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Six Tips to Increase your Business's Cash Flow and Profitability

Posted by Jack Craven on Fri , Jun 21 , 2019

Managing and running a business, whether it is small or large, is tough. Although each business is unique in its own way, here are six ideas to help your business increase its profitability and cash flow..

1. Understand your cash flow.One of the biggest causes of business failure is lack of  positive cash flow. At the end of the day,  you need enough cash to pay your ve ndors and your employees. While it may seem simple to understand your cash flow, this is always not the case. Consider the following:
  • If you run a seasonal business you understand this challenge. The high season sales harvest needs to be ample enough to support you during the slow non-seasonal periods. How do you deal with the flood versus the desert in your cash flow?

  • Businesses have unique patterns of cash flow. If you are a magazine publisher that sells one-year subscriptions, you may receive one payment from a subscriber but have to deliver issues over the next 12 months. And then there is the “double-whammy”, you must spend money to sell subscriptions. Take the following example of a 15-month period—months 1, 2 and 3 are the months of investing in your marketing and promotion costs, next you have the one-time sale of 12 month subscriptions. In the following 12 months as you deliver the issues, there are book GAAP earnings with no subscription cash.

Recommendation: Create a month by month 12-month rolling forecast of revenue and expenses to help understand your cash needs each month. As illustrated above, book revenues and expenses do not always translate into cash flow. Adjust your rolling forecast of revenue and expenses to a cash flow forecast.

2. Know your Key Performance Indicators (KPIs). KPIs are the key factors that drive your business. A KPI is quantifiable. When looking at your business, there are a few factors that drive your business success. Do you know the top four drivers of your financial success or failure? By focusing on the key financial drivers of your business, success will be easier to accomplish.

Examples: A KPI related to sales may be the number of sales calls (or outbound calls for a telemarketer) made by the sales department. A KPI for e-commerce may be website traffic and the related conversion rate.

3. Minimize / optimize your inventory. Many companies require a major investment in inventory. If your business sells physical product, you need a good inventory management system. This system does not have to be complex; it just needs to help you keep control of your inventory. Be sure to turnover slow-moving inventory. Cash turned into inventory that becomes stuck as inventory can create a cash flow problem.

Recommendation: Many businesses hold on to unsaleable inventory for too long. Get rid of old unsaleable inventory ASAP. Take your markdowns and move on! Develop an inventory system with periodic counts (cycle counting) to help identify when you need to take action to liquidate old inventory or research any discrepancies.

4. Know your customers. Who are your current customers? Are there enough of them? Where can you get more of them? How loyal are they? Are they happy? A few large customers can drive a business or create tremendous risk should they go to a competitor.

Recommendation: Know who your target audience is and then cater your business toward them and what they are looking for in your offerings.

5. Learn your point of difference. Why does the world need your business? Once you know who your customer is (your target audience), understand why they buy your product or service. What makes you different from/better than others selling a similar item?

Recommendation: If you don't know what makes your business better than others, an annual survey may be helpful. Ask your key customers to rate your product and services. They will tell you. Then take advantage of this information to generate new customers.

6. Create a great support team. Successful small business owners know they cannot do it all themselves. Do you have a good group of support professionals helping you? You will need accounting, tax, legal, insurance, and employment help along with your traditional suppliers.

Recommendation: Conduct an annual review of your resources, be prepared to review your suppliers and make improvements where necessary.

These ideas sound simple, but they are important to the success of your business, Call us at 212-786-7476 (NYC) or 516-280-8363 (Garden City, Long Island).

For more helpful information on increasing profitability and cash flow, please click on the following links:

We welcome your comments and ideas. Please see the box below.

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Topics: healthy cash flow, Profitability

The IRS Loves Your Business ... and That is NOT Good

Posted by Jack Craven on Wed , Oct 31 , 2018

The IRS continues to focus their audit activities in key small business areas. The wise business owner is well advised to be able to defend the following five areas to keep the IRS at a comfortable distance:

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Topics: tax planning, IRS tax code, tax tips, Business strategies

Understanding Sunk Costs in Business Decisions

Posted by Jack Craven on Mon , Feb 08 , 2016

As a previously published post, we wanted to reissue this informative and favored piece on sunk costs!

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Topics: business evaluation, sunk costs, business management, sinking ship

Avoiding  the Wrong Decision--Selecting an Accounting Method for Your Media Business--Cash versus Accrual Accounting

Posted by Jack Craven on Tue , Dec 29 , 2015

 In the first year of a startup business, you, as a business owner, will need to make certain elections for tax purposes. These start up tax choices (elections) establish precedents for tax years to come. An important election you will make is selecting an accounting method for your business. The two methods commonly used are cash basis  accounting or accrual basis accounting. You may be reading this and thinking, “What do cash and accrual basis mean?” and “What difference does this make to me and my business?”


Making the wrong decisions could cause your business to become just another failure.


Simply put, as our whitepaper explains, under cash basis accounting, a business owner such as yourself recognizes revenue and expenses (and pay taxes) when you receive or pay cash. Under accrual basis, you recognize income and expenses (and pay taxes) when they are earned without regard to being paid. In the attached whitepaper, we provide media company tax tips and advice.


Many accountants automatically suggest that all of their small business clients automatically adopt cash basis accounting. As we discuss on the whitepaper that follows, this should not automatically be the case for many media and entertainment companies. The remainder of this paper explains cash basis versus accrual basis accounting and how they impact your business.

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Topics: Tax ideas, #startup, cash flow, tax tips

Selling Your Business

Posted by Jack Craven on Wed , Aug 05 , 2015

Selling your business can be an emotional and life-changing event. On the “big day” of sale, hopefully, you may realize a once in a lifetime payoff. It could be that you have spent years building the business. Alternatively, your business could be a relatively new growing interactive business that you are cashing out.business-loans11-resized-600

We have put together some useful information on Selling Your Business. Our guide contains the following:

  • Who to speak with to get an idea on the value of your business
  • What kind of attorney is best for helping you sell your business
  • How to think going into the selling market
  • How to be flexible
  • How to spruce up your business
  • How to think ahead to the future
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Topics: media deals, merger and acquisition, technology deals, M&A

Worried about the Cyber-Safety of your Business? How you can avoid E-mail Scams.

Posted by Jack Craven on Fri , Jul 10 , 2015

A common belief of identity theft is that it occurs mostly to individuals, for example when social security numbers and other personal information are obtained.  Businesses are also subject to identity impersonation.  The remainder of this article discusses business e-mail scams, and the best practices for minimizing their likelihood as suggested by the Federal Bureau of Investigation (“FBI”).

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Topics: embezzlement, Bonnier, Business E-mail Scams, Keith Kelly, Pfishing, cyber security

Preventing Employee Fraud

Posted by Jack Craven on Wed , Jun 10 , 2015

 

Preventing Employee Fraud: A Brief Guide for Reducing the Risk 

As an entrepreneur, you work hard for your money. There is almost nothing worse than experiencing pilferage, embezzlement, and other types of misappropriation. Internal controls are extremely important to the entrepreneurial company.17971851_m
We have put together a guide that contains 10 steps to help you protect the earnings and assets of your company such as:
  • Using Cash Wisely
  • Managing Cash Outflows
  • Practicing Cost Control
  • Analyzing and Planning 
  • Monitoring Inventory
Please check out our guide below and give us a call if you have any questions about Preventing Employee Fraud. 

 Download our free guide NOW: Preventing  Employee Fraud

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Summer Time Tax Tips

Posted by Jack Craven on Wed , May 27 , 2015

It's getting hot outside, and you probably don't want to think about tax planning.  But we have put together some summer tax tips so that you can get the most out of your 2015 return.

Before you head off to the beach, please take a look below at what we have prepared. 

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Topics: summer time, summer planning, deductions, tax tips, 2015 return, summer tax tips

What is a Breakeven Point and How Do You Compute it?

Posted by Jack Craven on Wed , May 13 , 2015

The breakeven point in your business is where all direct and indirect costs have been met. You are neither making nor losing any money. The breakeven point can be measured in number of units sold, dollars of total sales, or possibly hours billed out.

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Topics: breakeven point, fixed costs, loss, profit

MediaCPAs.com Publishes Its new Guide: 104 Tax Deductions for Media Freelancers, Consultants and Entertainers

Posted by Jack Craven on Mon , Feb 02 , 2015

Whether you do your own tax return or use the services of a CPA firm, MediaCPAs.com Guide: “104 Tax Deductions” will help you: Have you taken all of the allowable tax write offs? Are you a media freelancer, internet consultant, independent media consultant, entertainer, (for example, a 1099 staffer who operates as a sole practioner or LLC)? If so, you are a media entrepreneur and you are treated for tax purposes as a business.

We want to help you avoid losing legitimate tax deductions and make sure that you pay the lowest possible income taxes. We have put together the attached whitepaper: “104 Tax Deductions: A guide for for the Media Freelancer, Entertainers and Independent Contractor.”tax purposes as being a business. Most of the costs of your business are tax deductible.

Our free guide will help you to:

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