Never Run Out of Money! Use Cash Forecasting to Stay Solvent

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StrategyDriven Managing Your Finances Article |Cash Forecasting|Never Run Out of Money! Use Cash Forecasting to Stay SolventWill you have enough to make payroll? It shouldn’t be a mystery.

Don’t run out of money might be the first commandment of any successful small to medium enterprise (SME). You need cash on hand to pay your employees, service your debts, and keep your supplies rolling in on time. In short, you need to cash to keep your business running.

Cash forecasting is the tool you need to make sure you have the cash you need. Instead of looking at accounts payable and receivable (AP and AR), cash forecasting predicts how much actual money you will have on hand to meet your responsibilities. In addition to keeping you solvent from day to day and year to year, cash forecasting has other benefits, too.

Identify Potential Problems Ahead of Time

Cash forecasting can be like a check engine light with premonition for your finances. You can spot trouble spots months ahead of time and plan your way around them. In doing your first-quarter forecast, you might discover that you will have additional expenses in March, or perhaps you will have shipped sales or provided services that aren’t due to be paid until April. Your sales will show up in your AR report, but you probably won’t actually see the cash until April. By predicting this sort of shortfall in March, you can reduce expenditures in February or secure a line of credit with your bank to prevent problems before they happen.

Plan ahead to keep problems from ever occurring.

StrategyDriven Managing Your Finances Article |Cash Forecasting|Never Run Out of Money! Use Cash Forecasting to Stay SolventCreate Strong Relationships with Employees and Suppliers

Your employees depend on you to provide them with a reliable paycheck. They count on that money to meet their household expenses, pay rent or a mortgage, and buy groceries. Your suppliers are in business just like you. They need your payments to meet their own expenses. Neither employees nor suppliers will want to do business with you if they can’t depend on you. Being a reliable partner will establish trust and goodwill that is invaluable in running your business.

Long-Term Planning

You need to make larger expenditures sometimes to keep your business running. Maybe it is time to upgrade all your laptops or invest in that software you need to manage your growth. Be careful. Longer-term forecasts may not be as accurate as short term ones. Nevertheless, your cash forecasting can help you be strategic about when to make more significant investments, how to spread the expense if necessary, and when it might be a good idea to delay a more substantial purchase. Forecasting also helps you put some of your revenue aside for a rainy day, because there will always be rainy days, and expenses or slumps you can’t predict.

Cash forecasting is one of the basics of business. In 2018, CB Investments did an analysis of 101 failed startup businesses. Of those 101, the second most common reason they failed was that they ran out of cash. Cash forecasting is essential for avoiding disaster.

A solid cash forecast is also something your investors will need and something a bank will want to consider before doing business with you. It should be a living, breathing part of your business, updated continually, and consulted often. Cash is king, don’t be caught without it!

Business Financing Tips for Latino Business Owners

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StrategyDriven Managing Your Finances Article |Business Financing Tips|Business Financing Tips for Latino Business OwnersStarting and owning a business is growing into a much more popular way for people to make a living. While people of all backgrounds are starting businesses in the USA, no one is doing it more than Latino and Hispanic individuals, as they are the fastest growing group of entrepreneurs in the entire country.

However, before you can start and run your business successfully, you need to have the money to finance it. Sure, when you visit Professional Hispano and other helpful resources, you can learn great tips and tricks for running a company, but it is important to know how you’re going to afford the many costs of running a business.

In an effort to help when it comes to the financing aspect of your business, this article is going to cover a few finance-related tips for Latino business owners.

StrategyDriven Managing Your Finances Article |Business Financing Tips|Business Financing Tips for Latino Business OwnersHave a Plan

The first and most important financing-related tip we can give is to make sure you have a plan. You need to take time to figure out just how much your business is going to cost to start up, and also what it will cost to run. This can take a lot of research on your part, but that is a necessary step in the process.

One of the best ways to come up with this plan is to think backwards. Start out by thinking about what you’d like your company to look like. From there, backtrack and cover all of the things you will need to have and pay for to reach that goal. For example, will you need office space? What about employees, computers and other equipment?

Whatever you need should be written down, along with the approximate cost so you have a good idea of what it will take to start the business. The last thing you want is to only secure $10,000 to get your business off the ground, when you actually needed $15,000.

Know the Options Available to You

Once you have a plan and know how much the starting and operating of your business will cost, it’s time to actually go out and get the funding you need. Thankfully, there are many options at your disposal as a Latino entrepreneur. You can opt for a standard business loan, a microloan from the U.S Small Business Administration or one of the variety of grants available from the government.

With some of these grants and loans, you will need to apply, so be sure you have a business plan in place and are confident in your numbers and projections. Some can be quite competitive, while others are easier to be approved for or given.

Of course, there is also the option to bootstrap your business and pay for everything out of pocket. This can be tough if the costs are high, but many entrepreneurs can bootstrap their venture if they decide to make sacrifices and work hard. This option can save you a lot in the grand scheme of things, as well.

Don’t Be Afraid to Seek Out Assistance

Figuring out the financing for your business can be an incredibly stressful and daunting experience. This is especially true for those who are new to the space. Thankfully, there are ways to get some help. There are many organizations, clubs and groups that you can reach out to such as SCORE, the U.S Hispanic Chamber of Commerce, the Minority Business Development Agency and others.

Each can help you get guidance from real professionals in the space, who can point you in the right direction when it comes to financing. You can also simply speak to other Latino business owners in person or online and learn about their story.

Hearing from others who have been in your shoes can be very valuable. It can give you a better idea of the steps you should take when it comes to not only getting financed, but also operating your business as a whole.

While you might run the business alone and it’s success is 100% dependent on you, there are still many resources you can use to ensure you are making the right choices when it comes to financing.

The Best Financing Options For You

Financing a business as a Latino entrepreneur can be a difficult and potentially-stressful experience. But if you have a plan, know your options for securing financing and know how to ask for help, you are well on your way to being able to successfully finance your business.

Expert Tips on How to Create an Investment Strategy That Works With Your Goals

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StrategyDriven Managing Your Finances Article |investment strategy|Expert Tips on How to Create an Investment Strategy That Works With Your GoalsDid you know that the collective worth of the 15 wealthiest investors in the world surpasses $300 billion?

An investment strategy can change your life for the better. Whether you are young or nearing retirement age, you can find an investment opportunity.

One thing about investments is that there are no limits to what you can choose. Also, there are no time limits, and so you can make the right choices at any age.

This guide will take you through the process of establishing an investment plan that works. Read it to make the right financial decisions.

Assess Your Current Financial Status

Your budget should clearly show your total income vs. the total expenditure. If the amount of money you remain with after the expenses isn’t enough, you must cut down some costs or look for more ways to generate income.

If you want a liquid investment, stocks would be the best. For illiquid investments, you can consider real estate investing.

Set Goals

Why do you want to invest? What do you want to achieve?

When you set goals, it becomes easier to attain your target. Maybe you want to buy a car with the investments, or you wish to secure your future.

If you have many goals, write them down and narrow your list according to their importance.

The goals should be measurable. For instance, if your goal is to save $50 every week, then you should evaluate your finances with time to know if you have achieved what you wanted.

The goals should also be realistic and achievable. You can’t plan to save more than $10,000 in a month when you know very well that you can’t achieve that.

Explore Options

The investment you choose should depend on your goals and your personal preferences.

If education is your saving goal, you may consider the mutual funds, stocks, bonds, and other long-term securities. You may also decide to invest in the real estate market or other physical products that increase value with time.

The key here is to diversify. As a beginner, you only need to dip your toes as you test the market. That’s why you should diversify the assets no matter how little they are.

This is the essential step for planning; thus, you might need to involve a financial planner. The planner should listen to your ideas and advise you on the best high rate investments to consider.

Check the Charges

Every investment includes some charges. If you decide to invest in stocks, you will need to hire a broker who will require a service commission.

If you choose investment funds, you will have to pay the fund manager too. The same case applies to real estate where you must pay a real estate agent.

Don’t commit yourself to any investment plan without knowing the charges. Ask the firm to explain to you all the possible costs that you will incur for the investment.

In most cases, the higher charge translates to better quality. But still, you should compare the price of getting a similar service somewhere else. You may be lucky to get the same quality service at a reduced price.

Do Your Research

Don’t invest blindly. As an informed investor, you should research the most profitable types of investments. You should always consult an educated professional, like Daniel Gordon, before making any big decisions in the financial market.

If you choose to invest in the financial market, you need to research on the best markets.

Currently, many firms are offering the same service. Some are legit, while others are not. Unless you are careful and do in-depth background research, you can quickly lose your fortunes to scammers.

If possible, check the reviews of the firm you choose to know what other people think about the firm. Don’t put your investment in a firm with too many negative reviews.

Understand the Risks

Every investment is risky. Young investors are more likely to fail because they are still green. Before you invest, you should familiarize yourself with the risk associated with your investment strategy.

If you plan to invest in the stock market, then you should know the possible risks of that industry. It’s possible to lose all money or even get abnormal profits.

With knowledge of risks involved, you can easily come up with a proper risk management strategy. For instance, you can diversify the assets to stay safe just in case one of the investments fails.

Be cautious with the investments which promise high yields only. There is no investment that does not have a risk. Unless it’s a scam, there will always be the drawbacks that you should understand.

Monitor the Investment

Don’t invest and leave your money there. You should monitor the progress of your investments.
Is everything going as expected? Are you depositing excess money into the investments? The progress of the investments should help you make the next step.

At times, it’s better to withdraw your investments if the plan is not profitable. After all, it would be useless to keep on investing without seeing the results of your hard-earned cash.

Choose the Best Investment Strategy

The right investment strategy should be cost-efficient and profitable. The ideal approach should also be simple and easy to manage.

So, don’t stress yourself finding the most complicated investments that promise the highest returns. Start small, and move to the more profitable ventures once you learn the basics.

StrategyDriven helps entrepreneurs make the right decisions for their businesses. Our help comes in the form of well-researched articles written by business experts. If you just started your business, or wish to create one, read our blogs to know more about the most important business aspects.

What Exactly Are Short Term Loans?

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StrategyDriven Managing Your Finances Article |Short Term Loans|What Exactly Are Short Term Loans?When looking to aid yourself out of financial difficulty, there are several elements to consider before applying. Not only do you need to ensure that you are eligible, but you need to ensure that the lender you are using is a reliable one. To help you understand what short term loans are and how you can apply, we have provided you with a little bit of insight.

What Is A Short-Term Loan?

A short-term loan is a loan that enables you to borrow the amount of money that you need over a short time period. There are several different lenders out there that allow you to borrow the amount of money that you need should you find yourself in a financial emergency. Whether it is for a boiler repair or for an emergency car replacement, this form of finance can work for you.

How To Find The Right Lender?

When you have established that the loan type is right for you, it is then time to find the right lender. By getting a quote from several different lenders, you can find one that will provide you with the borrowing amount that you need. By spending the time looking for a loan provider that works for you, you are then able to ensure that you are paying back your monthly repayments on time with a loan term that works for you. Whether this is over the course of either 3 months or 6 months, this can benefit you in the long term.

How Do You Apply?

Applying for short term loans could not be any easier. With a number of lenders providing you with a simple to use application platform, you can simply answer the questions online and get an answer the exact same day. The lenders for this style of the loan will look into your monthly income as well as your line of credit to generate an initial offer for the amount that you are looking to borrow. By making sure you are eligible before you apply, you can ensure that you will have the money that you need in your account within 24 hours.

How Can This Loan Type Affect Your Credit Score?

As with any form of alternative finance, there is an element of risk that comes with it. When using a loan type, it is important to ensure that you are meeting your monthly repayment date. This will limit the negative impact on your credit score and ensure that you are using your monthly repayment. Buy making sure that you are meeting your repayment, you will limit the chance of defaulting payments as this can lead to debt if not careful. By ensuring that your payments are on time, you can then strengthen your finances and show that you are good with money.

Whether you are looking to apply for a loan right this second or you are looking for your options in the future. There are several loans that you can benefit from in this time.

What Is A Net Working Capital And Why Is It Important?

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StrategyDriven Managing Your Finances Article |Net Working Capital|What Is A Net Working Capital And Why Is It Important?Many, if not most, businesses need money to develop, survive, and grow. Organizations need the right amount of cash to meet both short-term and long-term needs without high risks of ruining their businesses. Thus, a stable and sufficient net working capital should exist within these companies’ financial accounts.

Net Working Capital: A Brief Overview

Perhaps the simplest definition of net working capital is money that a business has in its bank account. It’s also the measurement of the liquidity, efficiency of operations, and overall financial health of a business entity. Therefore, if a business possesses a working capital of good standing, it can grow through various investments.

Note that it’s possible to grow the net working capital through various means. Organizations can produce additional sales, build long-term relationships with clients, and develop products and services. It’s also possible to acquire additional working capital by borrowing the cash from reliable lending corporations.

Having a lender loan the cash you need to start and maintain projects might help your company grow. You can use the acquired money to purchase equipment to streamline processes or hire additional workers to finish tasks quickly.

Calculating Net Working Capital

Always keep in mind that money is a finite resource. Hence, it would be best to learn how to calculate working capital to let you know the amount of money needed to develop, sustain, or grow business operations.

Don’t worry, as it’s not severely challenging to calculate your company’s working capital. It’s as straightforward as subtracting your business’ current liabilities from its current assets.
Your firm’s current assets may include (but not limited to) the following:

  • Current inventory
  • Cash and cash equivalent
  • Accounts receivables
  • Prepaid expenses
  • Marketable investments and securities
  • Other liquid assets

As for your current liabilities, these may include the following:

  • Accounts payables
  • Taxes
  • Accumulated expenses
  • Interest payables
  • Short-term loans

For example, a small business wants to calculate its net working capital and compiles all the data required to acquire this figure. After gathering all the necessary receipts, documents, and files, the company might find its current assets at USD$100,000. They then need to collect and calculate payables, such as taxes, loans, and other expenses. Now, it finds that the business has USD$45,000 in current liabilities. Using the formula of subtracting current liabilities from current assets, the net working capital is USD$55,000. Hence, the company could use this amount to cover operational costs and meet other short-term obligations.

It’s highly recommended for entrepreneurs to know how to calculate their company’s net working capital. The ability to be aware of your business’ income sources helps you check whether you have a steady income source to thrive and survive.

Importance Of Net Working Capital

Without a sufficient amount in one’s net working capital could lead to mild or serious issues. Avoid these concerns by looking at the various reasons why a working capital is essential in developing and maintaining a business.

  • Maintain Smooth Operations

Maintaining smooth business operations is crucial to the profitability of relatively any company. A successful business thrives on providing products or services that people want to purchase.

Providing your business with a stable and sufficient working capital helps the organization maintain smooth operations. Otherwise, you might encounter certain problems, such as the lack of funds to provide workers’ salaries.
If this scenario happens, it could lead to more serious risks. Your employees might go on strike and may not return to their working stations until you provide them with their just financial compensations.

Another problem you might run into is the lack of stable finances to continue producing goods for customers. If your sales representative tells your customers that you don’t have enough stocks for a particular item, you’re going to lose valuable sales. Furthermore, customers might opt to purchase from your competitors instead, and this scenario accounts for lost short-term and long-term sales opportunities.

  • Improve Company Earnings And Profitability

Many small businesses don’t have the financial resources available to sustain their operations and make them grow, unlike large corporations. Therefore, it might be tough to create a profit without knowing and possessing financial stability in the business’s net working capital.
If so, begin by asking yourself how you plan to handle your working capital. Using the formula mentioned above would calculate your company’s net working capital to know the budget for your short-term and long-term projects. In turn, you can figure out the company’s earning potentials and maintain profitability to access eventual growth opportunities.

  • Minimize Costs While Maximizing Returns

Knowing your company’s net working capital also helps you minimize costs while maximizing revenue potentials. It’s because knowing the figure in that aspect enables you to balance various benefits versus the costs.

For example, you might find that your organization is holding high inventory levels. Note that several benefits may come from having plenty of stock to offer to clients. That idea might not always be the most efficient solution, especially for startups and small businesses.
Excess inventory will take up valuable storage space. Hence, your company may not have enough room for other products, unless you’re willing to spend extra cash for additional storage. Furthermore, you need to add the costs of financing and insuring the inventory in case of losses. In turn, the excess stocks may lead to more costs for your organization if you can’t dispose of them soon.

It’s possible to figure out the right number of products needed for your business’ storage while satiating the needs of your loyal customers without spending too much of the company’s financial assets. You could achieve the answer to this particular concern by calculating your business’s net working capital.

  • Helps Identify And Solve Efficiency Issues

When your company has problems with the flow of funds, it might be because you may have too little money for your accounts receivables. But you might not know about this issue if you don’t know how to calculate for your firm’s net working capital.

In turn, you can identify and solve efficiency issues in your business. Identifying your organization’s working capital allows you to look at where your money is coming from and where it’s going. Thus, you can formulate plans to solve productivity issues to increase the business’ cash flow.

Conclusion

A company’s net working capital helps meet its short-term goals, which might lead to long-term solutions. Calculating the working capital and understanding its importance allows entrepreneurs to develop actionable strategies and implement projects based on their spending power.