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FINANCE
How to Prevent Common Cash Projection Mistakes
Cash flow is vital to the financial stability of every business - from the smallest to the largest. Therefore, every entrepreneur should become familiar with the cash flow statement.

Forecasting cash flow is a necessary foundation for future planning, enabling you to measure actual results against goals: meeting specified targets validates your initiatives, while missing targets identifies where improvement is needed.

However, a number of common errors with cash flow projections will result in poor strategic decisions. For example, projecting operating income is often the cause of cash flow blunders. This top line of the projected cash flow statement should represent a realistic profit forecast based on available resources.

The best starting point is a separate projection of revenue and expenses, and subsequently, an examination of changes in receivables and payables. This is accomplished by using figures for the average number of days that receivables and payables are outstanding. Cash flow is different from income because of the lag between sales and collection, as well as the lag between receiving a bill and paying it.

Other cash flow variables are investments and financing. These do not appear on the income projection, so they appear on a cash flow forecast. Investment in a new asset - such as machinery or equipment - subtracts cash. Financing these purchases by borrowing adds to cash.

Those entrepreneurs familiar with the components of cash flow statements can recognize the forecasting limitations, and they will seek professional accounting assistance to overcome these limitations.

 
HOT BIZ TRENDS
Small and Large Businesses Use New Approaches to Learning
 
New insights into learning styles, the use of motivational psychology and the newest tech tools have made corporate training more accessible and learner-centered than ever before. Interested? Look for these and other corporate learning trends in 2018 and beyond:

Mobile learning: Today's learners can access a wealth of information instantly on their mobile devices. Typical applications include on-the-job training and in-the-field troubleshooting.

Microlearning: Microlearning modules for specific learning objectives are typically three to five minutes in length. They offer short, focused chunks of instruction or positive reinforcement, and are ideal for learners with short attention spans.

Social and peer learning: Training programs often integrate blogs and courses from social media platforms such as LinkedIn. Collaboration tools enable teams to learn, create, and discover together.

Gamification: Online games motivate learners through quests and competitions, and make learning fun by offering incentives, certificates, or badges upon completion of modules or courses.

Adaptive learning: Adaptive learning allows individuals to learn at their own pace, focusing in depth on new knowledge and progressing more quickly through topics they're familiar with.

Augmented reality: Augmented reality offers an immersive learning experience in which complex subjects can be re-created in a lifelike environment. For example, surgeons may use technologies like Google Glass and Oculus Rift to polish their skills. Or executives may role-play case studies to hone decision-making and leadership skills.

Corporate training is a key tool for employee retention and engagement, and for change management, as well as a way to achieve business goals. It's a trend to keep up on.

 
WORK/LIFE
You and Stress: A Bad News/Good News Story
Toxic stress can leave a lifelong imprint on the brain and the body, undermining health and contributing to diabetes, depression, obesity, cardiovascular disease, and even dementia. And it's almost epidemic in today's workplace - as much in small businesses as in large corporations.

Consider the following from a recent report by The American Institute of Stress (AIS): "40% of workers reported their job was very or extremely stressful ... and 25% view their jobs as the number one stressor in their lives." As well, says AIS, "Job stress is more strongly associated with health complaints than financial or family problems."

Finally, job stress costs industry more than $300 billion annually.

Factors contributing to toxic stress include job demands, lack of sleep and exercise, and poor lifestyle habits, such as smoking, overeating, and overworking.

Of course, a certain amount of stress is tolerable, even necessary. And stress affects people differently depending on their life experiences, genetic makeup, and other factors. Regardless, overwhelming stress can have a devastating effect on us all. Here's why:

To maintain a physiological steady state (known as homeostasis), the body secretes hormones such as cortisol and adrenalin. These help us adapt, but in conditions of toxic stress, hormones can become unbalanced and ultimately alter brain structure and function.

There is an upside, however: we can develop resilience and reduce the impact of toxic stress through lifestyle changes and regular physical activity.

Indeed, physical activity is probably the best way to maintain brain and body health; working out regularly has been shown to help the brain regenerate areas damaged or destabilized by toxic stress.

So step away from the laptop and hit the gym. It's good for your stress.

 
FINANCE
How Much - and When - to Pay Yourself
 
Let's face it, every entrepreneur wants (and needs) to get paid. This is the foundation for a sustainable business trajectory.

The difficulty comes in deciding how much your business should pay you. Although there's no specific formula that covers all cases, the following standard factors can help you make this all-important decision:

Timing

The first element to consider is timing; your compensation as owner must not negatively impact the health of the business. For instance, in the early planning stage, the company has no revenue but probably has lots of start-up expenses. At this point, it doesn't provide cash to feed you; rather, you are feeding it.

When your operation is generating revenue, sustaining the momentum is paramount. In the first six months or so, the business builds cash for expansion, so you don't take any distributions in that time period. However, after six months, you need to take a distribution; after spending all your time and resources, it's crucial to your psychological well-being that you pay yourself something.

You are the most important - and possibly only - employee of your business. Even small recurring compensation demonstrates that the company exists to reward individual effort. This also means that predictable owner distributions become part of the business cash flow along with general operating expenses.

The amount

After a bit of history with your business, you're able to build a financial forecast. This considers your available resources - especially money - and predicts future revenue along with expenditures. Your owner compensation is one of the cash outflow categories. The budget should allow your pay to be adjusted based on other required costs for business operations.

Not all of the outgoing cash is for recurring overhead expenses. For instance, if your company sells products, funds are needed to replace inventory. Likewise, a service-oriented business may need parts or materials for the projects expected in upcoming months. Or maybe you'll require extra cash for necessary travel or subcontractors. The company bears these costs prior to getting paid by customers.

The key is remembering that your primary concern is the strength of the business, and you need to have a cushion of cash to reinvest in it. However, one of the costs of conducting operations is your labor. While you don't want to bleed the company dry, some amount of recurring compensation is reasonable. Find that amount in the company budget and pay yourself consistently. As you reinvest cash for growth, the cash cushion should rise, allowing you to take larger distributions in the future.

The people

Do you have investors or have you borrowed from financial institutions? Investors generally want to know that you are being paid by the business, and will usually set your salary ceiling along with performance goals. Lenders, too, want to see owner compensation as an indication you have an incentive to grow the business. Note that demonstrating sufficient cash flow for debt repayment is easier if your historical compensation is a consistent amount; variances complicate lenders' abilities to evaluate cash flow.
 
 
 
 
 
Company
 
How to Win Big in Today's Economy
The altered economic landscape presents innovative and nimble businesses with opportunities to thrive.
Find out how by requesting my free report "How to Win Big in Today's Economy" by replying to this email."
Just reply to this email and I'll send it right out to you.
 

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Worth Reading
Becoming a Sponge: How to Use Your Learning Style to Your Advantage
By Michael Keating
 
Business.com
 
We don't often stop to think about our learning styles. But if we're not using the right learning style for us, we may feel demoralized and unsuccessful. As Keating suggests, discovering the optimal learning style for you can help in that climb up the corporate ladder.

Playing Office Politics without Selling Your Soul
By Robert B. Kaiser, Tomas Chamorro-Premuzic, and Derek Lusk


HBR.org

Many of us try to steer clear of office politics, but in reality, they're simply unavoidable. The best way to deal with them? Stop complaining and play along. It's crucial if you want to become a major workplace player. But, say these researchers, there are good politics and bad politics; the good ones can enhance not only your influence, but your organization's as well.

Consumed by Anxiety? Give It a Day or Two
By Oliver Burkeman


TheGuardian.com

When you're anxious, it can feel like the end of the world. But that's most likely because you focus too narrowly on the present. Remember previous crises? Those problems that seemed insurmountable at the time? The world didn't end. Says Burkeman: "Most of what troubles us turns out to be tolerable, or even wonderful, or just never happens at all." Whew!

LINKS YOU CAN USE
Know your Customer
Your customers range from suppliers and partners to end users. Do you know how to meet their needs? Answer: know your customer. Rapid change in technology and marketing approaches makes this difficult, however. These links may help:

Begin to build relationships here:
5 Ways to Get to Know Your Customers Better

Make you are adding value to you customer relationships. Here's how:
Real Relationships With Your Customers

Take customer personalization to the next level with one-to-one marketing:
The Revenue Power of Personalisation

Are you using out-of-date approaches? Find out here:
How to Authentically Engage with Your Customers in 3 Steps

Which customer relationship management software system is right for your business?
CRM Software
This newsletter and any information contained herein are intended for general informational purposes only and should not be construed as legal, financial or medical advice. The publisher takes great efforts to ensure the accuracy of information contained in this newsletter. However, we will not be responsible at any time for any errors or omissions or any damages, howsoever caused, that result from its use. Seek competent professional advice and/or legal counsel with respect to any matter discussed or published in this newsletter.
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