Lindsay Burns
Lindsay Burns, Marketing & Sponsorship Specialist

Last week we heard from some community leaders offering tips for entrepreneurs. In preparation for Small Business Week, let’s look at more advice from key business leaders in our community. 

Why is it important for businesses to  pay attention to their energy impact? How much can you save? Check out this video from Efficiency Nova Scotia to learn more.

                        – Efficiency Nova Scotia

There are different financing solutions for different business needs. Here are a few examples from RBC.

1. What do you need money for?

  • To cover short-term expenses like supplies, payroll and rent until my sales generate real cash.
  • To get through the startup phase of my business.
  • My business is seasonal and I need money to get through seasonal slow periods.

Possible solution

  • Operating line of credit

How it works for you

  • Approval in advance to borrow up to set amount.
  • Pay down as cash comes in.
  • Pay monthly interest on amounts borrowed.

2. What do you need money for?

  • To cover and track short-term expenses like office supplies, business travel and utility payments.

Possible solution      

  • Business credit cards

How it works for you

  • Easy access to cash.
  • Track expenses for planning and record keeping.
  • Make purchases interest free until payment is due.
  • Earn reward points.

3. What do you need money for?

  • To buy hard assets necessary to operate my business: buildings, vehicles and equipment.

Possible solution      

  • Term loan

How it works for you

  • Pay off over longer time – avoid tying up credit line/cash flow.
  • Regular payments make it easy to forecast cash flow.
  • Match term of loan to life of asset – pays for itself over time.

4. What do you need money for?

  • New equipment, vehicles technology or furniture to grow my business.

Possible solution      

  • Leasing

How it works for you

  • Good choice when you don’t have the cash flow or do not wish to buy outright.
  • Up to 100% financing available.
  • Often requires little or no upfront cash.
  • Structured to match the useful life of the equipment – pay as you use the equipment.
  • Monthly payment may be income-tax deductible.
  • End of term options provide you with the flexibility to manage equipment needs effectively and efficiently.

5. What do you need money for?

  • To protect my business, my partners and my family in case something happens to me.

Possible solution      

  • Business loan insurance

How it works for you

  • Covers the business loan in the event of the death of an owner or key employee.
  • To a maximum of $1 million.
  • Pays off an insured business debt, preserving personal insurance for other needs.
  • Protects family assets for your successors.
  • Can insure up to 25 key employees.

                                                                                  – RBC

5 tips to manage your cash flow

1. Profitability check

First, make sure your business is earning a reasonable profit. Even the greatest cash flow management won’t help if your fundamentals are out of whack.

Analyze each product and service separately to see whether it’s pulling its weight. Make sure your products are appropriately priced, and work to eliminate inefficiencies. Instead of just chasing sales, chase profitable sales.

In 2007, Mike Whittaker’s company Bonté Foods learned the consequences of poor cash flow the hard way after facing large cost overruns on two major projects.

The company had to act quickly to restore its cash position. It analyzed its profitability and realized it had to raise prices to better reflect costs. Bonté also unloaded lower-margin product lines and launched an efficiency drive while tightening cash flow management.

The changes had a huge impact. Sales in Bonté’s meat division are up 36% since 2009, while gross profit is up almost 6%. “We learned to watch our cash very carefully,” Whittaker says. “You need to always be ahead of the curve on cash flow management.”

2. Do a cash flow projection

Next, prepare a cash flow projection for the coming year. This is your early warning system for cash flow hiccups. Use an Excel spreadsheet or accounting software to plug in expected monthly cash inflows and outflows, including anticipated big-ticket purchases.

Use the projection to anticipate slow periods and plan in advance what to do about them. “Through the year, check your actual cash position regularly—once a week or month—against your projection to see how you’re doing and deal promptly with any divergences,” advises Rohac.

3. Finance big buys instead of draining cash

One of the most common cash flow mistakes is using cash to buy a major long-term asset, instead of getting financing. Even if you feel flush right now, you may suddenly wind up short of cash if you experience a sudden revenue shortfall or rapid growth.

Use your cash flow projection to plan your financing needs ahead of time, not in the midst of a crisis, when bankers may be wary to lend. Rohac also recommends matching the lifespan of a purchase with financing of similar duration.

4. Speed up cash inflows

Getting money into your business more quickly can save you carrying costs on your line of credit. Some tips: send out invoices more quickly, ask customers to pay electronically and charge interest to slow-payers.

5. Raise cash quickly in a crunch

Facing an unexpected cash flow crunch? You can raise cash quickly using various techniques: approach your bank for help; check your inventory and assets to see what you can sell off, even at a discount; ask suppliers or your landlord for extra time to pay bills; or offer your customers a big discount to earn some quick sales.

                                                          – BDC

Join the Halifax chamber of Commerce in celebrating small businesses in Halifax from October 20-24. Register here.

Look forward to seeing you there!

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