Business growth often requires capital, but here’s the thing . . .
Raising outside capital can be difficult, time-consuming, and expensive.
On top of that, there’s a limit on how much capital a company can raise, given its financial history and prospects.
If you are looking to grow your company and you need capital, you’ll be surprised to know there might be some hidden opportunities right under your nose, easily accessible, and fast to implement.
Before looking to outside investors and lenders . . .
It’s worth looking internally for ways to finance your growth through increased company profitability and cash flow.
Identifying opportunities to maximize profitability or increase cash will also maximize the success of your capital raise when you get to that point.
Many businesses overspend on back-office costs because their internal processes are inefficient.
- A company with a manual, paper-based infrastructure spends more on payroll costs than a company that takes advantage of available technology.
- A company with slow-paying customers or slow-moving inventory has its cash tied up, which reduces working capital and increases financing costs.
- A company with unqualified accounting staff pays its CPA firm more for annual audits, reviews and tax returns.
- And a company without proper accounts payable processes is likely sending too much cash out the door too fast.
These examples are just some places you’ll find opportunities in your business to maximize profitability and cash flow and fund your growth by hiring new staff, buying new equipment or buying more inventory.
Here’s how we’ve tackled these issues for our clients:
1. Accounts Receivable and Collections
If you are a B2B company, you likely give your customers payment terms and wait 30, 60 or even 90 days for payment. That’s cash that can be used instead to finance your company’s growth.
Our $6 million data management client was experiencing slow collections, and 50% of their invoices were outstanding for 60+ days.
By implementing better procedures for invoicing and collections, we reduced their Days Sales Outstanding (DSO) by 15 days, increasing their cash flow by $250,000 within two months.
They used the extra cash to pay down their line of credit, saving over $10,000 in interest and fees. Of course, that $250,000 could have also been used to hire new staff, buy new equipment or buy more inventory.
2. CPA Audit and Tax Return Fees
Ask your CPA why their fees were so high, and they will likely tell you your books and records weren’t audit-ready.
Read through the auditor’s management letter comments and the audit adjustments—the more there are, the harder your CPA’s job is and the higher their fees.
Our $5 million global health-and-fitness client saw their CPA fees reduced by $40,000 a year because our firm provided them with clean, audit-ready financial statements resulting in zero management letter comments and zero audit adjustments.
3. Stale or Obsolete Inventory
When you buy inventory that sits around in your warehouse and doesn’t sell through, you not only have cash tied up that isn’t being put to good use, but you also waste valuable money on storage and maintenance.
Our $10 million distribution client was sitting on over $2 million in slow-moving inventory.
We analyzed the profitability of each SKU and identified which items to discount and by how much.
The sale of the obsolete inventory, together with the tax deductions from the write-offs, resulted in over $500,000 in increased cash flow to the business.
4. Manual, Paper-Based Processes
If your business still communicates with customers and vendors using paper methods (sending/receiving checks, bills, invoices, etc.), your payroll costs are likely higher than necessary because of the manual data entry and labor required to input that information into your system.
Our marketing consulting client saves over $75,000 in payroll costs every year because we implemented paperless accounting systems, resulting in reduced headcount.
5. Lack of Checks and Balances
Small businesses tend to have a high risk of cash misappropriation.
Cash goes out the door without proper oversight, approval or review simply because there aren’t enough resources to establish and enforce policies and procedures.
Before they came to us, our nonprofit dance school client suffered through a whopping $700,000 employee embezzlement over the course of three years!
When they became a client, we implemented an accounts payable system and established approval workflows.
The new paperless technology provides full transparency and oversight while safeguarding cash assets and preventing duplicate payments and fraud.
Don’t let back-office costs stunt your company’s growth.
Be sure you have someone on your team who focuses on maximizing your profitability and cash flow while supporting the operations of your business.
Look for practical ways to improve existing systems, policies and procedures, and find ways to do things faster, better and less expensively.
Then, use that hidden cash to fuel your growth!
Struggling to eliminate the cost and headache of managing your accounting staff?
Fighting to reduce the risk of fraud by replacing paper-intensive processes with technology-based solutions?
Is your accounting or finance getting in the way of your company’s growth and profitability?
If so, then schedule a 45-minute discovery call with us.
During our call, we will:
- Review the challenges you face
- Discuss the results you hope to achieve
- Assess the resources and infrastructure you have and/or need
- Decide your timing and budget considerations
- Share our firm’s unique service offerings
What happens at the end of our discovery call?
If we mutually agree that there is a fit, we will:
- Send you a signed NDA and instructions for providing us access to your accounting data
- Review your accounting data
- Present you with a detailed proposal that includes recommended scope of work and fees
After you receive the proposal, we can:
- Tweak the proposal to meet your needs, as necessary
- Send you a signed agreement and authorization to proceed
- Schedule a kickoff call
Isn’t it time to grow your business with your own financial SWAT team?