You
probably want to know, "What
sales results can I expect
from this training?"
They
develop a keen sense of whether
a borrowing situation is
likely to be met with lines
of credit, term loans, or
other loan products. They
understand and are able to
engage small business owners
in a romping discussion of
cash flow management challenges
and the impact of bank products
on those challenges; and
they'll know how to structure
a good, solid small business
sales call.
Conversation
#1 – Before
Talking Business
In
this conversation, Mary White
has little financial background
beyond what she’s
learned in platform sales
and the mostly administrative
training she received upon
her promotion to branch manager. She
has not taken the Talking
Business with Small Business
program.
We’ll
make short work of presenting
this first conversation
because, in truth, these
conversations are all too
often typically short.
In this
conversation, we visit
the same situation, only
this time White has just
completed the Talking
Business with Small Business program. Her
learning experience has
given her new confidence
in relating to business
owners, and she has become
more comfortable discussing
the operational and financial
issues that are their everyday
primary concerns.
We present
this second conversation
in two scenes. It's a long
one—as it should be:
Scene 1
Joe
Evans approaches Mary White
to discuss his
account. After an exchange
of greetings, Evans explains
that he would like to double
his line of credit to help
him manage a sudden and dramatic
increase in sales. He
tells White about the recent
article in Bubble Up.
“Wow!” says
White, “That’s
terrific publicity! What
kind of impact is the
article having on your
business? ”
“Well, it’s
been three months since the
Bubble Up article appeared
and, if I project out annual
sales based on what has happened
in the past 90 days, it looks
like we’re going to
double or even triple our
business for the year,” Evans
responds. “Frankly,
I’m quite overwhelmed
now. Managing this
sudden increase in orders
from customer contact
to production to shipping
and invoicing has become
quite a challenge.”
White
considers his situation.
Based on what Evans has
just told her, she realizes
Sunshine bank might be
able to help in several
ways beyond extending his
line of credit. She
looks up the US Tops account
and sees that it’s
in good standing.
White
says, “Well,
I could give you an application
for your line of credit extension
and, if it’s okay with
you, I’d like to come
see your operation. I think
there may be many more ways
the bank can make your life
easier getting through this
growth spurt. Do you think
you can squeeze me in?”
“If you can make my
life easier, I’ll make
some time. When can you come?” Evans
replies.
They arrange to meet the
next morning.
Scene 2
When
White arrives at the
US Tops facility, Evans
offers her a tour of the
factory. As they start,
White asks, "What
are your goals for the
business at this point,
and how have they changed as a
result of the new volume surge?"
"Well, I was shooting for growth of about 20% per year – hoping to bring the business to about $5 million over the next 5 to 7 years," Evans replies. "But if we get
another review like this
one, I may have to double
that target!"
"That's
terrific! A lot of
growth. That will mean
a lot of changes. In the
plant. In the back office.
In your cash flow. Is your
head spinning?"
"Yes," replied
Evans. It's a lot to
think about."
After completing the tour, they return to Evans' office.
“Well, that’s very impressive,” says White. “I never realized how much there was involved in making bottle caps.”
“It keeps me busy,” says Evans. “We are now shipping bottle caps to over 80 bottling companies all over the country.”
"So," asks White," How
do you see your major
priorities at this point?"
"Cash flow, first," responds
Evans. "Doing everything
I can to accelerate cash
flow. Expanding the line
to cover me during slow
cash periods. And, we'll
need to acquire additional
space and equipment when
we cross the $4 million
mark. Until then, I can
run more shifts."
"So,
now that I understand
your goals and major priorities,
tell me about how you
manage your cash flow.
Let's start with receivables
and collections. How much
have your accounts receivable
increased as a result of
this sales rush?”
“About
$200K.”
“And
long is your collection
period?”
“It was averaging
just about 30 days. Now it’s
up to about 45 days."
“How
do you expect that to
change?”
“I'm
not sure. If our sales
continue rising, it
will probably get worse
before it gets better.”
“Here’s something
to think about,” said
White taking out her pocket
calculator. “If you
are anticipating sales of—let’s
say $2.5 million—and
you were able to manage
your collections so that
your receivables held
at 30 days instead of
45, you could have an
extra $102,740 in available
cash.”
“Wow!” Evans
exclaimed. “I might
not need to borrow as
much as I thought. That
much extra cash can go
a long way towards helping
me fund our operations!”
“Managing your cash
flow is a critical activity,” confirmed
White. “Especially
during periods of rapid
growth. And we have some
great tools to help you.”
Continuing
her questioning, White
asked “How much
is your typical invoice?”
“I guess it averages
about $2,500,” Evans
replies.
“And you’re
sending out 80 invoices every
month?” White asks. “How
do you manage the bookkeeping?”
“Our accountant had
been sending someone in once
a week. Now he’s coming
twice a week, but I think
we’re going to
have to hire someone
full time. The workload
is just too much for
him.”
“Does he also take
the checks to the bank?” asked
White.
“Yes. And sometimes
it’s a week or more
before they get deposited. He’s
just too busy with invoicing,
collecting, posting and
payroll to make a run
to the bank.”
"And
how many accounts are
you using at this point?"
Evans
responded, "Three.
An operating account, a
payroll account, and
a money market savings
account."
“Hmmm. I have some
ideas that might reduce some
of that paperwork and speed
the conversion of your accounts
receivable into working cash,” White
replied.
“I’d
like to hear more about
that.”
“Great.
We’ll
get there. But first
there’s
one more cash management
area I’d like to
explore with you. We've
talked about invoicing,
collection, and depositing.
We can also help with
your disbursements,” White
continued. “You
mentioned late fees…I’m
thinking it would be
helpful for you to know
each day exactly how
much cash you need to
cover the checks presented
for payment to your account.”
“It sure would,” replied
Evans.
“We have an excellent
service that can give you
that information every morning,
said White. “But
first, let me ask: how
are you handling your
payments?”
“We write and mail
checks twice a month to our
employees, landlord, vendors,
and utilities. We probably
send out 30 – 40
checks a month."
"How
is that process working
for you?"
Evans
replied, "It
takes, probably, 12 – 15
hours a month, to handle
the outgoing checks. A lot
of time. And sometimes we
don’t have enough on
hand. We’ve paid
a few overdraft fees in
the past, and are probably
keeping $20,000 in the
account now as a defense."
“Right, said White. “I
have a couple of ideas
here, too. For example,
you could be investing
that extra cash in one
our sweep investment accounts.
Your excess cash would
be automatically invested
in short-term instruments
and automatically returned
to your operating account
when needed.”
Evans
considered the benefits
of the services White described. Perhaps
he could put off hiring a
full-time bookkeeper until
he had a better handle on
how this growth spurt was
going to play out. And
knowing just how much he
needed in his checking account
to cover the day’s
checks would save him overdraft
fees—especially when
things were tight. Evans
also gave him something
else to consider: If he
could speed the conversion
of his receivables into
working cash, he might
not have to borrow as much
as he thought.
“How can I learn more
about these services?” Evans
asked.
“Is
there anything else
about how you're managing
your cash flow or using
your loans that we should
talk about?"
"No,
replied Evans.
"Well, let's talk through
some of the ideas that could
help, to make sure I'm understanding
your challenges properly.
Assuming we're on track,
I would like to share a copy
of your most recent analysis
statement with our Cash Management
team and get back to you
with a proposal. We
can present it to you
in a week or so.”
“Let’s get started,” Evans
smiled.
