OK, here’s the wrap up of this series of posts. The series started with the question: Do you want to have more financial control of your company? Each tip up to now has identified a powerful way to do that, and this is the final tip in the series. It’s too late to stop now, so read on.
I urge you to go back and read the first 4 tips as well, not because you need them to understand this one, but because they’re equally valuable and you should be using them all to enhance your profits and ultimately the financial control of your company. So here’s Tip #5:
Look at your loans and credit lines. Whether from a bank or a finance company, equipment lender or whomever, if those loans have been on your books for more than 2-3 years and their interest rates have not come down significantly, you are overdue to refinance them to get your cost down to market rates. Of course if your balance sheet isn’t in shape that might be a problem. If your bank won’t budge, ask us to introduce you to a more flexible banker. We know some, and they’re getting increasingly competitive as the economy recovers. And keep in mind: a bank’s cash reserves earn nothing if they’re not loaned out.
Another clue: a big bank lending to a small company. You don’t have much bargaining power because your business won’t move the needle for them. That also means your relationship officer doesn’t gain much by going to bat for you. So if they won’t budge, you need to go shopping for a new bank. If you don’t talk banker language, we do that very well. One big bank officer told us we gave him the best loan renewal request package he’d ever seen, and we got the loan renewed despite a loss year for the client, because we helped the banker see the improvement possibilities.
Bonus Tip: Remember, the ultimate financial purpose of your enterprise is to convert cash to assets and to put those assets to work creating more cash than you invested in the first place. Not profits, cash. Profits are the promise of cash to come, but cash is the real profit. And if you don’t routinely analyze your company’s statements of cash flow – say what? – that balance sheet is the best gauge of cash productivity you’ve got.
If this is more number stuff than you want to wrap your head around, but you can see the possibilities, perhaps we should have an exploratory conversation. We wish you strong growth this year with lots of (cash) profits in the bank by year’s end.