Money Management How to Respond to the Global Financial Meltdown Submitted by: Money Management Solutions, Inc.
(OPENPRESS) February 13, 2009 -- While the media is whipping everyone into a frenzy over the global financial meltdown is NOT the time for business owners to panic. This is the time to be smart as a Fox, fast as a Gazelle, as prudent as Ben Franklin and as innovative as Thomas Edison.
Forget the doom and gloom forecasts for "The Economy" or even what Wall Street is doing. The DOW will recover as it always has and as for The Economy,' the plain fact is no one person can control THE ECONOMY. What the economy consists of is the smaller economies of individual businesses and households like yours and that is something you CAN control.
Money Management Response # 1 PROMOTE!
The most serious money management mistake you can make in your business right now is to cut back on or stop promoting in an effort to save money. That is what your competitors will be doing, cutting back or stopping their marketing campaigns. Take advantage of the reduced advertising "clutter" and be the one voice your current and potential customers will hear. Allocate sufficient funds from your weekly income to promote your business.
Let's face it, no statistic stays stable for very long. It will either decline or it can be propped up or pushed up higher. Take Gross Income for example. When you continue to promote, you are taking action to push the income statistic UP. When you stop promoting the statistic will eventually start falling and you will start losing income.
It takes awhile for the momentum of a promotional to get moving, so continuing the momentum is much better than starting cold and having to wait for the momentum to build. 25 years ago the advertising rule of thumb was that you had to reach a customer with an advertising message a minimum of 3 times before they would take action. That was before the tremendous increase in advertising clutter bombarding consumers today.
Now it takes 6 or 7 times for a customer to get your message and respond, and if you are reaching them with a postcard once a month for example, then that is 6 or 7 months you will have to work to rebuild the momentum to see a substantial response. That is why it is FATAL to stop promoting for any length of time.
Money Management Response # 2 Pay Off Past Due Bills and Debt
Easier said than done you say? Not when you use a simple technique called Dateline Paying' to do it. Dateline paying is a simple method of paying oldest bills first, based on the due date. The dateline tells you how far back in time your past due bills go. And yes, credit card debt should be treated just like any other past due bill. There are a few simple steps to this strategy that anyone can do.
Step 1 Make a list of all your past due bills and credit card debt. Use a report from your accounting program or a spreadsheet of some kind so you can sort them by due date. Be sure and put in a bill for more than the minimum payment for each credit card or line of credit.
Make the credit card bill for the amount you want to try to pay over the few weeks before the payment is actually due. For example, if your minimum payment is running at $400, put a bill in for $600.
Step 2 At the end of each business week, carve off 15% of the income to use to pay past due bills and debt. Use the remaining 85% to pay current operating expenses to keep the doors open, the lights on and the telephone ringing to get in more income. Be sure and use some of the 85% for promoting your products and services to keep customers buying, and set a bit aside as a cushion to handle emergencies.
Step 3 Use the 15% to pay the debt by dateline oldest bills first. Always use a portion of it to pay suppliers and part to pay credit card debt.
Pay a bit against credit card debt each week using on-line paying. Why? Because you stop the daily interest compounding on the amount that you paid. This can save you a lot of money in unnecessary interest charges over time. It also keeps you from being late on your payments and avoiding the late payment charges. In addition, it eliminates the scrambling to come up with a big chunk of cash to pay the credit debt on the week the statement says the payment is due.
Pay past due bills from suppliers oldest bill first. The only exception is a supplier who refuses to ship more product that you need in order to produce more income, or one who is threatening legal action. Those are dangerous situations that must be handled immediately. Systematically working at paying both ends of the dateline, 15% to past due bills and 85% to current operating expenses, gradually moves the dateline forward to present time until you are current on your bills and out of debt.
Money Management Response # 3 Do Income Planning Every Week
Working out how to raise your income so that you have an increasing amount of money to use to operate is one of the most overlooked steps to in effective money management. Income planning is easy if you know how to do it.
Step 1 - Accurately predict how much money is needed to operate the company this week and every week in the future. This identifies the income target. Figure out exactly what has been spent, by category, over the past year. This becomes the budget. The correct definition of budget here is: the amount of money it takes for the organization to function and to attain its goals. That is also called the break even point and tells you the minimum amount of income required just to stay afloat. This is the first step in effective money control management. Be sure and include adequate funds for promotion in the budget, and an additional 10% to do better than break even. Divide this number by 52 weeks to find out what the weekly Income Planning Target is.
Step 2 From the Gross Income that was banked this past week, carve out the amount needed to fund promotion. Then decide exactly the way these funds will be used to get in income this coming week. Also decide what products or services to promote based on customer demand, profitability and ease of delivery to the customer.
Step 3 Set sales and delivery targets and quotas for your employees. Figure out how many products or services have to be sold to make the income planning target and then assign the sales targets to the sales and delivery staff and have them report their production so you can see who is really producing as required. Here are a couple of examples:
If a dentist has an income planning target of $15,000 for each week, and their average patient visit generates $147.00, then divide $15,000 by $149 and they have to see a minimum of 102 patients per week to make the target. If they are only open 4 days, that means they have to treat an average of 26 patient visits per day.
If a rug cleaning service has an income planning target of $4,500 for each week, and their average service call generates $125.00, then divide $4,500 by $125 and they have to deliver a minimum of 36 cleanings per week to make the target. If they deliver service 5 days a week that is an average of 8 service calls per day.
It is advisable to keep a weekly statistical graph for each employee that sells / delivers that shows the dollar target they were assigned and their actual production in dollars. Percentages cannot be deposited in the bank, so use actual dollars. For scheduling staff, in a health care practice for example, the weekly target should always be that the scheduling book be at least 95% full.
Money Management Response # 4 Stash Some Cash
The definition of an emergency is A PREDICTABLE EXPENSE THAT WAS NOT PLANNED FOR. Emergencies always occur: equipment breaks, supplies run out, a storm causes the office to close for a few days, the delivery van has to have new tires.
Set aside 10% of every dime that comes in the door in a savings account as a cushion to fall back on in an emergency, for future expansion and for your personal long-term financial freedom. Then try like the devil to increase your income so you never have to spend the cushion. I guarantee you will sleep better at night just knowing that cushion is there while the hurricane of news about the global financial meltdown roars outside your door.
Furthermore, CASH IS KING! If you have to spend part of your cash cushion, be sure to negotiate a big cash discount. There is no law written anywhere that the sticker price is what you have to pay. Businesses out there are scared that customers will stop buying because of the economic crisis, so they will welcome you business and welcome your cash even more. They should at least give you a 3% discount because they don't get hit with credit card merchant fees if you pay with a credit card.
To recap, your money management solution response to the global financial meltdown includes systematically finding ways to increase your income to do better than break even, setting some cash aside for emergencies, expansion and your personal financial freedom, and working at paying both ends of the dateline, 15% to past due bills and 85% to current operating expenses. Gradually move the dateline forward to present time until you are current on your bills and out of debt. Seems simple right? And it is simple. It will, however, take personal discipline and commitment to keep your business' economy on a solid footing while the rest of the economy is in crisis.
This system is quickly learned, and implementation takes very little time each week. The business owners who use our Money Management Solutions software program report that it takes as little as 20 minutes each week. Done correctly and consistently, the end result is always having lots of cash on hand, all bills paid, and plenty of money in reserves to finance what you really want to do with your money; not just pay bills. Who doesn't want that, right?
Sandra Simmons, President of Money Management Solutions, Inc. and creator of the Money Management Solutions software program, specializes in helping business owners manage their cash flow to achieve their financial goals in any economy. To learn more visit www.moneymgmtsolutions.com or call 727-448-1011.