Learn & Do

Summary:
This article will look at accounts receivable factoring. A mechanism that helps business to free up cash flow.


The pace of change in today’s business environment is inarguably staggering. Growth of e-commerce; changes to business structures; evolving relationships; changes to funding arrangements; access to capital and its sources. All occurring at increasingly exponential rates. Fast. The fact that there is more computing power in the average notebook computer today than it took to put a man on the moon should illustrate how fast things change, and whether in senior management or a business owner you need to keep pace.

In particular, you must stay abreast of changes in your competitive environment, and remain fully apprised of mechanisms that will enable a response fast enough to keep you in the game. This article will look at one of those mechanisms, access to capital and through that, free cash flow. In doing so we’ll use an intuitive framework, peppered with some economics. Why? Intuitive analysis is ideal for answering specific questions; in this case ‘What will best enable my firm to manage rapid changes to competitive economic conditions and stay in the game?’ And I’ll use economics because of Steven Levitt, America’s most outstanding economist under-40, who along with Stephen Dubner considers that ‘if morality represents how we would like the world to work, then economics represents how it actually does work.’

By speaking to specific anchor points, strategic issues affecting the access to capital problem can be explored and initiatives developed to allow a timely solution. In short, it’s the fastest and most accurate way to answer the question you face, because it’s easier to understand and doesn’t get bogged down in extraneous, unnecessary analysis.

One of the anchor points in contemporary business is access to capital, especially when it helps maintain free cash-flow. In many respects they are one and the same thing, the difference merely being access to capital is a necessary precursor to free cash flow (you can’t use it until you have it). And everyone needs it. Payroll, materials, overhead, and debtors taking anywhere from 45 to 120 days to settle their accounts, using your firm as a surrogate line of credit.

Access to capital becomes an even larger issue in the business environment described earlier, where speed to market and the ability to ‘tool-up’ (increase production) are crucial to meeting ever shrinking delivery timelines. Many of us have experienced the elation of being awarded a large tender, something that will fill the order book for the next six months, immediately followed by the hangover that comes with the realization that the firm will struggle to fund the project based on existing and forecast cash flow.

Small-to-medium enterprises encounter particular problems when it comes to cash flow and capital access to fund growing operations, to the point where lack of access is an issue that can threaten continuing operations, even in a rising market. Balance sheets take time to build, and it is against this security that banks will lend.

Developing initiatives to tackle this problem involves looking at some existing options and making a comparison, arriving at a decision that best enables a solution to the problem at hand. In this instance, a comparison of bank funding against invoice factoring provides insight into possible solutions for the capital access / cash flow problem.

Everyday economics can inform this comparison, particularly the study of incentives - how people get what they want, or need, especially when other people want or need the same thing. Let’s start with banks.

Bank lending requirements are invasive and restrictive. They often engender a feeling that you have to ‘bare all’ to borrow a nickel. They would naturally dispute this claim, but let’s return to the incentives – what is their incentive for lending you money? To earn a return off your efforts. Certainly nothing short of this, and these days they also use lending as a lever to win the biggest ‘share of your wallet’ from their rivals, trying to have you as a customer for life, ‘growing with you and your business.’ When you add the fact that a surplus of people requiring credit exist in the market, they can afford to be choosy and do the economically rational thing – be risk averse. Risk aversion drives the mortgage a bank puts on your house to ensure they get paid, and is what drives them to lend against strong balance sheets. They look at balance sheets in an accounting fashion, weighing up tangible, realizable, liquid assets like cash and real property, apply a formula and lend in accordance with how the result stack up against their risk matrix. Your continuing success is of interest to them only to the extent that it enables you to service (and ultimately repay) your debt, generating an ongoing margin on their investment.

An overly simplistic description, the point being to illustrate that all of this takes time, and is structured around heavy regulation and evaluation constraints. Lots of time, and lots of influential rules. First, for you to build your balance sheet, and second, to get it appraised to a point where your banker might open or extend your credit facility. During that time, the window of opportunity to fund that large project, manufacturing expansion, or operations in a rising market quickly passes, leaving you out of pocket your application fee and if successful, servicing an even larger debt you might not need.

Turning to invoice factors, the incentives might seem the same, but how they view obtaining their return is slightly different. While banks rely on their acumen in accurately predicting your ability to repay a debt, invoice factors rely on their skills in accurately assessing the ability of your customer base to pay you. A lower perceived risk aversion with invoice factors plays a small part, but it is how the factor views the overall situation that is different from traditional lending. To begin with, factors recognize your accounts receivables as assets, just like the bank. The difference is that an invoice factor considers your receivables a quickly realizable asset, and is prepared to purchase the rights (and risks) of collecting your outstanding invoices.

Put another way, in economic terms the invoice factor recognizes your receivables as assets with a future value in cash flow terms, and provided their assessment of your customers is favorable, they are prepared to effectively ‘provide a market’ for those assets. This ‘market’ closes with your transaction selling them the invoice however; there is no secondary market like junk bonds or other derivatives.

Access to capital through factors is more expensive than traditional lending, and this is due to the risk premium attached not to you, but your customer base. This is not surprising, and you and I would probably do the same. Returning again to economics and our study of incentives, a rational person requires a premium for every extra unit of risk they take on. A bigger incentive for a perceived higher risk. In the case of factoring, the premium is higher than equivalent bank lending rates, as the risks are considered slightly higher when the security is not real property, rather a first position claim over all of your receivables. Your risk exposure is lower than collecting the receivables yourself (invoice factors are very good at mercantile operations) – the higher fee charged by the factor compared to the bank is simply the premium you must pay to lower that exposure.

The difference that factors provide is speed of access to capital, and what happens when you default. Default on the bank loan, you can lose your business, even the family home. Factoring is not quite as drastic, although the sums of money involved are invariably smaller. There are two types of factoring products available, recourse and non-recourse, and again, the difference comes down to assumption of risk, and the premium asked to assume the risk of non-payment on an invoice. With recourse factoring, you remain liable for non-payment by your customer, and with non-recourse, the factor assumes the risk up to a point, and at a higher premium.

In summary, there are merits and pitfalls in both traditional lending and factoring. These are volatile economic times, and having been burnt a number of times during boom times of the previous two decades, banks are far more risk averse, holding tight reign on their credit standards. So in light of this information, we return to our problem, looking to answer the question: ‘Which of these approaches best delivers the flexibility I require to allow me the opportunity to prosper in a fast-changing business environment?’

For many businesses, the answer lies with invoice factoring, which delivers in excess of $1 trillion in credit across the continental United States. As with all business situations there are caveats, or described another way, arrangements that if not continually monitored can become a comfortable security blanket that might actually be slowly suffocating you.

It is easy to become accustomed to continuing access to cash flow through factoring. It is also easy to feel at ease knowing you are backed by a massive publicly traded institution like your bank. Management and owners of Small and Medium-Sized Enterprises should continually remind themselves that the study of incentives works for them too. Constant review of your capital funding and cash flow arrangements is essential to ensure that the deal you end up with is the best for your firm, and not others. It’s all about getting what you want, or need, especially when other people want or need the same thing.

Summary:
An answering service is what every small business needs. Anyone who has ever worked for a small business, or has owned a small business knows that the answering service is a true God send. Every time you are not able to answer the phone, you take the risk of losing business. With an answering service, you don’t worry about missing important calls. Whether its an emergency or just an important client that needs a fire put out, answering services can meet your need.

Think a...

An answering service is what every small business needs. Anyone who has ever worked for a small business, or has owned a small business knows that the answering service is a true God send. Every time you are not able to answer the phone, you take the risk of losing business. With an answering service, you don’t worry about missing important calls. Whether its an emergency or just an important client that needs a fire put out, answering services can meet your need.

Think about a day with and without an answering service. You are taking a much needed day off and your secretary calls in sick. Your staff is out in the field doing whatever it is they do and your phone is MIA. Your biggest client needs a fire put out and needs it taken care of immediately. If you didn’t have an answering service what would be your options. Cancel your much needed day off and answering the phone yourself. Or, let your answering service handle all the calls and only notify you in an emergency or if a big client calls. Now you can enjoy your day off with the piece of mind knowing that if anything comes up, you’ll be the first to be notified by your very own answering service.

If you don’t currently have an answering service in your bag of tricks, maybe its time to investigate what an answering service can do for you. Believe it or not, answering services are relatively inexpensive. Considering how much money they can either make you by routing important calls to you from prospective new clients or save you by letting you know your number one client needs something done ASAP. Get an answering service today and grow your business with the piece of mind knowing that your answering service will keep you adequately informed of any important incoming calls.

Summary:
Have you ever been at a networking function talking to someone when during the conversation you felt very self-conscious trying to say the right thing?

Have you ever been at a networking function talking to someone when during the conversation you felt very self-conscious trying to say the right thing? Were you afraid that maybe if you said the wrong thing the person might not find you likeable, and therefore not want to do business with you? If you have, I am about to tell you why you should not worry about it. Like the obnoxious song "Don't Worry - Be Happy" from years ago, I want to share with you the reason why being careful about what we say works against us in the networking environment.

Our goal in business networking should be to establish new relationships and through the process of follow-up develop them over time. As with any relationship, being honest plays a very important role in that development.

When we meet someone for the first time, we want to make a good impression. Often we put on our "party face" so that we do. This can often cause us problems that we do not expect. One problem is that when we try to appear to be something that we really do not feel inside of us, we often have a fear that we are going to be "discovered". This fear causes us to feel uncomfortable about the situation and though we may be smiling, we are really cringing inside.

Most people worry that if they just be who they are, that no one can accept them. I argue that if we do not just be ourselves, sooner or later who we really are will slip out and then we will have to deal with the consequences of being discovered. This then leads to a feeling of distrust between people.

Have you ever been in a relationship with a person of the opposite sex where you did not tell them something important early on and later had to reveal it or even worse it was revealed by accident? It leads for difficult times after that and a lot of shuffling and apologizing.

In my opinion, it is better to risk being who I am up front. To let people know exactly how I feel. People, for the most part, have a forgiving nature. They actually want to forgive. If you make a mistake and say something that can be potentially embarrassing, you can always apologize for it and be forgiven. But if you say something that is not necessarily true and are discovered later, your credibility may be permanently damaged.

If you go into a networking environment prepared to be relaxed and genuine, you will find that it is a lot more fun to be there. If you have a plan of action to really get to know people, you will be much more productive in a shorter amount of time. People will feel comfortable talking to you and you to them. In an environment of truth, more people will want to do business with you and to be around you.

Authentic enthusiasm is contagious. You will always appear to be more attractive when you are excited about what you are doing. When you are not worried about making mistakes, you will appear to be happier. Being happy about the situation will help you to smile more, and the smiling face is a natural human attractor.

So next time you attend a networking function, just be yourself. Your results will improve and you will feel better when you leave to go home. Over time, the difference will be measurable in more ways than just your income. You will find that you have more friends than you had ever imagined possible. When it comes time for the referral, your friend will remember you because friends really do refer friends.

Summary:
With modern communication technology comes the popularity of information-based marketing, which is one of the oldest and most effective techniques in getting targeted prospects to sites and converting them into buyers. This is why article writing, submissions and publications are also getting popular.

To all writers and non-writers out there, now is the time to start digging up those creative writing skills back.
With modern communication technology comes the popularity of information-based marketing, which is one of the oldest and most effective techniques in getting targeted prospects to sites and converting them into buyers. This is why article writing, submissions and publications are also getting popular.
There are already many tools that people can use to make the process of distributing their articles more easily. Though this is invaluable in getting the contents more exposure, which is only half of the story.
Let us take a look first at the common mistakes that some people make before submitting their contents to article directories:

1. Confusing the reason to promote the articles with the reason to write them.
In article writing, there are three key benefits why you are promoting them; branding, lead generation and promotion, which are all part of your optimization efforts.
But there is only one reason why you write an article, and that is to inform your audience. If the article is not focused on this primary and most important purpose, it will fail to achieve the three promotion benefits because no one will be interested in reading them.
You need to figure out first how to get people to read what is in your article, then make them click on your resource box. You can achieve this by producing better contents.

2. Failing to maximize the promotional opportunities of article marketing.
You may know already that your articles can help you generate additional links back to your site. But do you know that you can get more visitors and better search engine results from that same articles?
Mention keywords at strategic places. Just be sure not to overdo them. Some are even using anchor texts which is also an effective method. But it is important to know that majority of the directories are not able to support this.
Remember that is not only about the links back to your site. Part of doing well in your article marketing is getting picked up by publishers with a large number of audiences and gaining the ability of leveraging other brands because of the quality of your work. Better search engine results also are great benefits.
But these things do not put much money in your pocket. There are other factors that can turn your article marketing efforts into an opportunity that can boost your earnings. Not just increase the number of visitors to your site.
Start out with a plan and see to it that your article will serve the function that you intended it to have.

3. Publishing content that does not help your readers.
Maybe in the process of writing articles, you are thinking that all that is you wanted is links back to your site. And any visitors it can generate are fine.
Guess what? Not all article banks and directories are going to accept your content automatically. Oftentimes, they have some guidelines and specifications on the articles that they are accepting.
You can double the number of sites you can submit to by writing articles that the directories want to share with other people. All it takes is one publisher with a hundred thousand readers to increase your potential audience overnight.
Write the articles that publishers want in their publications if you want your article marketing to work the most effective way for you. This also means you have to obey the standard guidelines, spell checks, researching on a good topic and even hiring a writer to produce a good content on your behalf.
In the end, it is all really a matter of choice on your part. You can start getting a little exposure from increased links back but on a very basic level. Or enjoy massive exposure from a little extra time making quality contents.
It will be your choice. You may not be aware of the fact that an article submitted on directories is not meant to have the same level of exposure as highly-targeted content ones geared on a narrow group of people.
Learn the difference between these two and it will surely help you know what kinds of articles to write and to submit.

Summary:
There are numerous success stories you will hear about businesses making it good on the internet . The troubling thing is, there are maybe a tenfold or even a hundredfold of stories inconsistent to theirs. Many have unsuccessfully launched a business venture that is internet based but only a handful shall succeed. Here are three (3) smart reasons why you should consider paying for your traffic including common-sense methods of showing you how to prepare your website.

There are numerous success stories you will hear about businesses making it good on the internet . The troubling thing is, there are maybe a tenfold or even a hundredfold of stories inconsistent to theirs. Many have unsuccessfully launched a business venture that is internet based but only a handful shall succeed.

Is this because of luck? That is even more remote. It takes good business sense and a lot of help and team effort. Most importantly, it is the eagerness to succeed and the persistence to learn and the willingness to put in a lot of hard work and some money.

However, before shelling out your hard-earned money on advertising, here are three (3) smart reasons why you should consider paying for your traffic including common-sense methods of showing you how to prepare your website.

1. The quickest method for getting customers to your website is to pay for your traffic.

Like Neo, traffic is 'The One' . Without traffic, all your efforts would just go to waste. Every business needs customers, without them you wouldn't have anyone to sell your products to. In the Internet world traffic is the walk in customer. The more traffic you possess the more people you'd be able to sell your products to.

But similar to any business that's in every corner building or in the mall, not everyone that goes in will buy. But for those who do come in to browse your merchandise, most of them will buy your products. It is a clear and known fact.

But, how do you get traffic, traffic great enough that could make a small portion of resulting buyers enough to make a fair profit. Many big companies generate traffic of tens of thousands a day and a measly ten to fifteen percent actually buys, but that small percentage is enough to supply them with adequate business.

Many of these success stories get their traffic from paying others. Yes that's right; you have to spend money to make money. Advertising is the key. The more people who know that your site exists the more people would of course go to your site, that's common sense.

While there are numerous ways to get free advertising for your business, free advertising doesn't generate the same high volume of traffic as paid traffic does. Paid advertisements include such advertising schemes as those offered by Google and Yahoo.

2. In order to take full advantage of the search engines, make sure that your site is properly optimized to rank high before paying for your traffic.

Search engines are the fastest and easiest way for finding what you need on the internet . Search engines are extremely popular because they provide an indispensable service to many people. They are free and easy to use. Because of their popularity, search engines receive many visitors as well as click throughs . With these benefits in mind, it is easy to see why so many companies would pay to advertise with search engines.

Search engines provide information to the millions of users they receive each day. They provide relevant links to many sites that a user may be looking for. If your site's link pops up as one of the top ranked sites on the search results page, you stand a great chance that the user will click your link and go to your site. While search engine optimization is a cheaper and low cost way to get your site a high rank, paying for advertisements will ensure that you will be on the top ranks.

When you pay for your advertisements, it is like paying for guaranteed traffic to your site. This may not seem like a good idea at first, but the benefits of doing so far outweigh the cost in the long run. When you pay for your traffic, you are guaranteed a consistent flow of traffic to your site. You will at no time go without making a sale on any given day.

3. Find and use tools that will aid you in researching relevant keywords for your chosen niche so that you don't waste money on advertising.

Normally, you will be charged with the number of hits a link gets when your ad is clicked, this is known as pay per click. For some search engines, you will be charged with the number of times your ad shows up when a certain keyword or keyword phrase is searched. It is imperative that you have good keyword content in your ad. There are many tools on the Internet which can aid you in using the right keywords at the right moment in time.

All the money you spend in paying for your traffic will not be for nothing. You will get an impressive boost in traffic which will also result in a great boost in your sales figures.



Keith Gloster has stumbled upon a proven system that solves four major problems 99.99% of marketers face everyday which are traffic generation, prospecting, lead generation and follow-up.