Well, like most things in life – and certainly in the world of entrepreneurship – there’s no real easy answer. There are a wide range of cash management products and services now available that can be invaluable, but there are few things you’ll want to keep in mind at all times. Here are just five:

Shorten the gaps

It’s much easier to keep things under control if you can shorten the gaps between spending money and returning a profit. Of course, this is easier said than done, but making sure customers pay on time and keeping a careful track of invoicing can help. You may want to charge penalty interest for late payment, offer discounts for prompt payment or make agreements based on deposits and staged payments for larger contracts.

Keep your suppliers happy

Your suppliers are just like you, they like to be paid on time for their services and are likely to respond better to your needs if you treat them as you would like to be treated. If you give them regular orders though, you may find they are agreeable to more flexible credit terms or discounts – just make sure you aren’t over-ordering or this could backfire badly.

Know your taxation

Tax is something of a minefield and as a business you are likely to be liable for everything from income and corporation tax to business rates and stamp duty. The key to all of this is keeping simple yet comprehensive records that let you calculate what you owe easily and accurately. Make major purchases at the end rather than the start of a VAT period and check with HM Revenue & Customs to see if you are eligible for any support.

All of the above are business basics you’ll want to get some understanding of at the earliest point possible, but don’t rule out the many cash flow management services that are on offer from banks and building societies that may also help. Whether it is business banking, overdraft facilities, or asset management, there are tools available that you should take advantage of if you are in business for the long haul.

The Equifax Quarter 3 Business Failures Report shows a 20.3% Year on Year increase in companies going under and a 7.8% increase Quarter on Quarter. With a total of 7,994 businesses failing in Q3 2011, this is the highest number of failures for more than 12 months and is not far short of the peak in numbers seen in Quarter 2 2009 (8874).

The biggest reason for failure is insufficient Cash Flow and a real understanding on how to maximize cashflow and protect it.

If you can answer YES to any of the below, then it is time to get help, otherwise your business will end up being one of the failures.

• Sleepless nights over business finances
• Customers paying late
• Bad Debt increasing
• No consistency in the debt collection process
• Poor Credit rating
• Overdraft facility heavily used
• Using Credit Cards to clear business liabilities or paying suppliers
• Late payments increasing
• No Procedures or policies to support the business continuation and growth
• Suppliers demanding you adhere to their Credit Terms
• Giving credit without considering the risks

Wow, as business owners we like to suffer sometimes in silence.

I will tell you straight, get Credit Management right and you will get a ROI, fact. I know, I have done it and I have being doing it for over 20 years.

A lot of businesses see Credit Management as a cost and a burden; after all, all we are talking about is picking up a phone, right! WRONG. This thinking will jeopardize all the hard work in setting up and continuing to be profitable in business.

Debt collection is just one piece of the puzzle.

Credit Management is a saving if dealt with effectively, it will increase your net worth, profit, credit rating and cash flow, after all, you went in to business to increase all four elements I mentioned not de-crease them.

I worked for a multi-national, multi- million pound organisation, and over a period of the last three years I worked there I saved them in excess of over £400k.

AND before you say “I’m not a multi-million pound organisation, I’m a very small company with minimal funds”. If that is the case then it is far more important as a small business you get it right or you will not survive.

IMPROVED REDUCED

Access to resources Cost of Sale
Asset Protection Cost of Operations
Profit Protection Relationship Risk
Client retention in Sales Exposure to external forces
Operational Efficiencies
Cash Flow
Revenue

Credit Management protects your profit, without it you will suffer or fail in business especially if you give credit. A truer saying has never been said:

“If revenue is the engine that powers your company, Credit Management is the oil that keeps it flowing”.

In business we have all heard the saying ‘Cash is King’ or ‘A Sale is not a Sale, until the money is in the Bank’; unfortunately many businesses forget this, as they are more concerned with upsetting or losing a customer. It is not all about the customer wanting you, it is also about you wanting that customer, believe me, there are many customers out there you don’t want.

So, what’s it all about Graham, how do you get the perfect customer? It is not about the perfect customer, it is about you educating the customer on what you expect so they become that perfect customer that pays regularly and on time.

Look internally at your own Sales Ledger, you will know the customers that pay you on time, a question you should be asking yourself is, why are they paying you on time, and why are your other customers not paying you on time.

You cannot always blame the customer!. If you were herding sheep into a pen 50 meters away, what would you do to accomplish it? You would guide them and cajole them to where you want them to go, it’s exactly the same with your customers, OK, they are not sheep, but the principle still stands. You need to guide them, cajole them, educate them in the way you work and what you expect in return for the products or services you have provided, if you don’t, what do you think will happen, yep, the same old customers will still not pay you on time.

Good Credit Management is about your relationship with your clients. Social Psychologists say that the three greatest fears are death, public speaking and asking for money. You know what I mean, when you get the gut wrenching feeling when someone owes you money and they are not paying you. Businesses would rather do without the money than risk a confrontation with a client and unfortunately the bankruptcy statistics are evidence that this is a serious issue. Many businesses instead go for the additional funding rather than taking a look at the internal cash flow mechanisms of the business.

If you give credit you need to have strong credit management procedures and policies in place. In my profession I come across many businesses that don’t have a clue of what their Debtor Days Outstanding (DSO) is. Every business that gives out credit should be using this Key Performance Indicator.

There is a strong chance, depending on the industry you are in, that 25/40% of your cus-tomer base will probably pay you late, but you don’t have to be a statistic in the late pay-ment culture if you put in place simple credit control procedures and be disciplined in your actions.

Most businesses have delayed payment of an invoice at some point, often past the due date. It is very tempting to do this especially if your sales are down and there are no consequences for paying late.

So with this in mind, look at where a substantial amount of cash may be tied up on your sales ledger, otherwise known as account receivables or debtors. All successful businesses rely on money flowing through the company at a certain rate to meet the businesses commitments. If this flow of money is sluggish, then you have a cashflow issue.

Credit control is not an exact science. It takes dedication, hard work and discipline to set up and maintain a credit control function in line with your business commitments and future operations.

So in summary, it is fatal to ignore the back office, get staffed trained in Credit Management get sales and credit control together. Get the rules in place for credit checking and write up sustainable procedures and polices so all staff members understand what is expected.

Although banks do initially lose money on student accounts, they act as a loss leader because they work to the fact that many students will continue to use the bank for years to come, generating profits through other products, from savings accounts to mortgages.

Student accounts are designed specifically with students in mind, allowing money to be paid in and withdrawn, as well as offering a number of other benefits including 0% overdrafts and discounts on products and services.

Below are some on the main things to keep in mind when searching for the best student account.

ñ  Look around for the best interest free overdraft

Most students will find the overdraft facility is the most useful tool they have, so it can pay off to find the best deal. Look into how the overdrafts are given, as some accounts advertise big limits but in the small-print you will see that these can’t be reached until the second or third year of study.

While many banks try to attract students with cash incentives or discounts, the most valuable feature of all is the 0% overdraft (unless you don’t need it). This can also be true after you have graduated, so look into the graduate accounts that will follow.

ñ  Always stay within your overdraft

It very important to make sure you never exceed your 0% limit. This isn’t just a rule for student accounts, it’s something you need to stick to for life.

Doing so is likely to lead to penalty charges, so if you’re desperate, go and speak to your bank as they may agree to increase your limit.

If you do find you have accidentally gone over your overdraft and you are charged, call your bank to explain – they may refund the charges if you are back within your limit and don’t make a habit of it. Something else to keep in mind is that different banks charge different amounts, so you could be charged up to £30 per transaction upon exceeding your limit.

ñ  Building up your credit score

Any products that allow you to spend money that you don’t already have, including bank accounts with overdrafts, are used to build up a picture of your financial activity which will affect your credit score. The data is stored, so if you stay within your limits you will build up a good credit rating.

However, exceeding your overdraft will have a negative affect on your credit score.

Your credit score is used by lenders to make an informed decision on how much of a risk you pose to them. Prove that you can be trusted with credit and you are more likely to be accepted on application to the top deals on loans, mortgages and credit cards.

This rule also applies to student credit cards, so be sure to stay within your credit limits.

ñ  Don’t choose your provider based on convenience

Just because a bank has a branch near to your campus, or it is the bank that you have used in the past, it doesn’t make it a reason to open a student account with them.

Most cash points offer free withdrawals these days and most banks come with online banking facilities, so this should mean you won’t need to visit a branch very often. Therefore, you should focus your reasoning purely on what the account offers.

ñ  Switch to a graduate account after finishing your studies

Once you have graduated, you will still be eligible for preferential terms, including interest free overdrafts to help you clear your debts without having to pay interest for the privilege. In some cases these accounts are free, but those that do charge often come with other benefits such as mobile phone insurance and breakdown cover, which may be less than you currently pay for these services.

Filing for bankruptcy when you’re in a financial bind is no fantasy; it’s something millions of Americans must resort to each year. In the event that you think you need to declare bankruptcy, here are a few things to consider before taking the plunge.

Explore your options

It’s very important to understand that just because you’re in debt doesn’t mean bankruptcy should be your first option. Depending on how much debt you’ve incurred, you may have a number of options available to you.

Debt Consolidation: Taking out a loan in order to pay for your other loans may seem counterintuitive, but it could mean lower interest rates and a single, steady road to financial revival. One effective way to consolidate your debts is to apply for a balance transfer card. These allow you to move your debt from other credit cards into one place so you can consolidate your payments and whittle away your debt without interest for a time. However, keep in mind that most credit cards charge 3-5% of however much you transfer.

Work with a Credit Counselor: You can try to take control of your debt situation with the help of a credit counselor approved by the Department of Justice. They’re there to help you get organized and come up with effective strategies to slowly pull yourself out of debt. Usually they can offer solutions to your financial woes, but if not, they can at least properly assess whether or not filing for bankruptcy is the right option for you.

Still in trouble?

If you’ve exhausted these options and still find yourself in a bind, it’s important to know exactly how bankruptcy works and how it will affect you. First and foremost, filing for bankruptcy significantly lowers your credit score—somewhere between 130 and 240 points. When you file for bankruptcy, it remains on your credit report for 10 years, making it difficult to get any credit or to make big purchases, like a house or a car, for a very long time.

It costs about $1,500 to even start the filing process and you’ll need to do pre- and post-bankruptcy counseling on your dollar according to the amendments to the law made in 2005.

Next, you need to consider which kind of bankruptcy you’d like to file: Chapter 7 or Chapter 13. Chapter 7 bankruptcy will wipe out all of your debts except for child support, alimony, student loans, and income tax debt, to name a few. Be sure to check if your debt can be lifted to avoid filing and ruining your credit score for no reason. You will be required to take a means test to see if you qualify for Chapter 7 bankruptcy or if your income is steady enough to gradually pay off your debts. It also remains on your record for 10 years, so make sure it’s the best option.

Chapter 13, on the other hand, allows you to pay off some of your debts over a 5-year period. You are assigned a payment plan that works with your current, stable income, and are given a little bit more breathing room. This stays on your record for 10 years—shorter than Chapter 7, but just as hard on your credit score.

Never Do It Alone

The best advice one could give is to never try to do this alone. There are plenty of sites claiming to help you avoid lawyer fees by declaring bankruptcy on your own, but the truth is, it just isn’t worth it. There is so much that could get lost or confused in the entire process that you may end up in a bigger jam than before. Find a credit counselor or a lawyer well versed in credit card debt to help you get through the process with as little damage as possible.

Bankruptcy should always be your last resort. It may be devastating to start, but it could eventually end up being your one lifeline when you need it most.
Tim Chen is the CEO of NerdWallet, a credit card company dedicated to finding you the best credit cards out there.

The CARD Act in the US has cleaned up a lot of bad practices that credit card issuers used to practice. But that does not mean that consumers are off the hook. When you are applying for a credit card or already have one, you still have to be careful of the following things.

Balance Transfer Deals – In the good old days of easy credit, credit card issuers were falling all over themselves offering 0% balance transfer credit cards for 12 months and they waived their balance transfer fees. But when the carpet got pulled from underneath, they started charging balance transfer fees and reduced their introductory period.

But the good old times seems to be back. Credit Card issuers are offering balance transfer deals again for longer periods. But now, consumers have to be aware of how they are offering them. There are basically two types of offers. The first type will offer you for a set introductory period – for example, 0% for 12 months. Such deals are clear in the sense that if you get approved, you get the 0% rate for 12 months.

But there is another type of balance transfer deal. And that is issuers offering 0% balance transfer deals for up to a certain time period. Using this language, credit card issuers entice consumers with what appears to be an attracting teaser deal. But for those who do not have stellar credit, they are likely to get an introductory period that is less than what is advertised. They did not do anything wrong. It is just that consumers tend not to really read and question a deal when they see one and ask if there is any catch. The reason this can be frustrating for consumers is that whether they get a balance transfer deal for 6 months or 12 months, they still have to pay a fixed balance transfer fee. Hence, in most cases, a longer introductory period always works out better.

Gas Rewards Changes – There have been changes in the way gas credit cards offer their rewards as well. When oil prices skyrocketed in, gas rewards started changing. Rather than paying a flat percentage (like 3% rebates for gas purchases), some cards have instead started to pay rebates in the form of getting a couple of cents rebates per gallon of gasoline purchased! This was to protect themselves from escalating oil prices.

Meanwhile, many gas credit cards started reducing their payouts on gas rebates. While many offered 5% rebates in the past, many have now reduced them to about 3%.

These changes are something that folks who are thinking of getting gas rewards should consider.

Subprime Issuers Get Hit – The new CARD Act has reined in on the fees that sub prime credit card issuers are allowed to charge consumers. They are now limited to charging only 25% of the credit limits given. As a result, we have actually seen many sub prime issuers stop issuing cards altogether! This is probably a great thing for the public as a whole as many of these cards should have never been issued in the first place.

More Focus on People with Good Credit – As the sub prime market becomes less profitable due to higher defaults and the CARD Act, credit card issuers are increasingly coming up with new credit cards for people with excellent credit. Chase has revamped their reward cards with a new Chase Sapphire Card. American Express has introduced a new Premier Rewards Gold card that lets you earn triple points when you buy airline tickets. So while may folks who carry a balance may have their credit limits slashed, those who pay in full every month have more rewards cards to choose from!

To sum up – I think the CARD Act has changed many practices of credit card issuers. The economic environment has also changed the behavior of credit card issuers and the types of cards they offer. These are just some of the changes we have seen. There will be many more and perhaps I’ll highlight them in another post.

Get a Good Business Plan

Obtaining a well-written and through business plan is a must if you are to be successful in getting the business funding you want. All lenders will require it – and others will want to see it as well. An easy way to do it is to hire someone with experience to write it for you. Make sure that it is realistic and avoid inflating any numbers – lenders will recognize numbers and projections that are too good to be true.

Apply for Government Grants

The Government of England is willing to help new businesses get off the ground. You certainly do to want to miss this opportunity to get this type of business financing because grant money is free. You should apply early in the process of finding business start up money because it will mean having to borrow less.

In addition, you may also be eligible for business grants from the European Union. They also provide grant money for some new businesses, as well.

Talk to Family, Friends and Relatives

The next step in getting money is to go to your family and relatives and see if they are willing to help you. Even if you do not go further than your relatives, it is still important to have a business plan. By showing them you are looking at this from a professional business perspective – they may be willing to lend or give you even more money.

Approach Bank Lenders

After you get all the free business financing you can get, then it is time to go after other sources – the banks or credit unions. It will take some time to get money from a lender, so be sure to allow plenty of time and be willing to talk to several. Compare the value of loans you are offered in order to find the best terms and interest rates.

Find Angel Investors

Angel investors are individuals or groups who are willing to lend you venture capital to start your own business. They will look for a good percentage of profit over a period of time. The better your business plan looks, in terms of details and realistic overviews, the more they will like it. In addition, many angel investors are experienced business men and women who may be able to provide quality guidance, too.

Credit Cards

The other option is to take out a business credit card. Many different credit card companies will offer several different credit cards ranging from those targeted towards small business credit cards to those that reward users with airmiles or cash back.

There are also other sources of money for you to tap into for your business start-up. Various business associations are always looking for new businesses to invest in, which means you will want to consider local business groups. You can get the business financing you need, but be sure to be professional in everything as you approach people about your new business offering. They will want to hear about it, and don’t forget to take advantage of networking, too.

Bank of America is the third-largest credit card company in the US.

Why annual fees?

The goal of the proposed annual fee charges is to reduce risk and increase profitability. Therefore customers who pay promptly and hence never attracted default interest charges would be those who will be taken in the pilot.

The annual fee charge was also adopted to show BofA commitment not to raise interest rates on credit cards before the coming into force of the new credit-card laws in February 2010.

The pledge was made in response to US Congress resolution to shift  the implementation date of the law to December 2009 when some credit card companies began raising interest rates and reducing credit amounts and access in the middle of this year after the credit card law was passed.  

It had been envisaged that banks would be tempted to charge annual fees in response to market forces and the new credit card law on basis avoiding cost and risk.

Consumer rights violated?

Card users have up to December 16 to accept or reject the annual fees. However, they risk having their accounts closed if they refuse the fees.

Closing a credit card account comes with it serious consequences to a card user. The most crucial being the loss of personal credit score, hence a lower the amount of credit available to a person.

The BofA has already started the annual fees on its airline rewards cards.

Consumer protection

A balanced consumer protection is crucially needed to ensure that it is a win-win solution for both consumers and credit card companies like BofA.

The new incentives are: lower interest charges, reimbursement of interest payments, and other to get cardholders to make early payments of their debts.

New reward programs

Some card companies like MBNA are giving consumers top ups and reduced yearly interest rates for honoring on a regular basis the repayment terms as well as keeping to credit limits (that is, from 0.25% up to 2% cutback in interest rate each time a cardholder makes a bare minimum payment for three successive months)

Other incentives are based on the percentage of balance paid off. For instance, payment of 10 percent off or more wins the lowest interest rate, while a 5 percent pay off attracts the highest interest rate. Some banks give as much as a whole month’s interest back following a six successive on time payment by their clients.

Benefits

Card companies believe that the new rewards will enable their customers to manage their finances and debt much better and at the same time enjoy more options to choose from including on-line services that help consumers to know the amounts they need to pay every month to clear the balance of payment by the set date.

They further argue that the available choices will encourage card users to pay their debts more easily – on time and enhance their credit worthiness. Indeed some banks claim to be recording a fall in customer default rate as a result of some of their products.

The challenge for card companies is how to balance increasing benefits to consumers as they pay up interest fees each month and ensuing that they do not default on payment.

A recent survey has shown that 57 percent of card users with the new reward system pay off 70 per cent of their balances each month.

Who really benefits?

These new deals do not always come in the interest of all consumers.

According to experts, while card users generally may benefit from improvement in their credit as a result of these programs, they are best suited for card users who maintain a balance on their cards regularly. Such users will benefit more from getting a card that offers very low interest rates.

Consumers who are not usually able to pay off significant portions of their balances at each month are better-off going for a low interest rate card.

At the end of the day it is the consumer’s decision to choose between the rewards. But the consumer must be well-informed on the benefits and the terms.

The key question now being grappled with by financial regulators and government technocrats is how to prevent a future financial crisis.

Some technical questions and answers

It is generally agreed that greater regulatory supervision and control by government is needed. It is also now agreed that the share capital of banks be raised and their quest for taking careless risk held in check. However, the big issues are political and philosophical in nature. For example, why are banks expected not to fail? What’s the best way to deal with banks whose actions socially counter-productive? How should the appetite for quick riches be addressed?

 In other words is finance an enemy to ethics and morality?

At the heart of the Pittsburg G-20 Summit the philosophical nature of the debate was expected. It was the U.S. and Britain (free-market proponents) versus France and Germany (proponents of a controlled free market) philosophies. But even in the US and Britain, many including financial experts are beginning to question the free-market system as the finance industry has grown beyond being socially responsible – a defeat of the purpose of prosperity – throwing the general society into chaos as evidenced by the financial crisis.

The debate over free-market and a controlled market is gone beyond academic debate. Government massive bailout responses in the wake of the financial crisis led to public outrage and call for greater public control of banks. Recent public outcry at the massive bonuses taken by bankers testifies of public expectation of ethical practices in the banking industry.

All is not well yet with the economies of US and Europe hence a call for banks to be restrained from taking irresponsible actions that can throw the economies back to a recession. After all, majority of big financial corporations are on government lifelines. Government bailouts will not be guaranteed in case of a relapse in the economy. President Barak made this point clear to bankers in the US.

However, the European Central Bank (ECB) is not entirely in favour of heavy control on banks. Instead, the ECB has proposed that banks be required to increase their share capital and be restricted on how far they can go in controlling their balance sheets.

Banks would also be expected to keep an amount of the credit they sell as asset-backed securities to ensure that they have a venture in what happens to those loans.

Others have called for banks to draft winding down policies to ensure that their activities can be ended in an orderly process incase they go bust. This will prevent the panic effect witnessed last year when the Lehman Brothers collapsed.