Financial coaching communications begins by acknowledging that people communicate differently and it’s your job to coach your business clients so they understand this fact about themselves and the people they communicate with in business. Your financial coaching will coach Chief Operating Officers to be more affective with bankers, investors, customers, and their suppliers when communicating about financial matters.

Mastering the 4 keys to communication below will help you be far more affective as a financial coach. You will be more powerful at enrolling more financial coaching clients because you’ll know what it is you need to do so CEOs and board members understand your value and what you can offer their business.

4 Financial Coaching Communication Styles For CFOs

Your client’s primary communication style will usually be one of the following or a combination of two of them. You need to learn to coach from all 4 perspectives because the more you can put business clients at ease, the easier it’ll be to work with them on preserving cash, making investments, and growing their businesses.

1. Dominant CEOs: They will be all about the bottom-line. Less details and getting straight to the point will work best for this style of communicator. Your Financial coaching should coach clients to give this type of communicator the facts that are necessary for them to make a rapid decision and no more details than that or you’ll risk frustrating them and loosing rapport.
2. People Oriented CEOs: This person is all about getting to know you and wanting to know who’s involved and what was said. They look on the bright side of things and they focus on their power to influence others. Financial coaching helps your client realize the potential financial downsides of their behavior and decisions and put their optimism in proper place.
3. Steady minded CEOs: Change and making rapid decisions isn’t usually welcomed with open arms with the slow paced communication style. Financial coaching for this style is to give this type of communicator time to ask questions and get comfortable with you or they may shut down. You may need to meet with them several times before they settle on a financial direction.

At the same time, their inflexibility can cause the firm problems in crisis and pivotal financial negotiations.

 4.  CEOS who play by Rules and Regulations: To get this person to take action and move forward, they need to know the boundaries. This communicator wants detailed facts and figures before moving forward. Financial coaching is to help them feel comfortable that they’re following all the rules and no policies or procedures will be violated. Ensure you come prepared to answer questions regarding financial charts, reports, and your financial analysis.

Many financial coaches naturally focus on the details and rules. That’s what makes finance work. Realize this fact and adopt the other financial coaching communications styles so you can be more effective in business communications.

Keys to Financial Coaching For CFOs

These 4 communication styles you encounter are the keys to successful CEO financial coaching. As a financial coach, you need to first know your primary communication style.

Then coach your client in realizing how they primarily interact with others. The most valuable thing you can do as a financial coach for your clients is to coach them so they understand each of the above distinct communication styles.

When you and your clients can flexibly communicate with bankers, board members, investors, and customers who have different styles of relating than your own, your communication effectiveness will rise to new levels.

As you become a more agile communicator and coach your business clients to do the same, you and your CEO clients’ financial bottom-line will increase dramatically.

Call today for a complementary financial coaching session to learn how you can more effectively coach your business clients to respond to the financial urgencies of their companies bottom-line.

Donald R. Hunter, MBA, CFP

Certified CFO Coach

How To Become A Chief Financial Officer  

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What I’m seeing is that there is a variety of ways in which you view and use the comments feature on my blog.

Comments have ranged from people who never make a “peep” to those who leave abusive rants. Then some racy commentators automatically post thousands of self serving and irrelevant comments with links to crude sites.

 I’m here for you to talk about scaling up businesses fast for profitability not body parts. You should go somewhere else for that kind of conversation.

Blog Comments Policy

I’m okay with different approaches you may have when you make comments. You know it’s up to you how you want to be recognized for what you say. However I want to communicate to you where I stand:

1. I cheer when you comment on my blog articles.  Your finance, financing, and business knowledge, experiences, and insights are important to my blog readership as what I write. They can add greatly to the perspectives and facts that I put forth.

If you want to remark on what I write then you’re more than welcome. Whether you’re an upstart or an expert, feel free to express your thoughts on any theme I write about. You can ask for more information or clarifications too.

2. You should know I remove spam right away. My spam filters automatically catch the majority of automated spam comments. I don’t put up with unrelated advertising or remarks which don’t add to my conversation topic. By design, the usual Facebook remarks like “great sharing” and “I love it” will be rejected by my spam filters straightaway.

3. You know your relevant links in comments are actively encouraged. If you leave a statement on my blog and want to point to a link on your own or some other site that is relevant to the subject then you should do so. This adds to the overall discussion and uplifts the dialogue. And it helps you get answers quickly to any questions you may have about any topic about finance, financing, and growing your business.

If someone comes to my blog and likes what you say in your commentary I’m happy to allow you to provide that information for them. And you know it helps you attract more visitors to your own site too.

4. Okay now. You know irrelevant links are not encouraged. If you leave a comment with a link in it that has no relevance to the blog post you’re commenting on that it will be deleted immediately.

This is a silly trend that I see happening increasingly on blogs. If you engage in this nonsensical link building practice I would encourage you to think about the impact that this has upon your online reputation and your company.

Now you’re welcome to build your blog’s identity through genuine interactions and participation in the Donald Hunter Financial community by all means. But know that spam comments and links do more damage to your online character than you may realize.

Now I don’t want to come off as being “heavy-handed” with my blog comments policy. And I also don’t want to waste anyone’s time who reads your remarks and receive no real value. This is not Facebook.

But there’s a fine line in how you moderate comments and I want to be open regarding my position. I hope by me outlining my policy, you’ll feel much better knowing your comments will be read by others who visit Donald Hunter Financial when you add your point of view which adds to the finance, financing, and growing your business conversation going on here.

Online Personas

I want you to know when you comment on blogs, it’s like you’re visiting the blog owner’s castle when you submit your “two cents.” Comments have the ability to build up or tear down your reputation. They are a permanent record of who you are and what you stand for.

So be sure to carefully ponder what you want to say. And my recommendation for you is to make sure your words add value not only to the blog you’re visiting but also to your own online persona.

Peace out.

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The forgotten secret is people enjoy doing business with people they know, like, and trust. So old fashion relationship-building is the focus of this article. Is it really “old school”? Or is it the tried and true thing that still works.

And reminding you that what I’m going to share with you may be the most innovative thing you can do for your company right now.  Go back to the basics.

Back to the Basics: Growing a Business By Leveraging the Power of Organic Reciprocity

Here we go. Now you can’t expect that a successful business relationship will develop overnight.  Be patient. A truly trusted relationship needs unswerving nurturing over a period of time. I’d say usually it’ll take at minimum one whole year.

Be strategic. Ensure your time and energy is well spent.

First look at your sphere of influence and map it out. Don’t hold back. Put every name you can think of on your sphere of influence map from the guy you speak with at the local grocery store to your dentist.

Then look at other business owners, entrepreneurs, and professionals who you could help them grow their business. If you can’t offer them any value, there’s no sense in you wasting their time and your time.

Now I currently run three mastermind groups every week (types listed at the bottom) for no direct compensation and give oodles of my expertise, insights, and advice without expecting anything in return. After 30 days and sometimes longer, members of my masterminds start referring me to people they know I can help. You know I’m demonstrating my value. That’s because my fellow mastermind members come to know I’m not a selfish person. I’m there for all of us to win.

What I discovered is most people really didn’t know how to refer me because they didn’t really know what I did even though I’d tell them. Now demonstrating what I do for them leaves nothing left to mystery.

Win-Win Is What’s In

A fruitful relationship is a two-way street.  From the list you made of your contacts when you simply mapped out who’s in your sphere, brainstorm what you can offer them and in return, how they might be able to help you. Growing a business through win-win relationships is the only way to succeed in the long-run.

And in the long-run, the only way your business relationship will grow into something special is if both you and your colleague receive what you want from your association. Right? A relationship won’t grow unless your outcome and their outcome produce a combined outcome which is mutually beneficial.

Get In Rapport

Rapport can happen fast when you discover a common interest you have together.  Like you share love for riding horses or jamming on your musical instruments on the weekend.  It’s simple. Treat them like a friend. Anyone who’s interested in helping me be successful is definitely my friend you know.

Keep track of the simple things they share with you.  If your partner tells you they’re going on a cruise. Then make sure you remember to spend time with them asking about what they did on their vacation. They’re excited. Right? If their a social media buff, go straightway on their Facebook page and comment on their photos and videos.

Go Even check on their FB page when their on vacation because some FB enthusiasts post things all the time. And what better way to show them you care about what their up to in their life than to show them some real love when their with their family and friends. Wouldn’t you like your co hearts to make you feel important too?

You know consistency is the “numero uno” thing when growing a business relationship.  You’ve got to nurture your associations like you like to be nurtured. “Do unto others as you’d like them to do unto you.”

So reach out and touch your contacts at least once a month. whether you send a short and sweet email, or an invite to an event which you know will be of value for your referral partner. And if you can work in your schedule handwritten notes, it would set you apart from all of their other business contacts because anything handwritten is so rare these days.

And you know if they get a personalized email from you, it’s  much more likely to be read than from your email marketing program: Constant Contact, AWeber, One Shopping Cart, or the mother of them all, Infusionsoft. I’m not down playing marketing automation because computerization is one of the best ways to grow a business. But I am saying to be personal and show you care about them and their success too.

So be the first to help to grow someone else’s business.  Dr. Ivan Mesner who founded Business Network International coined the phrase “givers gain.”

So learn about them. So you can give first. Leverage the power of reciprocity. Play detective until you figure out how you can become an ambassador for them. Be on the look out for how to deepen your business relationship with them by being interested in them, their business goals, and what their company is all about. Ask them who would be their ideal customer.

If you know someone who could use their product or service, offer to make an initial introduction. It’s better for you and them to properly make the introduction because it shows all who are involved you care. Don’t leave them out to dry. You know I’ve gotten referrals sometimes. And when I contacted the lead, it was worse than a cold call.

Do it right. You can read my friend’s Joanne Black’s excellent relationship building book: No More Cold Calling. Her book is all about growing a business through growing relationships. Joanne will whip you straight into relationship shape.

So you see. I do what I preach. I just gave a little bit of love to my friend Joanne. And we’ve never done business together. But if I had the need to call on her, she’d be their for me I know.

Grow Your Business Through Testimonials

A great business relationship can also be your best fan you know. Your relationship that works well provides you with a live testimonial. Right? And whether or not you do business with each other, Invite your business buddy to join you on your important prospect appointments.  Your relationship provides you with a live testimonial.  And you provide your friend with an introduction to a company they could do business with in the future.

Now this kind of close business relationship with a friend is invaluable. It has the power to spontaneously create new business relationships through your unique connections in your combined business networks.

I say business growth through relationships should be a large part of every business plan. Wouldn’t you agree with me?

Whether you prefer to network and create relationships today with social media like Facebook, Linked-In, MySpace, and Twitter or you join in an organization that facilitates business-to-business alliances, you are in a growth mode if you’re doing it effectively. And both business networking approaches can be a fantastic way to streamline your relationship-building system.  It’s a way for you to quickly connect with like-minded people.

So take the time now to create and follow through on a structured plan for growing your business through building and nurturing your relationships because  if done the right way, it will be both profitable for you and your business connections. What I’m simply saying here is you should pursue a philosophy of “collaboration over competition” you know — good old Berny Dohrman founder and Chairman, CEO Space.

Donald’s Mastermind Groups

• Sales Scripting Mastermind: Members bring their sales scripts and receive complementary coaching – six members
• Coaches Start-up Mastermind: It’s about coaches coming together to build their coaching practices and growing their businesses. We have a weight loss coach, business coach, business and finance coach,  and more – currently five regular members.
• Business Growth Mastermind: It’s a face-to-face meet up mastermind I’m launching in September to help business owners, entrepreneurs, and start-ups grow a business through getting their business strategies straight. And with strong financial planning, leadership, and management.

Let me know if you’d like to explore having me lead a Breaking Through Your Inertia Mastermind for your team. It could include a corporate team as well. My masterminds are proven to deliver what members want and need each week.

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As I’ve recommended to you on many occasions, you should lease long-term assets rather than buy them.  You know it’s easier on your cash flow. So use your cash instead to hire an employee to operate your new gadgetry.

And I say to lease instead of purchase because leases offer you more flexibility in adjusting to frequent changes in technology and your operating needs. And you account for lease payments like you would interest payments on a loan.

Now equipment could include hard assets like computers or forklifts. It could also include the software which is installed and running on the computer. At the bottom of this article, I give you a list of the types of equipment leases people search for everyday on Google.

Capital Lease

A capital lease is one in witch you will own the device at the end of the lease. You’ll have a “dollar buyout” at the end of your lease.

Operating Lease

In an operating lease, the owner transfers only the right to use the property to you. It is a short-term, cancelable lease. And it’s A type of lease which the contract period is shorter than the life of the equipment, and the leasing company pays all maintenance and servicing costs for you.

So an operating lease is the same as you renting the machinery. At the end of your lease, you’ll return the equipment or swop it out for a new one.

Importance of Accounting for Equipment Leasing

I first covered the types of leases so you’d know the difference. And now I’ll cover how to account for these different types of leases in your accounting records.

Capital leases go on your balance sheet as and asset. So you’ll reduce the long-term liability for your equipment or software by the payment each month. That means that each month, your long-term liabilities will decrease by the monthly payment but your short-term liabilities will increase by the same amount — ready for your accounts payable.

Then you will expense the equipment leasing interest on your income statement. And you will reduce your cash by the principal portion of your payment. This transaction will be performed each month until your capital lease has ended.

The reason I make the distinction between the interest and principal portions of your equipment leasing payment is many times your leasing company won’t break out the interest and principal. The invoice you receive from them just states your total monthly payment.

You need to be able to calculate and breakout the interest and principal portions of the equipment leasing payments. So you can do proper accounting each month. And so you know when your lease has ended.

Yes, I’ve heard some companies like Dell Computers  will just continue to send you a leasing bill each month unless you notify them that your equipment lease has ended. That’s right, big companies get away with “murder” at your expense.

Now at the end of your lease, contact the leasing company and let them know you plan to purchase your gadgetry (usually for $1) and to send you proof that you own the machinery.

Operating leases are expensed on your income statement and they are not included as an asset on your balance sheet because you don’t have the risk of ownership.

But in the case of a capital lease, you are responsible for some of the risks of ownership. For this reason, the lease is recognized both as an asset and as a long-term liability (for the lease payments) on your balance sheet. And you get to claim depreciation each year on the lease asset and you can deduct the interest expense portion of the payment each month.

For more information and assistance with equipment leasing, you can call or email me.

And for financing approaches for equipment leasing, you should take a look at my Financing Strategies Report which describes various loan programs and how you may use the funds.

Short List of Leasing Programs Thousands of People Search for Everyday (Hey Google I’m not “keyword stuffing”, I thought it would help clarify my visitor’s leasing options)

• Commercial equipment leasing
• Copier lease
• Dental equipment leasing
• IT equipment leasing
• Forklift lease
• Lease medical equipment
• Lease office equipment
• Leasing kitchen equipment
• Manufacturing equipment leasing
• Photography equipment leasing
• Restaurant equipment leasing
• Small Business equipment leasing
• Software leasing
• Used equipment leasing
• And more

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Business owners who excel have a growth strategy. Get a business coach who’s a financial growth expert you trust on your team to help you really understand your company from an opportunity perspective.

After you read my brief example below, answer this question. Does this confused business owner have a growth strategy?

My business coaching for you is you’re either growing or declining in business and there’s no such thing as status quo or equilibrium. So choose growth. You need to be actively pursuing a growth strategy at all times.

I attended an accounting seminar in Oakland, California, on Wednesday, and I want to share with you how getting stuck on erroneous beliefs about how you should make investments can be a train wreck for your profits.

“The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot

be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of doubt, what is laid before him.”

- Leo Tolstoy 1897

The above quote is a perfect lead in to small business coaching by telling you about a man who had a glaring limiting belief about how to make financial investments. This particular gentleman at the seminar contradicted the speaker on several occasions when she gave very good advice. The financial expert’s name is Sandra.

Sandra’s advice in this instance was don’t pay cash for your long-term assets like business equipment. She said to everyone that you should finance or lease your investments instead. Here’s the reason. It’s that using cash when you shouldn’t’ can cause unexpected shortfalls in your cash flow months after you’ve spent your “doe.” Use your cash instead to hire an employee to operate the equipment you lease or purchase.

Well this gentleman was stuck on how it is better to save-up money to buy a piece of equipment for his business. I didn’t get his name or the name of his business. But he was really adamant about not paying any interest at all. His philosophy sounds good. Right?

And he led several other business people in Sandra’s financial training seminar astray with his “fearful mindset” because he was so emphatic about not paying interests and making monthly payments on a business loan. This guy’s idea does sound somewhat appealing. Right?

And since he was so unwilling to listen to Sandra’s small business coaching, he never learned why his belief is so terribly flawed.

Small Business Coaching Advice

Saving to make investments to avoid paying interest can lead you straight into bankruptcy court. Here’s where the gentleman is flawed in his thinking.

Let’s say that you want to buy a piece of equipment which is a $20,000 machine which will help you generate more business. And it takes you 40 months to save up to purchase the machinery.

To make it simple for the both of us, I’ll begin my small business coaching example at the beginning of the year. Starting January 1, 2011, each month you put $500 into an account for the purchase of this $20,000 device. So you will be able to purchase this contraption at the beginning of May, 2014. That’s 40 months times $500 equals $20,000. And let’s assume for simplicity sake you won’t be earning interests on your savings account.

Now here comes the flaw in this gentleman’s thinking. If you had financed the equipment on January 1, 2011, you would have been able to generate more sales during the 3.4 years it would have taken you to save for the purchase of the $20,000 equipment.

And now let’s say this $20,000 shiny gadget would have enabled your company to make an additional $200,000 increase in sales per year. Well because of your limiting financial belief that you should save up for buying your machine instead of financing your purchase, you would have lost the opportunity to earn more than $650,000 in cash.

And in three years and four months, the price of your apparatus probably would go up and the business opportunity to increase your sales may no longer be available to you because your competition will have locked down the market.

This story about limiting financial beliefs illustrates the power of small business coaching and how financing or leasing equipment at the point you identify the growth opportunity can help you grow your business faster and more profitably. Even if you were able to save the $20,000 in half the time by saving $1,000 per month instead of $500, you still would have lost a significant amount of money by not making the investment on January 1, 2011. And the amount of interest on the $20,000 loan to purchase your equipment would be minute in comparison to the income potential of making the purchase straightaway.

What Are the Financial Misconceptions Limiting Your Business Growth?

Again, my small business coaching for you is you’re either growing or declining in business and there’s no such thing as status quo or equilibrium. You need to be actively pursuing a growth strategy at all times.

Who do you rely on for small business coaching and great financial ideas?

I want to share this business owner’s story with you because I see how business owners and entrepreneurs get influenced by great sounding ideas about how to bootstrap their way into a venture or save to make investments, but they don’t consider the opportunity cost of capital. That is you could be generating greater profits right away through leveraging other people’s money.

Sign-up for a complementary Business Growth Opportunities  coaching session to help you make better financial decisions for your company. I can help you:

-       analyze your growth opportunities

-         perform budget forecasting

-         improve your business credit

-         provide your best financing options

-         and more…

It’s true that confused business owners really do pass up huge opportunities to earn thousands of dollars each year because they won’t listen to expert financial advice. Does that sound like you?

So you must face the tough realities in your business and maintain a growth mindset to be successful. And the SBA reports that 90% of businesses fail in the first five years. Remember, your business is either moving forward or falling back. There’s no such thing in business as status quo.

Check out my Business Growth Strategies Report for great ideas on how financing could help your company grow.

Bookmark It

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Related posts:

1. Your Small Small Business Coaching Growth Strategy Wake-up Call

Business owners who excel have a growth strategy. Get a business coach who’s a financial growth expert you trust on your team to help you really understand your company from an opportunity perspective.

After you read my brief example below, answer this question. Does this confused business owner have a growth strategy?

My business coaching for you is you’re either growing or declining in business and there’s no such thing as status quo or equilibrium. So choose growth. You need to be actively pursuing a growth strategy at all times.

I attended an accounting seminar in Oakland, California, on Wednesday, and I want to share with you how getting stuck on erroneous beliefs about how you should make investments can be a train wreck for your profits.

“The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of doubt, what is laid before him.”

- Leo Tolstoy 1897

The above quote is a perfect lead in to small business coaching by telling you about a man who had a glaring limiting belief about how to make financial investments. This particular gentleman at the seminar contradicted the speaker on several occasions when she gave very good advice. The financial expert’s name is Sandra.

Sandra’s advice in this instance was don’t pay cash for long-term assets like business equipment. She said to everyone that you should finance or lease your investments instead. Here’s the reason. It’s that using cash when you shouldn’t’ can cause unexpected shortfalls in your cash flow months after you’ve spent your doe.

Well this gentleman was stuck on how it is better to save-up money to buy a piece of equipment for his business. I didn’t get his name or the name of his business. But he was really adamant about not paying any interest at all. His philosophy sounds good. Right?

And he led several other business people in Sandra’s financial training seminar astray with his fearful mindset because he was so emphatic about not paying interests and making monthly payments on a business loan. This guy’s idea does sound somewhat appealing. Right?

And since he was so unwilling to listen to Sandra’s small business coaching, he never learned why his belief is so terribly flawed.

Small Business Coaching Advice

Saving to make investments to avoid paying interest can lead you straight into bankruptcy court. Here’s where the gentleman is flawed in his thinking.

Let’s say that you want to buy a piece of equipment which is a $20,000 machine which will help you generate more business. And it takes you 40 months to save up to purchase the machinery.

To make it simple for the both of us, I’ll begin my small business coaching example at the beginning of the year. Starting January 1, 2011, each month you put $500 into an account for the purchase of this $20,000 device. So you will be able to purchase this contraption at the beginning of May, 2014. That’s 40 months times $500 equals $20,000. And let’s assume for simplicity sake you won’t be earning interests on your savings account.

Now here comes the flaw in this gentleman’s thinking. If you had financed the equipment on January 1, 2011, you would have been able to generate more sales during the 3.4 years it would have taken you to save for the purchase of the $20,000 equipment.

And now let’s say this $20,000 shiny gadget would have enabled your company to make an additional $200,000 increase in sales per year. Well because of your limiting financial belief that you should save up for buying your machine instead of financing your purchase, you would have lost the opportunity to earn more than $650,000 in cash.

And in three years and four months, the price of your apparatus probably would go up and the business opportunity to increase your sales may no longer be available to you because your competition will have locked down the market.

This story about limiting financial beliefs illustrates the power of small business coaching and how financing or leasing equipment at the point you identify the growth opportunity can help you grow your business faster and more profitably. Even if you were able to save the $20,000 in half the time by saving $1,000 per month instead of $500, you still would have lost a significant amount of money by not making the investment on January 1, 2011. And the amount of interest on the $20,000 loan to purchase your equipment would be minute in comparison to the income potential of making the purchase straightaway.

What Are the Financial Misconceptions Limiting Your Business Growth?

Again, my small business coaching for you is you’re either growing or declining in business and there’s no such thing as status quo or equilibrium. You need to be actively pursuing a growth strategy at all times.

Who do you rely on for small business coaching and great financial ideas?

I want to share this business owner’s story with you because I see how business owners and entrepreneurs get influenced by great sounding ideas about how to bootstrap their way into a venture or save to make investments, but they don’t consider the opportunity cost of capital. That is you could be generating greater profits right away through leveraging other people’s money.

Sign-up for a complementary Business Growth Opportunities coaching session to help you make better financial decisions for your company. I can help you:

-      analyze your growth opportunities

-      perform budget forecasting

-      improve your business credit

-      provide your best financing options

-      and more…

It’s true that confused business owners really do pass up huge opportunities to earn thousands of dollars each year because they won’t listen to expert financial advice. Does that sound like you?

So you must face the tough realities in your business and maintain a growth mindset to be successful. And the SBA reports that 90% of businesses fail in the first five years. Remember, your business is either moving forward or falling back. There’s no such thing in business as status quo.

Check out my Business Growth Strategies Report for great ideas on how financing could help your company grow.

Bookmark It

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1. Your Small Business Coaching Growth Strategy Wake-up Call

Now don’t get tricked into thinking because you’re a home-based business or a single person services company you don’t need to develop a realistic budget. Negative cash flow can be a crippling threat to your new venture.  And you must craft ways to deal with it in advance.

No matter how small or large your company is, you still need to pay very close attention to this serious financial advice.

Cash Flow Projections Can Avoid Negative Cash Flow

Negative cash flow results when you spend more money during the month than what you generate (net income). When you prepare a budget in advance, you won’t be surprised by money being spent or investments you make that you were not anticipating.

Now what I’m recommending here you do is figure out when your business will run out of cash in the planning phase instead of when you’re in the middle of trying to execute on your business plan.

And conduct your strategic thinking by modeling your forecasts and adjusting your estimates in a spreadsheet. Not while you’re in the middle of a fire fight in running your business. This financial analysis process will help you analyze how your different business assumptions can drastically affect your need for capital and your timing when you should add staff like engineers, office managers, and administrative assistants.

Don’t just wing it and pray it’ll all work out for you.

Types of Budgeting

There are two types of budgets:

• Zero based budgeting
• Historical budgeting

Zero Based Budgeting

If you’re just starting out in business, then a zero based budget is what you’ll create first to anticipate periods of negative cash flow. Zero base means you don’t have any prior historical financial numbers to plug into your budget. So you need to figure out what will be your starting numbers. I’d be happy to talk with you about how to get realistic numbers for your start-up forecasts.

Your zero based budget will consist of three financial statements:

• Income statement — profit and loss or P&L (like a movie)
• Balance Sheet (snap shot)
• Cash flow statement (tells you what happen with your cash during the month)

Income Statement:

The income statement is like a movie of what happen in your business during the month. So you’ll have to estimate your sales, cost of goods sold (direct costs), marketing and sales expenses, and general an administrative expenses such as accounting, legal, and training (indirect costs).

Balance Sheet:

Second, create your balance sheet which is like a snap shot of your business at a moment in time. So you will craft a zero based balance sheet.

Assets:

You’ll budget for all your assets like cash, accounts receivables, inventory, furniture and equipment, etc.

Liabilities:

Now estimate your current and long-term liabilities like payroll, accounts payables, and long-term debt such as a business loan.

Equity:

Your owner’s equity will be the amount of your own funds you’ll give to your new venture.

Now your balance sheet has to balance. Right? So assets equals liabilities plus owners equity.

Cash Flow Statement:

Finally, you need to include a zero based cash flow statement. Your cash flow statement tells you what happened to your cash during the month based on changes in your balance sheet.

Here’s the time when you should be really concerned. And that is when your cash flow from operations is negative.

Now this is your zero based forecast. And you’ll only have to do this one time. So next year you’ll engage in historical budgeting.

Historical Budgeting

So that was all about zero based forecasting where you were starting out in your first year of business. It’ll help you predict months when you may experience negative cash flow. After the first year, you will be doing historical budgeting. This means You’ll begin with your financial statements from last year and plug them into your budget forecast.

Then you’ll increase any financial numbers where you believe you can grow your business like sales, inventory, equipment, personnel, accounts receivables, and accounts payable. And then update your personnel numbers to reflect new hires that will help you grow your sales.

Get Help With Budgeting

No matter how complex or simple your business, you need a budget to avoid negative cash flow. Because so many people today are looking at starting their own business, I’m afraid that many will be doomed before they start.

You can sign-up for my complementary Forecasting Your Budget consulting session. I will help you develop forecasts for your business which will help you budget everything you’ll need to be successful and steer your business through periods of negative cash from operations.

And your financial forecast will help you anticipate financing needs and pin point when you may need outside funding to avoid negative cash flow. You can review my Financing Strategies Report to understand if debt or equity financing will be necessary to successfully execute on your business plan.

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Well the answer is most of the time a simple response. No. Keep your precious cash to take advantage of supplier discounts and fund strategic projects in your firm. You may need your cash to hire a new employee or pay for training costs which could make your staff more efficient. And a strategic project, lower inventory prices or service efficiencies, new employee, or better trained team in turn could dramatically lower your direct costs which would have a bigger positive impact on your company’s profitability.

You know that paying down long-term debt faster won’t improve your business profitability. Right? And using cash in this way has a negative impact on your cash position.

You need to first thoroughly understand your market and how supply and demand factors may shift from month to month and year over year in your markets before financing or spending cash. Macroeconomic conditions and microeconomics in your local market can be another factor which will influence your decision to finance or dole out cash. The current and future economic trends for sure play a role in my determinations as a financing professional to move forward with your funding request.

It is something I’d definitely include in my lending analysis before recommending you to a funding committee.

Now business debt includes current liabilities and long-term liabilities. I’m sure I don’t need to tell you that you must pay your current liabilities every month. Avoid late fees and take advantage of supplier discounts for paying early. Current liabilities include credit card payments, rent, workers compensation payments, etc.

But using cash to pay off long-term debt or to purchase equipment can be foolish. Hold onto your cash for more strategic purposes, to survive a temporary slow down in customer demand, and to take advantage of discounts from your suppliers.

Cash Flow Is King

As long as your cash flow from operations covers your principle and interests payments, you should leverage financing or lease equipment when possible.

Without getting too technical, you need to know whether outlaying a large sum of cash will throw your “current ratio” out of whack. So you need to make sure your “current ratio” stays align with industry standards and with your local market. The “current ratio” is what I use as your lender to measure your ability to pay off debt with your current assets.

Now another very important ratio I rely on to measure your ability to pay back debt on-time is the “debt to equity ratio.” This ratio helps me to verify how much “skin you have in the game” to pay back your current long-term debt and any future debt which would be added to your capital structure. Cash purchases and equity draws could put your business in a bind when it comes to future financing or investor capital, depending on the cash outlay and other debt on your balance sheet.

And just because your net income is positive and even substantial, you may not have the actual cash in reality. Yes, financial statement analysis is sometimes very tricky. For this reason, cash flow analysis is also another key step in deciding whether to payoff debt, purchase assets in cash, or finance or lease.

In short, I would say that before making large cash purchases or pay down long-term debt that you must perform financial and sensitivity analysis to know how using large sums of cash and/or signing on for additional debt financing will affect your immediate and near term business risks.

Why Do You Need Help With Debt Vs. Cash Decisions?

Well you don’t want to end up in a cash strapped position. Right? You know my financial company provides financing for equipment, commercial property, and business lines of credit. I can help you clarify your debt verses cash decisions.

Get expert advice. Sign-up for a complementary Help With Debt Vs. Cash Financing session with me today. And I will address your specific concerns with your debt verses cash decisions.

You can check out my complementary Business Survival Report which gives you an overview of the financing options you have as a business owner or commercial property investor.

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Cash Flow Financing Tips

If you allow your customers flexible terms because they have the power to demand you wait for your money (the government or large company), then you need a cash flow financing solution to help you bring in cash to pay monthly expenses and your payroll. In the finance world we say that “rent and salaries don’t float.” And I’m sure nobody understands that better than you at this time.

Now you may have very good strategic reasons to allow your customers to pay slow. But it’s always best practice to review your accounts receivable process, policies, and procedures to do a better job in invoicing and staying on top of customer payments.

The first question I’d ask you is whether you know your fast paying clients verses your slow paying clients. Look at the relationship differences your company has with each group of clients: speedy verses unhurried in paying you. Is there something here about your accounts receivables policies you can restructure to shorten the amount of time your leisurely paying customers enjoy right now by holding onto your hard cash?

I ask this direct question because you want to base your cash flow financing request on customers who pay you in 15, 30, 45, and 60 days or more.

And do you track the date they were first invoice by your company and can you clearly show me how many days your customers are past due?

Cash flow loans like factoring, purchase order finance, and inventory finance are based primarily on your customer’s credit worthiness. That’s right, your company’s credit plays a very small role in whether you get the cash or not. And this type of financing is especially beneficial to start-ups and companies with virtually no assets to pledge to secure a loan.

You know what you’re doing in reality is extending credit to your late paying customers. So do they deserve an interest  free loan from your “cash strapped” firm at this time? And have you performed a credit check recently or truly understand the viability of each firm you’re extending credit?

One huge value for you which comes with cash flow financing is that I can help you evaluate the credit worthiness of your customers you decide to include in your cash flow financing program.

Because in business as you already know things change for better or worse. And they can change very rapidly you know.

Get Back Into the Cash Flow

The one loan program that’s fueling businesses today is the cash flow loans. Get back into the money flow today with my Money Tree cash flow solutions. I will help you identify customers you want to pick for your financing solution and share all the fine points with you about my Money Tree cash programs.

Call me today to find out more about how my Money Tree cash flow program can help your situation. You can also sign-up for a complementary Money Tree Cash Flow consultation.

I will share with you all the best practices I know in helping you better structure and manage your business money flow.

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It’s not enough to know how much cash you have in your pocket right now. Lenders want to make sure you manage your accounts receivables effectively and pay your creditors on time.

How Does Accrual Basis Accounting Help Your Lender?

Well your lender wants to verify that your business makes enough money on a monthly basis to pay back your loan. By looking at your financial statements, lenders can quickly identify negative and positive financial trends in your business. Lenders are looking for good growth trends over the prior 12 to 24 months.

As lenders, the question we want answered is whether your business or commercial property produces enough cash on a monthly basis to pay back your loan. Your financial reports may indicate your business is profitable, but you may be cash poor. And it could be only a matter of time before your business runs out of cash and sputters to a dead stop.

If you’re in a cash strapped situation right now, a cash flow loan based on your accounts receivables may be the solution for you to help you rescue your business.

Two Critical Financial Functions to Manage In Your Business

The two main financial areas I want to make sure you oversee effectively in your business and with your commercial property is your accounts receivables and accounts payables.

Accounts Receivables:

Accounts receivables is the most important financial management function in your business to control. It’s about doing every thing you can do to ensure your customers are paying you on-time.

Accounts receivable best practice is critical to invoice your customers on a timely basis. Don’t wait until the end of the month to bill your customers. You may be surprised, but some business owners have a fear of invoicing their clients. If your industry allows it, invoice immediately. At minimum invoice on a weekly basis to improve your cash flow.

Train your customers to pay your invoices on-time.

For your commercial property tenants, you need to make sure you clearly communicate in writing your policies on when your tenant must pay the rent and other expenses that your tenant is responsible for paying. If your tenants don’t pay you on-time, then you can’t pay your lender as promised.

Accrual Basis accounting says that you recognize the revenue at the time you complete the work or deliver the product verses when you receive the cash from your customer.

Accounts Payables:

Accounts payable should be consistent. Align your money coming in with your money going out. Remember that “rent and payroll don’t float.” And you must pay your bills the same time every month to avoid late fees on credit cards for example.

You are the main controller in your company. Do you review every bill that comes into your company or do you simply hand off this task to your bookkeeper? It would be a mistake on your part to hand over your bills or bank statements to your bookkeeper without first approving each invoice from your creditors or correspondence from your bank.

And banks do make mistakes. You need to verify accuracy of charges and deposits. And you can’t expect your bookkeeper to know the intimate details of your business.

Accrual Basis accounting requires that you recognize expenses at the time the expense is incurred whether you have actually paid the expense or not.

Financial Analysis

Accrual accounting is the only accounting method which allows you to perform financial analysis. You can compare your performance to prior periods like comparing the current quarter to the same time period last year.

Financial analysis is always performed on a loan or refinance based on the accrual basis because your lender wants to be able to compare your books with similar businesses in the same industry.

At any moment and time in your business, you’ll be able to know where you stand in terms of profitability. You will have the control you need to make wise business decisions based on accurate financial information. You’ll know where to cut costs and where you should invest, which means you need to look at your financial reports on a regular basis.

Get Aligned With Your Business Performance

If you don’t understand the process, procedures, and software applications involved with accrual accounting, then you need to get help immediately. Accurate and timely financial accounting is about business survival.

You need to get a copy of my Business Survival Report right now to better understand the things you need to do for tracking your revenues and expenses effectively so you can get commercial finance for your business or a commercial property loan when you need it.

The other thing I recommend for you is to sign-up for my Financial Management Tune-Up consulting session. I’ll share with you my best practices and the step-by-step processes I recommend to better manage and get a good handle on your revenues and expenses in your business through accrual accounting.

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