Tag Archives: Credit card debt

Want To Survive? Forget Profits, Focus On Cash Flow

When I was starting out in business I had a difficult time understanding cash flow.  I thought in terms of profit.  Making the big score. Incredibly I saw people making big bucks but still teetering on the edge of disaster.  I saw business people who thought they could spend their way to success, and, instead crashed and burned.  I determined then that cash flow was a mystery I had to master if I wanted to succeed.

You may find it hard to believe there are individuals with $100,000 a month income who find, at the end of each month, they’re spent more than that. There are businesses in the same position. No matter how much cash comes in, it’s always possible to spend more. The reason some people and businesses bump into this reality is not because they are wanton spendthrifts, but because cash flow itself is a more fluid and dynamic process, more subtle and challenging to master than a simple balance sheet. But master it you must, if you want to be in control of your money; master it if you want to survive in business, because without cash, no one cares if you’re worth a million dollars on paper or in widgets, the doors will shut and you will be out of the game.

If you get a handle on the dynamics of your cash flow, that act alone will both improve your business and improve you as a manager, the beginning of a very positive and powerful cycle.

Jeff Cornwall has some thoughts on that in Why Cash is King:

“There are four key reasons why watching cash flow in a business is more important than ever.

First, you can anticipate greater uncertainty of sales over the next several months. Most businesses are seeing smaller and less frequent purchases by customers.

Where a strong cash position is particularly important is during “sales shocks,” which can occur when large, steady customers suddenly stop ordering. If this is because they have found a better price from a competitor, you have a chance to win them back. But, more and more businesses are waking up one morning to discover that one of their longtime customers has suffered a business failure.

Secondly, as I have written about in the past, bank credit is getting more difficult for small businesses to obtain and some entrepreneurs are beginning to have their loans called by their banks.

SBA loans are drying up

The news last week that the Small Business Administration loan program funding also is drying up makes finding credit even tougher. SBA loan funding is down more than 50 percent from this time last year. The SBA program offers guarantees for qualified small-business loans.

Third, just as your business may be feeling the effects of the economic slowdown, so are your suppliers. You should anticipate that your suppliers may begin to tighten their terms on trade credit to help shore up their cash flow.

Some may even begin to refuse to sell to you on credit, even if you have been paying on a timely basis in the past.

Finally, even in a bad economy you may find new opportunities. Don’t count on any external sources such as banks or investors to fund new initiatives.

If you do not have the cash to fund expanding into new products, new markets, or even to buy up struggling competitors, you may not be able to pursue these opportunities.

If you do not do so already, watch your cash flow statements very carefully. And if the business starts to have consistent negative cash flow, you need to also measure and monitor how long your current cash will last.

Develop weekly, monthly and quarterly cash budgets to help make decisions on which bills need to get paid, or can get paid, and when.”

As I mentioned in a previous post, using Mint.com to track your cash automatically might be a big help to watching over those nickles and dimes and greenbacks.  Because a Mint screen shows the cash you have on hand and the debts you owe….your credit cards, for example, it can be a bit of a bracing shock, if you have less cash on hand than the amount you owe, even though you’re paying your credit card debt off over time.  Nonetheless that shock of staring your finances square in the face and watching them shift may be the shock you need to swing into action, get vigilant, get thrifty, make changes and survive.

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Tough Times Make For Desperate People: Don’t Fall For Scams

Telemarketers!

Image by Cayusa via Flickr

Not only do people get desperate.  Companies do, too.

Some offer to reduce your credit card debt for a fee.

Some prey on people whose homes are being foreclosed.  For a fee, this person or business, will make that crisis disappear.  But, usually, the only thing that disappears is your money.  In one case in San Antonio, Texas, a couple lost the home they’d raised their family in after paying an unscrupulous business owner more than they owed the mortgage company.  This, after the business owner had already gotten and agreed to a “Cease and Desist Order” from a court over just this kind of predatory behavior.

These are scams pure and simple.

Perhaps it’s too harsh to call all of these enticing propositions scams.  But when you analyze some of the things companies, even very large, respectable companies, are asking you to do, they certainly could be classified as much better deals for them than for you.

Last week my mortgage company asked me if I’d like to pay 2% less interest and several hundred dollars less a month in my mortgage payment, for no fee from them.  Naturally, I said “Sure!”  But when I received the paperwork yesterday, it turned out there were over $10,000 of additional fees, added into the mortgage payment.  Yes, over the life of the loan I’d be paying less interest, but it would take me 40 payments, or 3 years and 3 months to get back to where I am today.  Was that a good deal?  For the mortgage company, yes.

Seth Godin in Too good to be true (the overnight millionaire scam) writes about the scams that crop up in tough times and the imperative to avoid being suckered in by them:

“Times are tough, and many say they are going to be tougher. That makes some people more focused, it turns others desperate.

You may be tempted at some point to try to make a million dollars. To do it without a lot of effort or skill or risk. Using a system, some shortcut perhaps, or mortgaging something you already own.

There are countless infomercials and programs and systems that promise to help you do this. There are financial instruments and investments and documents you can sign that promise similar relief from financial stress.

Resist.

There are four ways to make a million dollars. Luck. Patient effort. Skill. Risk.

(Five if you count inheritance, and six if you count starting with two million dollars).

Conspicuously missing from this list are effortless 1-2-3 systems that involve buying an expensive book or series of tapes. Also missing are complicated tax shelters or other ‘proven’ systems. The harder someone tries to sell you this solution, the more certain you should be that it is a scam. If no skill or effort is required, then why doesn’t the promoter just hire a bunch of people at minimum wage and keep the profits?

There are literally a million ways to make a good living online, ten million ways to start and thrive with your own business offline. But all of these require effort, and none of them are likely to make you a million dollars.

Short version of my opinion: If someone offers to sell you the secret system, don’t buy it. If you need to invest in a system before you use it, walk away. If you are promised big returns with no risk and little effort, you know the person is lying to you. Every time.

Has anyone tried to scam you?  Write and share your experience.  It will help all of us to have a common pool of scams to avoid.


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Think Outside The Box : Get A Free Online Financial Guru

Tough times have arrived.  Time to think outside the box.

Do you ever spend more than you should?  Let your bank account get too low?  Put off budgeting?  Forget or delay paying off those high interest credit cards? Who doesn’t?

What we could all use is a a financial planner/ manager who will take care of all those myriad money details for us.  But who can afford that?  You can.  We all can.  Because Mint is free.

Mint – Manages Your Money

http://www.mint.com/

“Mint is fresh, intelligent online money management. Not only is Mint free, it saves you money….

With Mint , you can achieve better online financial management in less than five minutes. After that, … Mint money management software does the rest, with virtually no more work required. It automatically pulls together your bank, credit union and credit card data, and provides up–to–date and amazingly accurate views of your financial—life from the big picture to specific details, in a friendly and intuitive way.”

How Does Mint Work ?

Mint connects to more than 5,000 US financial institutions. Your account information is updated daily. Mint automatically categorizes all your purchases, showing you how much you spend on gas, groceries, parking, rent, restaurants, DVD rentals and more, with amazing precision.

Secure: Mint provides bank–level data security and industry–leading identity protection. Its security and privacy have been validated by VeriSign and TRUSTe. Users sign up with nothing more than a valid e-mail address, password, and zip code, then enter login credentials for supported financial institutions. Mint doesn’t store any of these credentials, working instead with Yodlee, a third-party financial aggregation service provider that’s provides similar services for “top” US financial institutions. Mint uses 128-bit SSL encryption to communicate with Yodlee and pull your transaction data. Mint never knows your identity.Their level of security is much the same as Paypal.com, eBay.com, your bank or many of the other online companies to whom you’ve given your financial information.

Mint Is Your Financial Traffic Cop/Watchdog

An advanced alerting system highlights any unusual activity, low balances, unwanted fees and charges, and upcoming bills so you’re in constant contact with your money. Plus, Mint is proactive—alerting you when you are exceeding your personal budget, have a low balance, need to pay a bill, and more.

Mint Is Your Sharp Eyed Accountant Looking for Savings

In addition, Mint goes beyond visibility and analysis providing personalized money–saving and money–making suggestions. Mint provides users an average of $1,000 in savings opportunities during their first session. Mint is constantly working to find you savings. Mint keeps looking for new ways for you to save every day—continuously comparing your needs to product, service and bank offerings most relevant to you. ( Of course, the companies who are making the offers are also financing the program, Mint, so you don’t have to….to you it’s free.  Just bear that in mind when you evaluate the offer.)

Mint is Your Always On, Anywhere/anytime access, Free Financial Planner

These are some of the goals Mint can help you with.

Perhaps in some ways we all practice a little avoidance ( perhaps even denial) when it comes to our finances.  Do we really want to know how much we spend eating out or whatever our personal indulgences are? Maybe not.  Or, at least, maybe not by choice.  But a recession is upon us and, for most of us, there is not only the possibility but the real likelihood that the champagne will not be flowing and the airline tickets won’t be raining on our heads.  One way or another, we should all be contemplating the recession time strategy of tightening our belts, lowering our expenditures and increasing our savings to ride out this gathering storm. I, for one am going to be trying Mint to see if it can help me achieve some of those those financial goals I’ve procrastinated about.  Where else can I get a financial guru I don’t have to pay, feed, meet with or take to an expensive lunch?

If you try Mint, please do write us and share what you think and how it’s working for you.  If you have any other online, automated financial guru you’d like to recommend, please do.

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