B2B CFO^®    (877) 4-B2B CFO

According to an article in the Denver Business Journal today, we are seeing an uptick in Banker confidence.  In a recent bank executive survey covering a 12 state region (including Colorado) conducted by Grant Thornton, respondents indicated more optimism related to U.S. economic growth than they had 6 months earlier.   

·         Thirty-four percent of bankers in the region said that they expected the U.S. economy to improve in the next six months, up from 14 percent six months ago.

·         Fifty percent said that they expected their local economy to improve over the next six months, up from 19 percent in December 2009. On this question, they were more optimistic about their local economy than bankers in other regions in the country, including those in the Northeast (43 percent), the Southeast (29 percent), the Midwest (27 percent) and the West (25 percent).

·         Twenty-nine percent of central-region bankers said that their bank would hire more people in the next six months, down from 32 percent in December 2009.

Grant Thornton’s national 17th Bank Executive Survey was published on June 18, but the regional data breakdown was reported Wednesday.  Grant Thornton and Bank Director Magazine conducted the national survey of bank CEOs and CFOs from May 4 to May 24, 2010, with 230 respondents. Of those, 38 were from what the survey calls the central region, including Arkansas, Colorado, Kansas, Louisiana, Missouri, Montana, Nebraska, North Dakota, Oklahoma, South Dakota, Texas and Wyoming. (Compiled by Renee McGaw)

With bank optimism on the rise, there seems to be a slight improvement in the lending marketplace.  It’s becoming more commonplace to hear bank advertising noting that “we are lending”.  Mind you, the lending is cautious and it’s more critical than ever that a company’s financial statements be in order.  The owner will still need to provide a guaranty and will need to be able to illustrate their ability to service the debt.  The fact that small businesses may find it possible to secure working capital to accelerate their growth though is fantastic news and worth celebrating.

As private business owners continue to see small improvements to their revenue and growth prospects for 2010, these businesses will continue to urge the recovery forward through job creation, innovation, and good old American entrepreneurism. 

My client, Robert Schickler, President of Brunswick  Automotive Professionals, Inc. wrote this paper regarding assisting employee success.


A manager’s job is 100 times easier and more rewarding when his or her employees are performing like a well-oiled machine. But when that machine runs slowly or breaks down, a manager’s job becomes exponentially harder.

1. Clarify, clarify, clarify

It’s hard to get things done when people don’t understand their roles, responsibilities or exactly what’s expected of them.

Too often, supervisors assume their employees understand what needs to be done. Or, they fear they’ll insult an employee’s intelligence by stating what seems obvious to them.

Don’t underestimate the importance of making certain that everyone is on the same page. Clearly communicating roles and duties is never a wasted effort.

2. Establish clear expectations

Goals are an important part of clarifying. They help employees focus on what’s important and provide incentives to find more efficient ways to get work done.

The only way to improve the way you’re doing things is to set clear, measurable goals and constantly monitor your success in those areas.

3. Don’t micromanage entrepreneurial-minded employees. But do monitor them

Entrepreneurial-minded employees—those who take initiative and do an effective job without much direction from managers—are often great employees.

But just because you feel like you can let them loose with a project doesn’t mean they don’t need management. In fact, when you empower employees in this way, monitoring becomes even more important. You may be concerned they’ll think you’re micromanaging them. Don’t be. When done right, monitoring doesn’t have to feel like micromanaging. Use this check-in as an opportunity to recognize effective behavior and get their feedback.

4. Encourage employees to share bad news with you

How? Don’t shoot the messenger!

If there’s a problem, mistake or delay, employees may be hesitant to inform you. They may fear your reaction or think they’ll look incompetent. That’s why it’s important to react correctly to bad news. Strive to be constructive, not punishing. Express appreciation for the accurate information, no matter how negative it may be. Respond quickly to the problem with specific actions.

5. Solve problems quickly, but not too quickly

Don’t waste time when dealing with threats or problems. But be aware that jumping to solutions too quickly can end up causing more headaches.

Smart managers know when additional information or analysis is essential—and when it will only delay action without adding value. Before taking action, managers should always use a systematic, logical analysis to identify the cause of a problem.

6. Encourage informal and spontaneous interaction

Our employees’ informal relationships are key to getting things done. We know that the ability to connect with a colleague “in the moment” when you have a problem or new information is vital for effective execution. But in today’s high-tech world, it can be difficult to make these connections. Don’t let co-workers in departments go days just e-mailing back and forth. Facilitate informal gatherings to brainstorm and hash out problems.

7. Creating a winning team

We will hire the right team members based on the skills needed for each position with cost to match our payroll budget. We then have to determine which systems each employee will be involved with. Define clear objectives and create standards to measure employee success and identify development needs. This process ultimately creates specific job descriptions that can help us hire the right person for the job.

Recruiting,hiring,developing and empowering the right team members for our business is one of the most critical tasks for us to achieve. This will make our company special and we will be able to motivate our team to provide the same level of customer service each and every time. 

PLANNING FOR LONG TERM SUCCESS

1.      Align our business for profit

The first step we have to master is to understand our ideal business model. Our needed sales,margins,fixed costs to make our desired profit and to keep our business healthy

2.      Drive Sales.

High car count alone won’t take us where we want to go. We have to maximize the value of every customer visit. Not by selling things customers don’t want or need, but by capturing every service dollar by being the one shop people trust to keep their vehicles safe and reliable.

3.      Customer is King.

Customer satisfaction is what we are striving to reach. The goal we set to achieve has no final level. We must always reach further and further until each and every customer says to us that they never experienced such exceptional service and then we have to take it one step further

We know for a business to survive and grow we have to completely change the status quo. “What got us here won’t keep us here.” Our job is to create order with systems and procedures to create predictable quality, high production, and a consistent wonderful customer experience.

It has been a guilty pleasure of mine to watch some of the Food Network shows on cooking with my wife.  It is always interesting to see how chefs can make such an amazing dish out of things I could find in our kitchen. The most fun shows for me are the reality shows like Chopped or Next Food Network Star.  These chefs are put in contests with either strange foods or missing ingredients, which causes either masterpieces or disasters in cuisine

Seattle sports teams seem to continue year to year with missing the ingredient to take them to the championship games, much less the playoffs. The running back, offensive line and a healthy quarterback have all been missing for the last few years for the Seahawks.  A group of strong pitchers and consistent bats to win those games and the division has eluded the Mariners since the 116 game winning season,

In the last year I have worked with two companies that are 12-24 months into a major accounting and ERP software conversion that are logistical and financial nightmares. The software programs were nationally recognized solutions in their respective industries.  The management of each company vetted the program, reviewed the agreements provided by the Value Added Reseller and set out to convert from their existing software to the new better, faster, cost savings solution.

In the first company the total investment has been over $250,000 for software and consulting time.  The project was not ill conceived but not well planned or converted.  The conversion was put into the hands of a hardware / network consultant who had never converted any accounting software systems. This person charged the company over $50,000 directly and resulted in the VAR consultants to charge an extra $100,000 in fees.  The company had three different controllers during the conversion period and the turnover made everything cost more. The company pulled the plug on the conversion and reverted to the prior system.  They own the software and pay $5,000 per month to the finance company as a painful reminder of a poorly managed conversion.

The second company is 18 months into the conversion, $100,000 over the original conversion budget and struggling to get their accounting system to report the basic financial information, much less enjoying the much touted enhancements.  The accounting staff has not turned over, the support was directly from the software company with no VAR layer of consultants and yet the result is painfully similar.  The project cost has exceeded $250,000 and the total cost will continue to rise.  The support from the software company has been fragmented and continually put the blame on the buyer of their product.  Their consultants have complained about the “new version” that was released just after the purchase was made.  This has put the company on the “bleeding edge” of technology not the leading edge. A lawsuit may result from this company as the management is extremely frustrated.

In both of these companies either there was no quarterback to lead the team through the conversion or the person in the seat was not qualified for the job. The missing ingredient made for a bad recipe and costly result.

Next week I start working with another company that is preparing for the major conversion of software systems. This company’s operations are located in two states and the scope of the conversion will start with a comprehensive study of the steps to convert this $25M manufacturing and distribution company onto a new platform that is being vetted.

The team will be assembled between the company software representatives for the ERP system, a local VAR for the accounting software, key management and departmental staff and in the quarterback role; me. I don’t work directly for the software vendor or VAR and I also bring independence to the employees and management.

After doing dozens of conversions over the past 20 years from small companies to a large west coast franchise company I know the true value of having all the right ingredients so that the result is within budget, the timeline and the scope of the implementation. 

Make sure that if you are planning any system conversion that you include on your team a quarterback who can make sure you end up where you want to be.  Hire someone with experience and enough authority to keep the team on task with one eye on the conversion budget and the other on the finish line

I have two clients that are both very focused on determining their budget for the Fall of 2010.  One of these clients already established a budget back in February 2010 the other client has never done a budget before. Why the difference?  Both are small family owned businesses that have survived for at least 10 years.  Here are some general observations on budgets:

1. Have a plan at the beginning of the year that everyone in the company understands and believes is achievable.

2.  If your current situation at midyear has changed your assumptions dramatically then make a revised fall budget so you can reset expectations.  Unrealistic budgets are ignored and therefore of little real value.

3. Each month compare your actual results to the budget and be prepared to discuss the variances.  Why are the differences occurring and are they due to timing or fundamental shifts in the operation of the business?

4. Review your assumptions at least quarterly and decide if you need to reset your expectations.  Budgets provide a meaningful goal to achieve a result as a company and can be fun to compare actual results to plan.

5.  Information from accounting and finance needs to be timely and accurate to be of value to compare to budgets.  Have the budget loaded into your existing accounting package so all the budget line items match up with the reported actual results.

6.  It is important to create key performance indicators (KPI’s) for your business to measure results daily and weekly.  These KPI measurements may use budget assumptions and data but often require operational information as well (example:  average sale per customer requires both sales  revenue and an accurate customer count).

Finally a good finance professional such as the controller or CFO helps provide guidance in preparing and analyzing results to the original budget.

You're probably familiar with Maslow's Hierarchy of needs from Business 101.  Humans have a basic need for food, warmth and shelter.  Until they have fulfilled those needs, they cannot think about other things.  Once they have fulfilled these basic needs they can start to move up the scale.  Next come Security needs, and then the need for Love and Affection.  As they fulfill these needs and move up the list, they want to achieve and feel more Self Esteem.  At the top of the pyramid is Self-Actualization.  Maslow describes self-actualization as a person's need to be and do that which the person was "born to do."  

The Hierarchy of Needs is a good metaphor for a business.  The business hierarchy of needs is simpler with just three levels.  In order for any business to progress and really take flight, it is necessary to evolve through each level. The first level of business needs is the Basic Infrastructure: 

Basic Infrastructure

Collections: Is cash coming in on time?  Are collection activities automatic and efficient?  Are you measuring and controlling receivables and being aggressive in taking action?

Payables: Are you managing Payables correctly?  Taking advantage of free vendor credit, and maximizing discounts available for accelerated payments?  Are you using electronic tools to stay on top of purchases?

Payroll and Benefits: Are you in outsourcing payroll and ensuring that taxes are paid in a timely manner?  If handling in-house, have you evaluated the risk you are taking vs. the cost of a service?  Are you providing a competitive benefits package?

Book-Keeping:  Is you accounting system working efficiently?  Is it providing you with the basic information on revenue and profitability?  Can you analyze profitability by product or region?  Is your book-keeper competent and honest?  Who is watching over your accounting system? What is your upgrade path?

Financial Control: Are you confident that opportunity for theft is minimal?  Are parts of transactions split between staff?  Are all books and records reconciled on a regular basis?  Do you have documented procedures?

Sadly, many companies don't have the basic financial infrastructure under control.  This is like building a house on sand.  B2B CFO has heard many tales about companies that "crash and burn" at critical times like growth, acquisition and exit, because of employee theft, inadequate financial information, failure to pay payroll taxes, or collapse of an overloaded accounting system.  For those who have satisfied the basic need of core infrastructure they can move up to Controllership issues...

Controllership

The next level of business needs are what we call controllership functions. 

Cash: Are you planning cash flow?  Do you anticipate cash needs?  Are your lines of credit adequate?  Have you "termed" debt correctly matching short and long term needs with appropriate debt formats? 

Profitability:  Have you benchmarked profitability?  Do you know the profitability of each product/ region/ rep?  Do you understand your direct costs and overhead and the effect on profitability?  Is your pricing model tied in to your quoting and accounting system?

Budgets:  Do you prepare an annual budget?  Do you prepare a rolling forecast? Are you measuring Revenue and costs against budget and taking corrective action?

Productivity:  Do you manage key metrics for your business - both financial and non financial?  Do you set targets for improvement and monitor trends and progress with Dash Boards?

Again, the percentage of companies that take an active role in Controllership is smaller than it should be. Many operate on a very basic level and attempt to wing it when faced with these issues.  Sadly, this is where companies can face fatal issues - when cash runs out, when the company finds out its key products are actually causing the company a loss, when deals are lost because of the lack of forecasting and realistic pricing capabilities.  So far, the company has been looking backwards.  Stopping at this point means the company is not really influencing its destiny, not achieving self-actualization which in the business world means growth, profitability and value. So we come to the highest level of the Business Hierarchy...

Strategic Control

To achieve Strategic Control a company needs to focus on Planning, Strategy and Execution

Planning: Does the company prepare action plans?  Is the company award of industry benchmarks, SWOT analysis, market share, core competencies?  Does the plan show scenarios for acquisition strategies? For Exit Planning?  Is the company forecasting future growth possibilities, capital needs, and road blocks?

Strategy: Can the company move from Vision to Projects and Initiatives?  Has the company mapped out the Current vs. the Desired state and the path to get there?

Execution: Can the company communicate the plan to stakeholders?  Are procedures in place to track the plan with regular reviews and updates?  Does the plan have accountability for milestones, performance measurements and goals?

Only the top performers reach the highest level of company performance.  These are the companies that survive in down times, and thrive in growth times.  These are the companies that produce the highest Exit value for the owners.  These are the companies that have their own experienced

Sunday is Father’s Day.  For many of us, our fathers were part of, what Tom Brokaw labeled, “The Greatest Generation.”   They were a generation that was brought up during the depression and hardened by war.   Unlike most of my generation, they knew sacrifice and exercised that concept in the balance of their lives.  They sacrificed so that their children could have a better life.   My generation, the baby boomers, has become consumption oriented.   The Greatest Generation believed in the value of hard work.  Much of my generation and the younger generation have much more of a sense of entitlement.

The result of our fathers’ generation was to build the greatest industrial power the world has ever known.   As business owners and fathers, we should learn from the example “The Greatest Generation” set.  And thank them.

As discussed in the first of the 4 articles (The ABC's of Understanding Financial Statements-Part 1 of 4), there are always three main components to every financial statement.  They are:

1. Balance Sheet
2. Statement of Income
3. Statement of Cash Flows

This article will focus on the Balance Sheet.  Articles 3 and 4 will address the other reports.

The Balance Sheet is different from the other two statements in that it represents the financial condition as of a specific point in time (i.e. as of December 31) as opposed to measuring activity for a longer and defined period of time (i.e. 1 year, quarter, month, etc).  It represents a snapshot of the company’s financial position as of that date.  While many business executives focus on the Statements of Income and Cash Flow, the Balance Sheet is the primary report that measures the financial health of the entity at that point in time.  That is why every financial analyst (bankers, investment brokers, credit reporting agencies, etc) will monitor key metrics from the Balance Sheet to understand the financial health of that business.  It is unfortunate that too many small business owners ignore this report when examining their own business opportunities.

There are three major sections within the Balance Sheet.

1. Assets – the initial cost of everything the company owns and uses in their business.
2. Liabilities – debts owed to lenders and creditors.
3. Equity – represents ownership of the shareholders.

Below is an example of a simple Balance Sheet.  You will notice a few key elements that will appear on every report.  First of all, the name of the Company will always be at the top of the report.  It will also always be identified as the Balance Sheet and give the specific date in which the numbers were reported.

ASSETS

The assets of the business will be the first section reported.  Sometimes they will appear in the left column (as in this example), other times they will appear at the top of the report.  Assets will be allocated between current, fixed assets and long-term (none are shown in this example). 

Current assets are those that will be utilized within the next 12 months of the operating cycle.  They will include cash, accounts receivable, inventory and sometimes other prepaid expenses.

Fixed assets are those items that are used in the production of the company’s products and/or services and include machinery, equipment (both production and office), office furniture, land, buildings, vehicles, etc.  Since fixed assets have a defined useful life, they are depreciated over that useful life.  The annual depreciation expense is reflected on the Statement of Income but the accumulation(s) of the annual depreciation is recorded as a reduction of the fixed asset and is known as accumulated depreciation on the Balance Sheet.  Once the accumulated depreciation for an asset equals the initial cost of that asset, there will be no more depreciation expense incurred.  However, the fixed asset will remain on the Balance Sheet with a net cost of zero.

Long-term assets are (as you suspected) those that will be not be utilized within the next 12 months and have a useful life over the next several years.  Items that typically will be classified as long-term assets are goodwill, security deposits, prepayments on multi-year contracts, etc.

LIABILITIES

The liability section of the Balance Sheet will either be on the right side of the page or just below the asset section.  Similar to assets, liabilities will be allocated between current and long-term.

Current liabilities will include accounts payable and accrued expenses that are due to vendors within the next year and the portion of bank debt that is due within the next 12 months.  Since many bank loans extend beyond a 12 month period, the outstanding balance will be allocated to both current and long-term liabilities based upon the repayment schedule.

Long-term liabilities will be any other debt which is due to be paid after the one year period.  Again, this would include bank loans and certain long-term leases

EQUITY

Equity is that portion of the balance sheet that reflects shareholder investment.  It IS NOT an indicator of the current value of the business. It represents the initial investment of the shareholders (Contributed Capital) plus the accumulation of profits and losses for all the years the company has been in business (Retained Earnings).  Equity will always be the difference between total assets less total liabilities (ASSETS – LIABILITIES = EQUITY).  In the event that Equity is a negative number that means the company’s liabilities exceed the assets.  This is also known as “insolvency”.  Insolvent businesses are not necessarily out of business, it means that they do not have sufficient assets to pay off all of their debts.  As long as the lenders and suppliers do not require immediate payment, the company can continue to do business. However, it is important to note that companies that are insolvent should be monitored carefully and frequently if you plan to do business with them!

In summary, the Balance Sheet is a useful tool for the business owner in understanding the overall financial strength of their company.  Since most suppliers and all lenders rely on the Balance Sheet to make decisions on credit worthiness, it is imperative for the business owner to also understand the criteria and metrics that are being used.

Next month we’ll address the Statement of Income and how it should be used in measuring and evaluating performance over a period of time.

The fiscal ramifications of the various stimulus and bailout packages will likely be felt for several years.  As the government looks for sources to raise revenues, it will be increasingly necessary to keep a keen eye on the Treasury and IRS when planning strategies for both business and corporate structures.

The impact of the combination of the expiration of the Bush tax cuts beginning in 2011 with the increase in the Health Insurance taxes beginning in 2013 has the potential to raise the top tax rates for wages by 5.5%, for long term capital gains by 8.8%, and for dividends by 28.4% assuming Congress does not limit the tax on dividends to 20%.

As we near 2011 where the majority of the impact will begin to be felt, those that own closely held businesses (especially in the form of a pass through entity) should use this time to plan to increase revenues, defer deductions, and accelerate planned restructurings in 2010 to maximize their after tax earnings.   By enacting certain strategies, the relative tax savings due to the rate differential may be significant enough, even on a net present value basis, to warrant the acceleration of income or deferral of deductions.

There are several strategies that can be employed.   Some are automatic and others may require the filing of a request with the IRS for an accounting method change.  The scope of this entry will focus solely on business transactions.  Your B2B CFO^® in conjunction with your tax advisor should cover scenarios involving IRS approval as they are more complex.

For business transactions, some general planning considerations should include:

ü  Adjustment of contractual terms so income accrues in an earlier year (accrual basis taxpayers).

ü  Acceleration of cash collections prior to year end (cash basis taxpayers).

ü  Change in accounting method for advance payments received (consult tax advice).

ü  Delay timing of economic performance to subsequent year (accrual basis liabilities).

ü  Defer payment of expenses until 2011 (cash basis taxpayers).

ü  Elect to capitalize certain prepaid expenses and deduct them over the period of benefit (accrual basis).

ü  Make a Section 59(e) election to capitalize R&D for eligible expenses.

ü  Make a Section 174 election to capitalize and amortize certain research expenditures.

ü  Check you capitalization elections under Section 263(a).

ü  Elect using alternative depreciation versus MACRS and electing out of bonus depreciation.

ü  Generally delay any compensation payments beyond 2 ½ months after year end as long as the liability was incurred by the last day of the year.

For accounting methods, planning considerations should include:

·         Changing inventory method from LIFO to FIFO now.

·         Consider changing to simplified allocation method for Section 263(a) cost capitalization.

·         Adopting the gross method to account for cash discounts.

For owners of C Corporations who wish to make a S Corporation election or  S Corporations, there are a couple of specific planning opportunities that merit mention:

Ø  If considering conversion to a S Corporation, take into account Built In Gains tax to be recognized over time, potential for Section 1031 exchanges, LIFO recapture, and future potential for Excess Net Passive Income Tax.

Ø  A Deemed Dividend election may be an excellent strategy if the S Corporation has currently suspended losses due to a lack of basis or expects significant future losses.   This may also be beneficial if the S Corporation has accumulated earnings and profits and anticipates future distributions in excess of its Accumulated Adjustments Account.

Ø  Take note of the AMT posture of shareholders prior to finalizing any restructuring as this may dilute some of the potential tax benefits.

Time will be rapidly running short for those who may wish to benefit from these or other specific planning strategies.    Strategies must be thought through, analyzed and executed in many cases by the end of this calendar year.  Don’t delay.   Contact your B2B CFO^® to discuss.

At B2B CFO^® we concern ourselves with the client’s success and aspire for them to attain their goals and dreams.

Cash.  We help you get it.

  What is it about planning that brings such dread to mind?  No doubt many of us have been involved in planning before, so we have memories of the experience, some good, some not so good.

  A popular business proverb is “failing to plan is planning to fail”.  Do an Internet search on that phrase and you get 24,700,000 hits!  That means a good number of people have heard that proverb before and have something to say about it.  So what?

  Those of us that have been involved in strategic planning in business have many stories we could tell.  Sometimes planning is borne out by the results, sometimes not.  If the planning is simply done so someone can say the company has a plan it will fall into the “sometimes not” category.  What a waste, some would say.  We tried it once and it didn’t work.  We can’t predict the future so why try? 

  Well, we do it because studies of businesses over time bear out the fact that those that are actively engaged in careful planning perform better than those that aren’t.  Hence the proverb.

  Unfortunately, the majority of businesses don’t have a strategic plan in place.  They may have written a business plan to obtain a loan, perhaps an SBA loan, and that was the last time anyone gave planning much thought.  It is unlikely a strategic plan spelling out the details of how the company would accomplish that plan was ever written.  If having one is so important, why doesn’t it get done?  It seems that business owners simply don’t know where to begin and may feel they don't have time to develop one.  They want to get the business underway and think they can handle things as they come up.

  Alan Lakein, author of books on time management, said “Planning is bringing the future into the present so you can do something about it now”.  He was talking about this in the context of someone’s personal life, but for owners of a small to medium-sized business, the line between personal and company goals can be a blur, so I believe what he said is important for both. 

  Personally, do we plan what to do for a given day after the day’s end?  Of course we don’t.  At the start of the day we know what we want to accomplish for that day.  When an entrepreneur starts a company, it is imperative to have an end-game in mind ahead of time as well.  Is the purpose of a business to provide a living for a period of time?  Is it to build something of value to sell or perhaps pass on to a subsequent generation when the time is right?  Whatever the end goal, the planning needs to be done before a business opens its doors.  If not, there is no better time than right now to start planning for the future.  That’s true from business or individual perspectives.  A successful strategy requires that business owners be fully engaged in the process of setting short, medium and long-term goals.  Reducing goals to writing AND then detailing the steps for achieving those goals in the strategic plan helps owners and their staff focus on how to manage the company.  Once a plan it is developed, it must be periodically updated to be effective.  Otherwise it will simply be a paperweight gathering dust next to other long-forgotten objects.

 Your B2B CFO^® partner can help developb or update your strategic plan.

This has been a very busy week meeting with bankers discussing the current bank lending situation here in Phoenix.  The bankers I talked to both large and small here in Phoenix made the following recommendations when asked what they look for in the ideal loan customer.

1. Have a plan of what you want in terms of loan size and structure and be prepared to defend your request. This shows the lending officer that you understand the need for the loan and how the cash flow impacts your operations.

2.  Have a current set of financial statements complete with balance sheet and the income statement (P&L) and supporting subsidiary schedules for accounts receivable and accounts payable.  You get bonus points for having a cash flow statement and/or a budget prepared.

3. Be prepared to discuss your fluctuations in earnings, accounts receivable and general operations and any other outstanding debt.  Also be sure to be prepared to discuss gross margin percentages, breakeven volume and EBITDA (earnings before taxes, interest and depreciation and amortization).  Bonus points are awarded for anyone who can articulate why their earnings changed and how they plan to improve to previous levels prior to the current economic downturn.   

4. Understand you’re the business risks related to your specific industry and how the current economy and markets will impact future performance.  Be prepared to discuss how your product or service is superior to your competition and why you will succeed in the marketplace.  Also, understand any regulations or technologies unique to your industry.

Banks are only lending to those companies and organizations that have a positive cash flow, a history of earnings, good collateral (accounts receivable or inventory) and a favorable future earnings trend.  Banks have money to lend but fewer businesses to lend to in the current economic and regulatory environment.

Finally a good finance professional such as the controller or CFO helps provide confidence to the bank and loan committee that the company is well controlled financial and is committed to a long future with the proper financial controls.