Thanks to everyone for keeping the Prodictive Times newsletter going strong!
Each week we get more and more comments and praise. That's just
great! In our last newsletter we focused on selling tips for commercial
markets. I had a couple of our customers reply with another timely idea
that they are using these days to stay in the thick of a project and I
thought it should be shared. Here it is ..
Volunteer a value engineered price in addition to your regular bid price. The
value engineered price will get both of your bids noticed and if a
contractor already has a good value engineered price to work from they
are far more likely to pick up the phone and talk about it while they
are finalizing the project with the owner. Keep in mind that it's not
just contractors that negotiate .. owners do too, so during those negitiations you to plant some ideas on how to save money and who to use. Of
course if you're using a good estimating system you can value engineer
a project in just a few minutes. Hmm, what software would that be? The
Alliance Millsoft/Prodictive Estimator of course! 
This week we have an article on cash flow management during tough times. It's
written by David Bitton. David is our Prodictive Implementations
Director and also a business management consultant specializing in the
woodworking business. He has turned around numerous troubled companies.
You may contact David with questions and comments via email here or by calling 800.381.2664.
Managing Tight Cash Flow in Tough Times
Cash is king, so goes the cliché. So important is cash to your business
that you can compare it to blood. Much like blood, cash circulates thru
your business and managing it proves challenging in good times and very
difficult in tough economic times. The following are a few strategies
to help you better manage your cash flow:
1. How to Manage Your Accounts Payable When Cash is Low.
Learn you’re A/P (accounts payable) aging and know your exposure.
Divide your A/P to three categories: 1st priority, 2nd Priority and 3rd
Priority. In the 1st category list all your "MUST PAY" vendors and
overhead such as primary suppliers, rent and utilities to name a few.
In the 2nd priority category place all the expenses that are important
but failed to meet the core test. Place all the rest of the active
vendors in this category. In the 3rd priority category list all
expenses that are owed to companies you no longer doing business with
and all onetime expenses such as shipping and other unusual
expenses.When cash is scarce should be made according to priority. Pay
payroll, utilities and major supplier in the 1st category. Any extra go
ahead and pay the 2nd category. In the 3rd category pay only when you
absolutely have to. It helps to look at the material needs of the work
flow ahead to determine upcoming critical suppliers and make sure you
have them in good steed. All payments must be done according to your
plan.
2. Prepare a Cash Flow Projection Plan. Review your Accounts Receivable and create a cash projection plan.
Try to make a two week projection if possible. Trust me you are
not likely to be accurate in your projection, but at least you will
have a ball park of what you are expecting to receive. When cash is
getting tight it’s a good idea for you to get directly involved, if you
are not already, in the collection process. A phone call from you may
help speed up collection of a late account. At the minimum get
commitments from them and record all promises of payments and track
them to ensure that customers know you're serious about delivering on
the promises. Otherwise your check could slide to another supplier.
Earmark expected incoming cash flow to specific expenses. For example
the funds from this account will cover rent or lumber vendor etc.
3. Hold onto a Cash buffer. That
means strengthening your credit lines, banking relationships, and cash
on hand. Have a plan for what to do if things get tighter than they are
now.
4. Continue to strengthen your business.
Look for quick, multi fold paybacks in your business investments.
Ironically now is a good time to INVEST in tools and systems that will
help you better manage your business. Why? Because now you have the
time to implement them more effectively without disrupting business
flow. These things are difficult to do when you are very busy.
5. Ask For Help while someone still can help.
If you tried your best and still need more help it’s time to call for
help. The toughest part of all for business owners is to ask for help.
Ego and other issues such as “no one knows my business better than me”
are preventing them from getting the timely help they need before it’s
too late. Do not get into a "too little too late" situation.
Next week we'll tackle the now popular subject of recession proofing your business! Stay tuned.
Do you have ideas on subjects you would like us to tackle in the newsletter? Don't be shy, send us a note here. The Prodictive team has a lot of experience in woodworking business management and we'll do our best!
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