Your company’s books should reflect your way of thinking, and whoever maintains them should generate information according to your policies. Thus, you should hire an outside accountant or accounting firm to figure your return on your investment, as well as the turnover on your accounts receivable and inventory.
Such an audit or survey should focus in depth on any or every item within the financial statement that merits special attention. In this way, you’ll probably uncover any potential financial problems before they become readily apparent, and certainly before they could get out of hand.
Many small companies set up advisory boards of outside professional people. Such an advisory board or power circle should include an attorney, a certified public accountant, civic club leaders, owners or managers of businesses similar to yours, and retired executives. Setting up such an advisory board of directors is really quite easy because most people you ask will be honored to serve.
Once your board is set up, you should meet once a month and present material for review. Each meeting should be a discussion of your business problems and an input from your advisors relative to possible solutions. These members of your board of advisors should offer you advice as well as alternatives, and provide you with objectivity. No formal decisions need to be made either at your board meeting, or as a result of them, but you should be able to gain a great deal from the suggestions you hear.
You will find that most of your customers have the money to pay at least some of what they owe you immediately. To keep them current, and the number of accounts receivable in your files to a minimum, you should call them on the phone and ask for some kind of explanation why they’re falling behind.
If you develop such a habit as part of your operating procedure, you’ll find your invoices will magically be drawn to the front of their piles of bills to pay. While maintaining a courteous attitude, don’t hesitant, or too much of a “nice guy” when it comes to collecting money.
Something else that’s a very good business practice, but which few business owners do is to methodically build a credit rating with their local banks. Particularly when you have a good cash flow, you should borrow $100 to $1,000 from your banks every 90 days or so. Simply borrow the money, and place it in an interest-bearing account, and then pay it all back at least a month or so before it’s due. By doing this, you will increase the borrowing power of your signature, and strengthen your ability to obtain needed financing on short notice. This is a kind of business leverage that will be of great value to you if or whenever your cash position becomes less favorable.
By all means, join your industry’s local and national trade associations. Most of these organizations have a wealth of information available on everything from details on your competitors to average industry sales figures, new products, services, and trends.