This week, Jack Mencini and Adam Sonnhalter of Maximum Value Partners (MVP) cover the topic and the dirty secret that Most Small Businesses Are Really Banks!
As a small business owner, take a look at your Accounts Receivable on your balance sheet. Are there entries older than 30 or 60 days? Or do they go way, way beyond the normal terms of payment that you discussed when they first became your customer?
“It happens so often with many of our clients,” said Jack, “Our clients experience great growth and they will ask us where all the money is after paying their employees and their other expenses? They will comment: ‘My CPA tells me I’m profitable, but I don’t have any cash’.”
We usually ask them if they understand their financial statements. In most cases, they really don’t – and are surprised to find out that much of their cash is tied up in receivables or inventory. Then comes the difficult realization that they’ve become a bank for many of their customers who aren’t paying in a timely fashion. We coach many of our small business owner clients on how to get out of this situation and avoid getting into it in the future. One simple step all businesses should institute is having new customers fill out a credit application so you can perform a credit check on this potential new customer.
Not many of MVP’s clients initially do this important step because they are too caught up in the excitement of landing the new business. They assume payment will not be an issue. People often get worn down by the collection process, but cash flow is the lifeblood of any healthy small business and business owners need to stay on top of their receivables. If you have had this dilemma, call Jack and Adam to talk about it at 877-849-0670.
Tune in to hear Jack’s How Come? when he talks about:
How come if we learn from our mistakes, why are people so afraid to make a mistake?
In this segment, Jack refers to blogger and writer, Lisbeth Saunders Medlock.
Jack took an excerpt from Medlock’s article in summarizing that mistakes derive meaning from what we desire and what we see as success. ‘In many cases, what I see as important and desirable and being a success will be a failure if the situation or project does not go as I planned.’
Mistakes can be beneficial to inspire others—we all make mistakes and we need to accept that we are flawed. In a work environment, failure can inspire the group to say great things about what you, as a leader, have done and they will be inspired that you, as their leader, can admit that you have made mistakes.
In a family dynamic, grandparents have a war chest of stories of when mom and dad screwed up that the kids love to hear about it… it humanizes their parents. In a workplace, recognizing failure also humanizes the leader in front of the team to show growth and humanity.
How do you make mistakes on purpose? Don’t be afraid to make mistakes. Don’t be afraid to keep moving forward and put yourself in an environment to keep achieving and learning.
As the boss, be willing to accept mistakes in your employees who are trying to grow and move forward to help the business and themselves be successful. Your mistakes and theirs will inspire others to own up to it and to share the learnings.
Every week, tune into http://dirtysecretsofsmallbusiness.com to catch up on all the podcasts, hear about their clients’ Success Stories and learn more about how to be a productive and successful business owner and if running a small business is really right for you!