business

The title of this article is sensational on purpose. Certainly, many small businesses today are doing just fine without the benefit of AI. However, AI is the sort of technology that builds slowly at first until it reaches a critical mass, at which point it mushrooms quickly in functionality and ubiquity.

Companies that begin using AI now, and smartly prepare their businesses for the coming explosion of AI-powered business technology will be well-poised to benefit, leaving their competitors to an early grave. Now is the time to adapt.

Already we can see how AI will lead this revolution in business efficiency, productivity, and predictability. Below you’ll find a number of examples of AI’s current applications in small business as well as an extrapolation of their future potential.

Competitive Intelligence

Small businesses frequently operate in highly-competitive markets, where small competitive advantages can have an outsized effect. The more insight businesses have into what their competitors are doing, the better equipped they are to revise their own strategies.

Today, tools like Crayon are applying AI to the task of collecting actionable competitive intelligence, and the practice is showing promise.

Crayon passively scours the hundreds or thousands of advertisements, online updates, social media posts, and other public communications made by your competition looking for patterns. It can tell if a given competitor is subtly changing its marketing language, shifting its focus to other business priorities, and whether its in a cycle of price increases or decreases.

With natural language processing capabilities and machine learning algorithms built-in, these sorts of competitive analysis tools can come to know your competition better than they know themselves.

In the future, these tools will be able to track and analyze far more data points, with a deeper level of integration. They could provide a meaningful, moment to moment picture of exactly what your competition is doing, how they fit into your overall industry, and exactly the steps you should take to overtake them.

Business Management

Today there are myriad tools that help businesses of all stripes manage inventories, schedule employees, track project statuses, keep tabs on their finances, and more. Prescient software designers are beginning to add AI and machine learning into these functions to give businesses the ability to not only track key business factors, but also to predict them.

You can imagine a software tool that keeps tabs on a business’s sales, current inventory, returns, as well as industry and social fads, in order to more reliably predict product usage over time. This reduces inventory risks, making businesses leaner and more competitive.

Small businesses like restaurants have been using integrated, digital POS (point of sale) systems for years. These allow owners a central dashboard to keep tabs on food usage, food sales, dining room staff composition, staffing needs, and more. The future will see this sort of software expand into more industries, along with full AI-integration.

Companies will have AI-optimized business management at their fingertips. Machine learning algorithms will be able to automatically keep inventory at optimal levels, maximize staff efficiency, enhance spending practices for better cash flow, suggest strategies to stay ahead of the competition, and monitor customer feedback online for useful insights into what the business could do to improve.

In the future, AI could replace managers entirely, but for now, the intelligence it provides will make your managers far more effective.

Customer Service

Responsive, informed customer service can make the difference between a business’s ultimate success and failure. However, many small businesses don’t have the resources to address customer service as holistically as they’d like. This is particularly true for small online retail businesses that deal with large volumes of customer feedback, questions, returns, and more.

Today, online AI chatbots, like Boost.ai and MobileMonkey, plug into a company’s website or into Facebook Messenger to help address common customer concerns without the need to speak with a human. As the AI that powers these evolves, it will begin to monitor all customer interactions, learning answers to customer questions it didn’t previously know.

In time the AI would be able to field most any customer questions or concerns. It would only require human support for unique cases it hadn’t encountered before.

It’s reasonable to imagine a future where intelligent chatbots and automated phone systems handle the entirety of a business’s customer service needs, serving up instant answers, advice, and recommendations based on more data points than any person could ever keep track of.

AI is the Future for Small Business

AI-powered software and machine learning algorithms will begin to dominate the small business space in the coming years. Now is the time to familiarize yourself with what these technologies can do for your business. Don’t wait until your competitors have already lapped you. The future belongs to the bold.

The truth of business is that, no matter how successful your business is, there will be good times and there will be tough times. There will be times when the business is flush with cash and times when the lack of cash on hand becomes a problem. There are many different reasons businesses run into cash flow problems. No matter how you end up there, the simple fact is when you do, you need to get cash in the door quickly to recover. When this situation occurs, you need solutions that will help you collect faster. Here are 3 ways to speed up cash collection in emergencies.

Hand Over Past Due Debt  to a Collection Agency

Even if your company has a solid collections department, that is not your core business. In order to recover as much money as you can for accounts receivable that are past due and in the collections process, handing it over to a professional collections agency will help. Just as your business is good at what you specialize in, so are collection agencies. They can dedicate more time and have more experienced, skilled, persistent negotiators on staff to go after the money your business is owed. Yes, it will cost money upfront or a portion of the debt collected but that is a good trade-off to make when you need cash fast.

One thing to keep in mind when you are looking to outsource your debt collection company is that you are working with an ethical debt collection agency. Any company collecting a consumer debt is beholden to the “Consumer Credit Protection Act” and the Fair Debt Collection Practices Act. If a less than reputable debt collection agency does not follow this, you risk not getting paid and damaging the reputation of your company.

Reward Early Payments, Penalize Late Ones 

Going after clients who are past is one side of the equations. The other side is working to incentivizing clients to pay early and penalize those who pay late (this is for customers who are late but not delinquent). Especially for customers who are diligent about paying their bills on time, offering a small percentage discount or other perks for early payment may be something they are keen to take advantage of.

On the other hand, for those clients who are always paying late and do not seem to make a move until you politely “remind” them a few times about their bill, you may want to consider taking slightly harsher actions and charge a fee for late payments. This is a valuable tool because it can either get you some more money when they eventually pay, or you can waive it for the customer as long as they pay immediately. That will help get the money in much quicker. Finally, if you have customers that are consistently behind on payments, you may consider dropping them. Sometimes it is just not worth it.

Bill Better, Bill Faster 

By streamlining the billing process, you will be able to get money in the door quicker all the time which will hopefully lead to fewer emergency situations to begin with. You want to make sure that bills are going out promptly, either when goods are shipped or service is provided. If you are on a billing cycle, you can speed that up too. If bills generally go out every month or two weeks, change it up to every week. The simple adage to keep in mind is that you cannot collect on what you have not billed.

One of the best ways to do this is to switch to an online or automated billing system. With these types of systems, bills go out and are followed up on automatically so there is less room for human error or oversight. The added benefit for this is that most of these systems come with online payment portals as well. If you do not have to wait for a check to be mailed or picked up the money will hit your coffers much quicker.

Conclusion

When times are tough in business, the main focus needs to be getting cash in so you have the working capital you need to function properly. By following these 3 tips, you should be able to get cash in immediately to help the situation. These strategies also will be beneficial for the long-term health of your business because they will speed up your accounts receivable process so you do not get in as many tight situations in the future.

Knowing how to create accurate cash flow forecasts for your business is an essential skill you need to master so you can predict how much money your business will bring in each month and what overheads you have to cover.

Why do you need to create cash flow forecasts? Cash flow forecasts help you predict fluctuations in your income, your outgoings, and help you make better decisions about your expenses and when to put money away for emergencies (rather than taking it as profit, for example). You may also need to create a cash flow forecast to show to potential investors, your shareholders, or a lender if you apply for a business loan.

What Does a Cash Flow Forecast Look Like?  

A cash flow forecast doesn’t need to be complicated; you can simply forecast your incomings and outgoings on a spreadsheet for the next twelve months (or a shorter timeframe if you prefer) and work out the totals for each month and the year overall – there are a lot of free templates online and you can even do it by hand if you prefer. You also may find your accounting software has a cash flow forecast feature.

6 Steps to Creating Accurate Cash Flow Forecasts

Step 1: Refer to Past Accounts

If you have at least a full twelve months in business behind you, you should have accurate accounts of what your cash flow looked like during that time. These records will make your cash flow forecasts much easier to complete and more accurate, as if nothing changes in the coming year it’s realistic to believe you can achieve the same results. If you believe things will improve or if you suspect things will take a downturn, you can use your original numbers as a guide.

If you are creating a cash flow forecast for a brand new business things are a little trickier, but you just need to do your due diligence to realistically forecast your future cash flow. Be conservative without being overly pessimistic.

Step 2: List All the Expenses That Don’t Occur Regularly

The expenses you pay quarterly or yearly are the expenses that can fly under your radar and cause inaccuracies if you forget to include them in your forecast. Make sure you include expenses like:

• Insurance
• Yearly software subscriptions
• Taxes
• Buying stock
• Accountant and banking fees
• Advertising and marketing campaigns
• Hiring short-term staff or consultants
• Savings for replacing equipment in the future if you buy outright

Step 3: Prepare for Seasonal Fluctuations

Is your business one that ramps up or down during the holiday season? This is important to know, as you need to be prepared to bring in less money from late November through early January, or alternatively, see a big boost. If the holidays are the best time for your business, do you need to including buying in extra stock or hiring extra staff on your forecast? Imagine what your day-to-day would be like during those times and try to foresee those expenses. If necessary, create several cash flow forecasts so you’ll be prepared for a number of different scenarios.

Step 4: Budget for Unexpected Expenses

An emergency fund is an essential part of good personal finance, so it’s only natural that businesses should have one too. Include a budget for unexpected expenses in your cash flow forecast so you can put some money away in a separate business account (if possible) each month for emergency repairs and other unexpected problems.

Step 5: Get Everyone On Board

Are there multiple people in your company with control over spending? Make sure they have their say on the forecast and give them a copy of the forecast when it’s complete.

Step 6: Update Your Cash Flow Forecasts Regularly

The best way to stay on top of your business finances? Update your cash flow forecast on a monthly basis – keep an eye on all those little expenses and services you pay for because they are “no brainer” expenses but are soon forgotten about. When you monitor your cash flow regularly, you’ll see the places where you can trim the fat.

While no cash flow forecast can be 100% accurate, doing your best to research the facts and figures will help you better manage your finances and easily share them with those who need to stay in the loop.

Standard litigation is enormously expensive. In 2019, American companies spent nearly 23 billion dollars on lawsuits. Much of this money was spent on pretrial discovery and the myriad other processes that occur before a suit ever reaches a courtroom. By the time suits finally reach trial both parties have already spent a considerable amount.

The primary issue is that standard litigation is adversarial in nature. Parties to the dispute treat each other as enemies, to be beaten at all costs. This renders the possibility of an amicable resolution next to impossible.

In this adversarial atmosphere, where the lawyers for both parties must labor to find and exploit any possible edge over the other side, you often see years of pretrial discovery, motions, and other procedural machinations. Neither party can afford to miss a piece of evidence or leave a possible argument unmade, and so the cost of litigation balloons astronomically.

Standard litigation is more like a war than a negotiation. Two enemies meet on a battlefield, and the only thing that will stop them from shooting at each other is the total defeat of one side. Until that occurs they will continue to throw troops, resources, and money into the fray. War and litigation are inefficient, and terribly destructive processes.

In answer to this waste, alternatives to standard litigation have developed to give people ways of coming to a solution that doesn’t involve hemorrhaging cash, leaping into trenches and lobbing legal hand grenades at each other for years.

The most common of these amicable contract dispute resolution procedures are arbitration, mediation, collaborative law, minitrials, and summary jury trials. Each one has its strengths and weaknesses, but all can be potent tools to help avoid litigation.

Arbitration

Arbitration resembles standard litigation in many ways. A neutral third party acts as a judge, and the decision they render is legally binding. There is no negotiation in the arbitration process, so it still hangs on to much of the standard adversarial baggage.

However, there are some significant differences. The arbitrator doesn’t need to have any formal legal training, and they don’t need to abide by standard courtroom procedures. Arbitration admits variety in the rules of engagement. Lawyers still make arguments and present evidence, but the endless discovery process that accompanies the courtroom is omitted.

Arbitration is in many ways Standard Litigation Lite. It retains some of the structure of a standard court case, but eliminates formality and greatly reduces the cost of dispute resolution by eliminating onerous pretrial discovery.

Mediation

Arbitration is still fairly adversarial. Mediation takes the opposite approach. This method for amicable dispute resolution is more like couples counseling than litigation. The mediator doesn’t render a decision. Instead, they work to help the disputing parties reach a resolution on their own.

Mediators frequently have a legal background along with formal training in effective listening, and negotiation. Their job is to avoid the sort of adversarial tactics that shut people down and stop them from listening to each other.

In this way, mediators help facilitate a discussion between the two parties. The mediator may find him or herself explaining or translating each party’s positions. They help establish goals for the mediation and offer tools for profitable conversation.

Trust and a willingness to make concessions are very important to mediation. Mediators help both parties stay in conversation so that they can find useful commonalities the help reach a solution.

Collaborative Law

Collaborative law is very similar to mediation except that there is no third-party participant. Instead, each party and their lawyers set the rules of engagement, and work collaboratively not aggressively to work out a compromise.

Because there’s no mediator to help calm tensions and guide the conversation, collaborative law can be more difficult to navigate. Each party has to agree ahead of time that the pursuit of an amicable solution is more important than making sure they get everything they want.

This method works best when participants are all motivated to avoid court and the staggering fees associated with it. If the process is successful, a binding settlement agreement will result.

Minitrial

Minitrials have features of both standard litigation and mediation. They’re meant to give the parties to a dispute the chance to plead their case as they would in a court of law, but with a dramatically condensed schedule.

Instead of spending years on discovery, witness depositions, document exchanges, and the rest of the legal process, this is all accomplished in a few days. Then each side makes its case as it would during a trial, but with brevity as the goal.

Minitrials are interesting because each side is arguing its case to three people. One is either a former judge or a subject matter expert. The other two are representatives of the disputing parties. In this way minitrials resemble mediation.

Once proceedings have concluded, the representatives can ask the third-parties opinion about what the result of the trial might have been in a real court of law. Then the three can use that knowledge to help come to an agreement.

Summary Jury Trial

Disputing parties often have unrealistic notions about how strong their case is, and this leads them to charge blindly into litigation. A summary jury trial uses a jury of six people, all under the impression that they’re rendering a binding decision, to give both sides a true sense for how a jury might receive their arguments.

The trial is conducted in a standard courtroom, often as a precursor to standard litigation. Lawyers for both sides will make opening statements, and then present evidence, deliver testimony briefs, and argue their case in a condensed format, usually speaking for an hour.

Closing statements follow and then the jury is released to make their decision. This isn’t binding, but they don’t know that. The whole process gives participants a more realistic, grounded understanding of what it would take to win. In the vast majority of cases where summary jury trials have been used, they’ve resulted in rapid settlements.

If you’re looking at the possibility of litigation, it behooves you to try and interest the other party in one of these alternative dispute resolution models. You’ll both save a substantial amount of time, money, and heartache. You may also be able to salvage your business relationship, and that can often be motivation enough.

Maintaining healthy cash flow and proper working capital levels is a constant struggle for most businesses. If you’re having issues, it may be worth looking at two key metrics that may indicate where your problems lie.

DSO, or Days Sales Outstanding measures the average number of days that it takes your customers to pay their invoices. A high number indicates slow payment, which can delay cash from hitting your account. Lowering your DSO will translate to stronger cash flow.

The other metric to look at is your DPO, or Days Payable Outstanding. This is the flipside to DSO. It represents the average number of days that it takes your company to pay vendors, bills, and other outstanding invoices. With DPO, higher numbers are better as this translates to cash-in-hand for longer periods of time. If your DPO is too low it means that you’re paying invoices too quickly, placing unnecessary limitations on working capital.

Below you’ll find a number of strategies to reduce DSO and improve the ratio of DSO to DPO in order to heal cash flow problems.

Increase Visibility

Before you take any other steps, it’s important to have a full and complete picture of your receivables and payables. For DSO, make sure you have reporting practices in place that allow you to see which customers tend to pay late, trace any correlations that exist with your sales practices, and discover internal issues that might be causing delays.

For DPO, you need to know how much you’re spending, on what, by whom and the terms that were negotiated. Increasing visibility on both of these metrics will help guide your improvement efforts.

Adjust Your Payment Terms

A good rule of thumb is that your DSO should be within 20% of your stated payment terms. If you’re within the right range and find that your DSO is too long you should consider gradually reducing your payment period. If you find that the percentage is significantly higher than it should be it’s worth offering incentives and/or charging penalties to motivate a closer alignment.

You could offer an early payment discount if your customers pay within 10 or 15 days. On the flip side, you could charge a small penalty for payments that are made after your normal payment window. These penalties could accrue at regular intervals after an invoice’s due date passes.

Automate Your Billing

If you’re still relying on manual, paper-based billing systems, you should consider going digital. Electronic invoices can be generated and submitted for payment considerably faster, arriving in your customer’s inbox immediately.

These systems will keep you apprised of outstanding invoices, send out automatic payment reminders, and can make it much easier for customers to pay. In many cases, you can have direct links to digital payment methods included right inside your invoice.

It’s also worth offering your customers a wide range of payment options. Depending on their current financial situation, certain payment methods might be more desirable than others. Meeting your customers where they are will help speed collections and reduce your DSO.

Reexamine Vendor Terms

It’s often possible to negotiate better payment terms with your vendors and other accounts payable, particularly if you give them a lot of business. Don’t assume that their default terms are the only ones they’ll consider. Ask for a longer payment window, or a discount for faster payment.

If your current vendors aren’t willing to negotiate, consider switching to one of their competitors. The more you can negotiate advantageous payment terms the longer you can push out your DPO, gaining a more favorable DSO to DPO ratio.

Focus on Customer Credit Issues

It’s important to institute customer credit risk policies and apply them consistently, no matter the salesperson making the sale. The goal is to identify risky customers, both current and new, and decide what level of credit risk your organization is willing to face.

You should run thorough credit checks on new customers, and consider rejecting them if their established credit record is worse than your predetermined threshold. You might also consider firing existing customers that consistently allow their invoices to become significantly delinquent. Your organization has a limited number of productive hours. If your services are in demand, it’s worth eliminating bad players so that you can focus on customers that help keep your DSO down.

Have a Rigorous Collections Process in Place

You want all of your AR personnel to be following a consistent collections process. This makes certain that invoices are sent in a timely manner, that payment reminders go out on time and without fail, and that delinquent accounts are handled professionally, and with a level of severity appropriate to the delinquency of the account.

Taken in their entirety, these practices can go a long way to bringing your DSO and DPO into more acceptable ranges, delivering more consistent cash flow and higher working capital levels.

If you operate a small business, you are undoubtedly aware of the looming and ever-growing risks of cyberattacks. You’ve likely heard of large-scale data breaches, ransomware attack and theft of customer and other data from big enterprises like Home Depot, Target, and others. You probably assure yourself that you are not a target, because you are not a huge enterprise. Or, maybe you feel protected because you don’t handle customer data.

The truth is, however, that cybercriminals do not discriminate when they target businesses. These attacks are not always executed with precision but can be blunt force attacks merely looking to exploit any vulnerability of any user. Sure, they are looking for big targets, but will also exploit smaller ones that can present fewer obstacles. And no matter what technology you employ in your organization, users are the most significant vulnerability when it comes to cybersecurity. The best defense then is through user education and the implementation of clear cybersecurity policies.

Human error is the greatest risk

Small businesses need to enable basic-level technologies to protect their networks and systems. Firewalls and anti-virus software help block significant attacks. But, no technology will protect against human error. By far, the most common human mistakes regarding cybersecurity involve clicking unknown links, opening attachments, and entering login or other credentials into sites that seem legitimate but are, in fact, counterfeit. According to one recent survey by Experian, 66% of businesses consider their employees to be the weakest cybersecurity link.

This is not to say that employees are not intelligent. The way business is conducted has changed drastically, and emails with attachments are part of daily, if not hourly, life for most workers.

Policies help make security second nature

Creating a strong and easy-to-understand security policy helps facilitate more secure employee behavior. The most effective policies evaluate today’s risks and are flexible, allowing for revision as necessary. While there’s no one-size-fits-all solution, small business cybersecurity policies should include provisions on email security, passwords, multi-factor authentication, and the use of media such as USB drives. Let’s take a brief look at each of these risks and how a policy can provide ongoing protection.

1. Email can be an open door for cyber risks

Phishing, a fraudulent practice where emails are disguised as legitimate to induce people to give up personal information, such as passwords. A cybersecurity policy can address this by adding a layer of caution. Users can be trained on the signs of phishing, such as poor writing, odd email extensions, such as @mail.apple.work instead of @apple.com. It’s equally crucial for your security policy to state that it covers the use of personal and work email on work computers. 

2. Passwords only protect when used properly

Strong password hygiene is an essential component of cybersecurity policy. Train users to avoid sharing passwords with others. Policies should prohibit using the same login credentials across various online services. Security experts recommend using complicated passwords that contain no “dictionary words” and use a mix of characters, numbers, and different capitalizations. Your policy should also prohibit using the same credentials for various services.  

3. Enable multi-factor authentication where possible

Small businesses can increase their protections with multi-factor authentication (MFA). This technology requires a user to know something (a login credential) and possess something (a smartphone or other device.) MFA raises the bar for hackers considerably. According to Microsoft, 99.9% of account hacks are blocked by the practice. If MFA is an option on the programs and systems your business uses, enable it, and make sure your policy requires it for all users.

4. Addressing the use of removable media

Not all cyber threats travel via email and the internet. Some can sneak in on a removable USB drive. USB drives can help transport documents, but it is essential to protect your systems from malware and viruses that can jump from a home or other computer. USB drives also can be easily lost, leading to the risk of sensitive information getting into the wrong hands. A USB drive security policy should require encryption of files, at a minimum, but can also extend to other protections, such as ensuring that only a specific brand of drive is used, as malware can hit the drives during manufacturing in some cases.

These are just a few examples of how a cybersecurity policy can protect your small business. Cyber threats often change, with new risks identified almost daily. Your policies should respond to these changes. Hold frequent security meetings and ask for input, even if it is held once a quarter. With a clear and enforced policy, cybersecurity can be on your users’ minds throughout the day. Help spread enthusiasm for security, and you’ll make great strides towards a more secure business.