the costs to the business can be very, very high. Interest, loan covenants, improved reporting requirements, legal compliance issues, shareholder agreements, investor relations and more. Some business owners even lose control of their company or have their decisions vetoed by the new investor directors!
There is one source of cash, however, that does not introduce such onerous burdens. Internal funding! A review of your current business cashflow and your balance sheet may unlock a wealth of cash for your business. There may actually be a treasure chest right under your nose!
Debtors - You can actively chase up the outstanding debts, review your credit terms (eg reduce them from 30 to 14 days net). By managing your debtors better you may be able to bring thousands into your business.
Creditors and Suppliers - You can review credit terms. Look at suppliers who can give you extended terms. Can you buy stock on consignment (and only pay for it when you sell it)?
Grant Funding - You can consider any applicable grants (state, federal or local government). Often these grants reimburse up to 50% of eligible expenditure.
Costs - You can review where you are spending your cash. Can these costs be trimmed? Can you put some suppliers out to tender (eg professional services)? Are all of your costs really necessary?
And Your Banking - Every business must have a bank account. But what interest rates are you earning on your working capital? Is the bank paying you 6.5 per cent interest or less than 1per cent on your transaction account? And what about those bank charges. Can they be reduced?
There are many ways a business can improve its cash position without the need for any external funds. With a good accountant working 'inside' your business and reviewing your existing business records it would be possible to calculate how much of this 'treasure' is just sitting untapped in your business. I've personally helped companies unlock hundreds of thousands of dollars from their existing business - and they haven't had to pay the bank a cent, or dilute their ownership of the business! If you would like any one of our 280 qualified contract accountants to help you unlock your treasure chest, give us a call on 1300 79 1946.
Business ethics have been in the news a lot lately. Here's a classic on the topic!
A businessman decided it was time to give his daughter, a recent business school graduate, a little lecture.
Next Month: Big, bad banks and illusive investors - a myth or reality?
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