All posts by admin

We all know the dangers of a blind spot while driving down the road, where the vehicle that we cannot see could be lurking, and leading to a possible accident. Thankfully for our safety on the roads, today’s technology has compensated for the blind spots in our vehicles while driving. However, on the winding road of entrepreneurship, blind spots are still much more common than we would like. There is a number in your business right now that is a blind spot, and that blind spot could be doing damage right under your nose. What number is it? And what should you do about it?

What is it?

There is no magic uniform technology to expose the blind spot in your business. Like the human body, your business is unique – how it operates, its resources, its constraints and its culture. To narrow down that blind spot number, what is driving your business today? What are you susceptible to? What has changed in the market that is affecting you? Changes in collections can have a material impact on a company’s cash position. Could your days sales outstanding (DSO) be that number? Gage your team, what are they seeing? What is keeping them up at night? Are they seeing something on the ground floor? For example, even though sales are still increasing, perhaps fewer deals are entering the funnel despite sales efforts. Are you watching trends of how many new opportunities are being generated each month? Could this pending slowdown catch you by surprise? Is the team as efficient as they had been in the past? Revenue per FTE or revenue per sales or other department FTE can be a key indicator. Is this a sign of trouble? Another great way to look at data is in rolling 3 month averages. This smooths out the impact of one month, good or bad. Could a rolling three month trend tell you that your sustained growth rate is less than you think?

How do you monitor it?

First off, how good is your data? Is it reliable? Is it timely? You must start there. A blind spot is problematic, but a false positive or false negative based on bad information could be just as dangerous, creating a false sense of security or unneeded panic. Look at trending. And understand what is driving its movements. If DSO is that blind spot and it is deteriorating over time, is it uniform across all customers? Just a few large ones? The answer to that question will dictate the nature of the response. Empower the team to understand their role in improving the results.

How do you mitigate future blind spots?

Again, your team can be a great weapon here. Encourage their curiosity and candor to actively identify and raise flags to management at any time. Leverage the network of partners around your business. Your CPA firm and lender, among others, can provide a frame of reference of what is happening in the market and to companies in and around your industry. This can provide context, and a head start that allows you then to dig into your business.

Find that number in your business. Reflect, dig into the numbers behind the numbers, and get your team engaged. It is imperative that you can peer through the noise to accurately monitor this key metric and the information beneath it. Continue to be vigilant as new blind spots can emerge. By identifying and monitoring the right numbers, you can create your own early detection system, just like the blind spot warning system in your car. Don’t let that accident sneak up on your business.

It is critical for businesses to have the right strategic partners around it for lasting success. A key part of the network every business needs is an effective, trusted CPA to manage tax and other compliance aspects. The world of tax is very complex, and evolves far more often than people realize. Couple that with an evolving business, and the alignment of a business with its tax professional is essential. We have business owners tell us quite often things like, “I’m not totally happy with my outside CPA”, “I’m not sure how to leverage them” or “I’m not sure how to make the relationship work better”. It is a vital ally to have, so how do you get it right? Be educated, be engaged and be selective.

What to expect – An essential part of the relationship with a tax professional is that they are proactive. If you are not doing any proactive tax planning before the year ends, or getting tons of questions about the past year right before filing day, you likely have the wrong team. Conversations should be frequent throughout the year, both forward looking and past. At times you should have your own agenda, at times they should have theirs. They should be asking questions about where the business is and where it is going and bringing ideas to the forefront. You may suddenly be eligible for tax deferrals or credits that were not relevant in the past. And on the flip side, you need to do your best to keep them informed of big changes in the business. They need that context. You should get to know them, and they should get to know you. There should be no big surprises in either direction. And in the long run, it will save you time and money, so do not worry about paying for that extra couple hours of meetings, with the right fit, the ROI is many times over. This iterative conversational component is a mutual commitment and what you should insist on and nothing less.

Match up expertise – There are tons of tax professionals that have wide bases of experience. There is nothing wrong with that. You do want someone who is comfortable and competent with business you are in, its size and the geographies in which you operate and the tax considerations accordingly, of not just today, but tomorrow. The needs evolve over time. We have often seen the classic case where what got you to point A is not what will get you to point B. Tax is no exception. Ask questions of your current CPA and who their clients are today. Do the same if interviewing new ones. A client of ours materially grew a B2C arm, only to find out their tax firm was not skilled in sales tax. That is a problem. We recently had a horror story with a technology company that has developed patents and made huge investments over the years that had not only not taken advantage of, but not even aware of tax benefits around research and development. Given that CEO’s business, I have no idea how that was never a topic of conversation. Don’t assume they can handle it all. Ask, and ask tough questions. Make sure the capabilities are there. This is not a one-size fits all.

Match up fit – This is a key partner. Do they align culturally with you? Do you communicate well with each other? Do you feel they understand you and vice versa? This is often overlooked, but no less important. Can you be vulnerable with them? Much of the time, the same CPA will handle both personal and business tax matters, and even if that is not the case, there is still crossover. Can you share worries and excites you and not hold back? They also need to fit with your team of strategic partners. They need to communicate with your financial planner, your legal advisors, lenders and other external stakeholders. If they don’t “fit”, their effectiveness will be limited. You cannot afford that.

Finding the right CPA has certainly become harder, with firms merging and longtime CPAs retiring. With the right expectations and commitments, the right CPA for your business is within your reach, and could be the one you already have, with just a simple reset conversation needed. Some of this may seem like such common sense. I can speak from experience with the tax mistakes we saw in the past tax year, that many businesses do not follow this approach, and leave themselves exposed to unexpected costs, anxiety and frustration. That does not have to be you. Be diligent and make sure you have a tax CPA in your corner that is there for you today and tomorrow.

We are in a period right now that I would describe as renewal shock. Companies have renewed loans already, some are in process and many more will do so in the coming months. We have seen first hand a number of changes, in the renewal process, terms and even in some cases polite nudges out the door from existing bank relationships. Rates are clearly higher, but just as important, underwriting standards have tightened, meaning deals are just harder to come by than they were a year ago, potentially even at your current bank partner. Very few banks are “not lending”, so the more important question is “how” are they lending and what does that mean for your business.

I won’t bore you with a long economics lesson, but the economy overall has slowed and due to multiple factors, there is less money in the banking system to be lent to borrowers than there was 6 to 12 months ago. That means we are in a state of increased scarcity. The days of low cost, easy to obtain financing are in the past. Unfortunately, in some cases, that may mean your deal that was bankable last year is not bankable today. We are involved firsthand with clients in that boat that either have to settle for a different structure or potentially find non-bank financing.

How do they see you? Underwriting has tightened across the board. Many banks have gotten picky on industry and company profile, either because of a higher perceived risk level, a high concentration or a combination thereof. Do you know how your bank views your industry? You want to. A majority of the banks we see will be more aggressive for existing customers than new ones, which can be to your benefit. You need to know where you stand in their eyes. Odds are it will not be exactly the same as it was 6, 12 or 18 months ago.

How has the process changed? Be prepared for a lot more questions about your business, its financial performance, its customers and its future. We see business owners at times getting offended by the level of questions that can be asked. “They never asked that before” is a common complaint. You are in the majority if you are hearing that. Don’t be alarmed, use it as an opportunity to make a strong case why they should still love you. We have also seen deals take longer to get done. Allot more time accordingly.

How might the deal look? Rates are clearly higher overall, as core interest rates have risen, but the spread over the whatever index the bank is using is also higher than it was a year ago. Fees are much more common, including higher origination fees. Unused line fees on lines of credit are commonplace as well, so you could pay more to just have capacity. And meaningful deposits at the lending bank are a norm, even to the point that we are seeing significant covenants tied to cash balances on hand. Be prepared for terms you may not have seen in a while, if ever.

Based on all this, a few points of caution and steps to take.

• Understand the whole deal – there is much more to evaluate beyond rate. Evaluate the entire structure. Understand the all-in costs. And understand the requirements and covenants. You will likely have new covenants and more of them, so you want to understand how it affects your business.
• Ask to see deal points in writing as early as possible. The lending industry, like many others has struggled to source talent. We have seen too many instances where the relationship banker does not understand what the bank can actually get done and deliver on. They likely will not put anything in writing that has not been vetted to some level. You cannot afford to be on the receiving end of a prolonged no.
• Get out ahead of a renewal, as you might, like many, need to start looking for a new home. The good news is there are still plenty of deals that will get done. And companies are moving to new banks that are lending – you just have to stand out above companies competing for the same dollars.

The banking sector and its impact on small businesses has created a new constraint. Accept the facts, do your homework, and be proactive – that is your best chance to get the options you want. The ultimate solution may not be perfect, but an imperfect deal could still allow you to put dollars to work and drive long term value in your business. Don’t let the renewal shock and its hurdles cloud that big picture. Keep growing boldly.

We all know the dangers of a blind spot while driving down the road, where the vehicle that we cannot see could be lurking, and leading to a possible accident. Thankfully for our safety on the roads, today’s technology has compensated for the blind spots in our vehicles while driving. However, on the winding road of entrepreneurship, blind spots are still much more common than we would like. There is a number in your business right now that is a blind spot, and that blind spot could be doing damage right under your nose. What number is it? And what should you do about it?

What is it?

There is no magic uniform technology to expose the blind spot in your business. Like the human body, your business is unique – how it operates, its resources, its constraints and its culture. To narrow down that blind spot number, what is driving your business today? What are you susceptible to? What has changed in the market that is affecting you? Changes in collections can have a material impact on a company’s cash position. Could your days sales outstanding (DSO) be that number? Gage your team, what are they seeing? What is keeping them up at night? Are they seeing something on the ground floor? For example, even though sales are still increasing, perhaps fewer deals are entering the funnel despite sales efforts. Are you watching trends of how many new opportunities are being generated each month? Could this pending slowdown catch you by surprise? Is the team as efficient as they had been in the past? Revenue per FTE or revenue per sales or other department FTE can be a key indicator. Is this a sign of trouble? Another great way to look at data is in rolling 3 month averages. This smooths out the impact of one month, good or bad. Could a rolling three month trend tell you that your sustained growth rate is less than you think?

How do you monitor it?

First off, how good is your data? Is it reliable? Is it timely? You must start there. A blind spot is problematic, but a false positive or false negative based on bad information could be just as dangerous, creating a false sense of security or unneeded panic. Look at trending. And understand what is driving its movements. If DSO is that blind spot and it is deteriorating over time, is it uniform across all customers? Just a few large ones? The answer to that question will dictate the nature of the response. Empower the team to understand their role in improving the results.

How do you mitigate future blind spots?

Again, your team can be a great weapon here. Encourage their curiosity and candor to actively identify and raise flags to management at any time. Leverage the network of partners around your business. Your CPA firm and lender, among others, can provide a frame of reference of what is happening in the market and to companies in and around your industry. This can provide context, and a head start that allows you then to dig into your business.

Find that number in your business. Reflect, dig into the numbers behind the numbers, and get your team engaged. It is imperative that you can peer through the noise to accurately monitor this key metric and the information beneath it. Continue to be vigilant as new blind spots can emerge. By identifying and monitoring the right numbers, you can create your own early detection system, just like the blind spot warning system in your car. Don’t let that accident sneak up on your business.

It is critical for businesses to have the right strategic partners around it for lasting success. A key part of the network every business needs is an effective, trusted CPA to manage tax and other compliance aspects. The world of tax is very complex, and evolves far more often than people realize. Couple that with an evolving business, and the alignment of a business with its tax professional is essential. We have business owners tell us quite often things like, “I’m not totally happy with my outside CPA”, “I’m not sure how to leverage them” or “I’m not sure how to make the relationship work better”. It is a vital ally to have, so how do you get it right? Be educated, be engaged and be selective.

What to expect – An essential part of the relationship with a tax professional is that they are proactive. If you are not doing any proactive tax planning before the year ends, or getting tons of questions about the past year right before filing day, you likely have the wrong team. Conversations should be frequent throughout the year, both forward looking and past. At times you should have your own agenda, at times they should have theirs. They should be asking questions about where the business is and where it is going and bringing ideas to the forefront. You may suddenly be eligible for tax deferrals or credits that were not relevant in the past. And on the flip side, you need to do your best to keep them informed of big changes in the business. They need that context. You should get to know them, and they should get to know you. There should be no big surprises in either direction. And in the long run, it will save you time and money, so do not worry about paying for that extra couple hours of meetings, with the right fit, the ROI is many times over. This iterative conversational component is a mutual commitment and what you should insist on and nothing less.

Match up expertise – There are tons of tax professionals that have wide bases of experience. There is nothing wrong with that. You do want someone who is comfortable and competent with business you are in, its size and the geographies in which you operate and the tax considerations accordingly, of not just today, but tomorrow. The needs evolve over time. We have often seen the classic case where what got you to point A is not what will get you to point B. Tax is no exception. Ask questions of your current CPA and who their clients are today. Do the same if interviewing new ones. A client of ours materially grew a B2C arm, only to find out their tax firm was not skilled in sales tax. That is a problem. We recently had a horror story with a technology company that has developed patents and made huge investments over the years that had not only not taken advantage of, but not even aware of tax benefits around research and development. Given that CEO’s business, I have no idea how that was never a topic of conversation. Don’t assume they can handle it all. Ask, and ask tough questions. Make sure the capabilities are there. This is not a one-size fits all.

Match up fit – This is a key partner. Do they align culturally with you? Do you communicate well with each other? Do you feel they understand you and vice versa? This is often overlooked, but no less important. Can you be vulnerable with them? Much of the time, the same CPA will handle both personal and business tax matters, and even if that is not the case, there is still crossover. Can you share worries and excites you and not hold back? They also need to fit with your team of strategic partners. They need to communicate with your financial planner, your legal advisors, lenders and other external stakeholders. If they don’t “fit”, their effectiveness will be limited. You cannot afford that.

Finding the right CPA has certainly become harder, with firms merging and longtime CPAs retiring. With the right expectations and commitments, the right CPA for your business is within your reach, and could be the one you already have, with just a simple reset conversation needed. Some of this may seem like such common sense. I can speak from experience with the tax mistakes we saw in the past tax year, that many businesses do not follow this approach, and leave themselves exposed to unexpected costs, anxiety and frustration. That does not have to be you. Be diligent and make sure you have a tax CPA in your corner that is there for you today and tomorrow.

We are in a period right now that I would describe as renewal shock. Companies have renewed loans already, some are in process and many more will do so in the coming months. We have seen first hand a number of changes, in the renewal process, terms and even in some cases polite nudges out the door from existing bank relationships. Rates are clearly higher, but just as important, underwriting standards have tightened, meaning deals are just harder to come by than they were a year ago, potentially even at your current bank partner. Very few banks are “not lending”, so the more important question is “how” are they lending and what does that mean for your business.

I won’t bore you with a long economics lesson, but the economy overall has slowed and due to multiple factors, there is less money in the banking system to be lent to borrowers than there was 6 to 12 months ago. That means we are in a state of increased scarcity. The days of low cost, easy to obtain financing are in the past. Unfortunately, in some cases, that may mean your deal that was bankable last year is not bankable today. We are involved firsthand with clients in that boat that either have to settle for a different structure or potentially find non-bank financing.

How do they see you? Underwriting has tightened across the board. Many banks have gotten picky on industry and company profile, either because of a higher perceived risk level, a high concentration or a combination thereof. Do you know how your bank views your industry? You want to. A majority of the banks we see will be more aggressive for existing customers than new ones, which can be to your benefit. You need to know where you stand in their eyes. Odds are it will not be exactly the same as it was 6, 12 or 18 months ago.

How has the process changed? Be prepared for a lot more questions about your business, its financial performance, its customers and its future. We see business owners at times getting offended by the level of questions that can be asked. “They never asked that before” is a common complaint. You are in the majority if you are hearing that. Don’t be alarmed, use it as an opportunity to make a strong case why they should still love you. We have also seen deals take longer to get done. Allot more time accordingly.

How might the deal look? Rates are clearly higher overall, as core interest rates have risen, but the spread over the whatever index the bank is using is also higher than it was a year ago. Fees are much more common, including higher origination fees. Unused line fees on lines of credit are commonplace as well, so you could pay more to just have capacity. And meaningful deposits at the lending bank are a norm, even to the point that we are seeing significant covenants tied to cash balances on hand. Be prepared for terms you may not have seen in a while, if ever.

Based on all this, a few points of caution and steps to take.

• Understand the whole deal – there is much more to evaluate beyond rate. Evaluate the entire structure. Understand the all-in costs. And understand the requirements and covenants. You will likely have new covenants and more of them, so you want to understand how it affects your business.
• Ask to see deal points in writing as early as possible. The lending industry, like many others has struggled to source talent. We have seen too many instances where the relationship banker does not understand what the bank can actually get done and deliver on. They likely will not put anything in writing that has not been vetted to some level. You cannot afford to be on the receiving end of a prolonged no.
• Get out ahead of a renewal, as you might, like many, need to start looking for a new home. The good news is there are still plenty of deals that will get done. And companies are moving to new banks that are lending – you just have to stand out above companies competing for the same dollars.

The banking sector and its impact on small businesses has created a new constraint. Accept the facts, do your homework, and be proactive – that is your best chance to get the options you want. The ultimate solution may not be perfect, but an imperfect deal could still allow you to put dollars to work and drive long term value in your business. Don’t let the renewal shock and its hurdles cloud that big picture. Keep growing boldly.

We all know the dangers of a blind spot while driving down the road, where the vehicle that we cannot see could be lurking, and leading to a possible accident. Thankfully for our safety on the roads, today’s technology has compensated for the blind spots in our vehicles while driving. However, on the winding road of entrepreneurship, blind spots are still much more common than we would like. There is a number in your business right now that is a blind spot, and that blind spot could be doing damage right under your nose. What number is it? And what should you do about it?

What is it?

There is no magic uniform technology to expose the blind spot in your business. Like the human body, your business is unique – how it operates, its resources, its constraints and its culture. To narrow down that blind spot number, what is driving your business today? What are you susceptible to? What has changed in the market that is affecting you? Changes in collections can have a material impact on a company’s cash position. Could your days sales outstanding (DSO) be that number? Gage your team, what are they seeing? What is keeping them up at night? Are they seeing something on the ground floor? For example, even though sales are still increasing, perhaps fewer deals are entering the funnel despite sales efforts. Are you watching trends of how many new opportunities are being generated each month? Could this pending slowdown catch you by surprise? Is the team as efficient as they had been in the past? Revenue per FTE or revenue per sales or other department FTE can be a key indicator. Is this a sign of trouble? Another great way to look at data is in rolling 3 month averages. This smooths out the impact of one month, good or bad. Could a rolling three month trend tell you that your sustained growth rate is less than you think?

How do you monitor it?

First off, how good is your data? Is it reliable? Is it timely? You must start there. A blind spot is problematic, but a false positive or false negative based on bad information could be just as dangerous, creating a false sense of security or unneeded panic. Look at trending. And understand what is driving its movements. If DSO is that blind spot and it is deteriorating over time, is it uniform across all customers? Just a few large ones? The answer to that question will dictate the nature of the response. Empower the team to understand their role in improving the results.

How do you mitigate future blind spots?

Again, your team can be a great weapon here. Encourage their curiosity and candor to actively identify and raise flags to management at any time. Leverage the network of partners around your business. Your CPA firm and lender, among others, can provide a frame of reference of what is happening in the market and to companies in and around your industry. This can provide context, and a head start that allows you then to dig into your business.

Find that number in your business. Reflect, dig into the numbers behind the numbers, and get your team engaged. It is imperative that you can peer through the noise to accurately monitor this key metric and the information beneath it. Continue to be vigilant as new blind spots can emerge. By identifying and monitoring the right numbers, you can create your own early detection system, just like the blind spot warning system in your car. Don’t let that accident sneak up on your business.

It is critical for businesses to have the right strategic partners around it for lasting success. A key part of the network every business needs is an effective, trusted CPA to manage tax and other compliance aspects. The world of tax is very complex, and evolves far more often than people realize. Couple that with an evolving business, and the alignment of a business with its tax professional is essential. We have business owners tell us quite often things like, “I’m not totally happy with my outside CPA”, “I’m not sure how to leverage them” or “I’m not sure how to make the relationship work better”. It is a vital ally to have, so how do you get it right? Be educated, be engaged and be selective.

What to expect – An essential part of the relationship with a tax professional is that they are proactive. If you are not doing any proactive tax planning before the year ends, or getting tons of questions about the past year right before filing day, you likely have the wrong team. Conversations should be frequent throughout the year, both forward looking and past. At times you should have your own agenda, at times they should have theirs. They should be asking questions about where the business is and where it is going and bringing ideas to the forefront. You may suddenly be eligible for tax deferrals or credits that were not relevant in the past. And on the flip side, you need to do your best to keep them informed of big changes in the business. They need that context. You should get to know them, and they should get to know you. There should be no big surprises in either direction. And in the long run, it will save you time and money, so do not worry about paying for that extra couple hours of meetings, with the right fit, the ROI is many times over. This iterative conversational component is a mutual commitment and what you should insist on and nothing less.

Match up expertise – There are tons of tax professionals that have wide bases of experience. There is nothing wrong with that. You do want someone who is comfortable and competent with business you are in, its size and the geographies in which you operate and the tax considerations accordingly, of not just today, but tomorrow. The needs evolve over time. We have often seen the classic case where what got you to point A is not what will get you to point B. Tax is no exception. Ask questions of your current CPA and who their clients are today. Do the same if interviewing new ones. A client of ours materially grew a B2C arm, only to find out their tax firm was not skilled in sales tax. That is a problem. We recently had a horror story with a technology company that has developed patents and made huge investments over the years that had not only not taken advantage of, but not even aware of tax benefits around research and development. Given that CEO’s business, I have no idea how that was never a topic of conversation. Don’t assume they can handle it all. Ask, and ask tough questions. Make sure the capabilities are there. This is not a one-size fits all.

Match up fit – This is a key partner. Do they align culturally with you? Do you communicate well with each other? Do you feel they understand you and vice versa? This is often overlooked, but no less important. Can you be vulnerable with them? Much of the time, the same CPA will handle both personal and business tax matters, and even if that is not the case, there is still crossover. Can you share worries and excites you and not hold back? They also need to fit with your team of strategic partners. They need to communicate with your financial planner, your legal advisors, lenders and other external stakeholders. If they don’t “fit”, their effectiveness will be limited. You cannot afford that.

Finding the right CPA has certainly become harder, with firms merging and longtime CPAs retiring. With the right expectations and commitments, the right CPA for your business is within your reach, and could be the one you already have, with just a simple reset conversation needed. Some of this may seem like such common sense. I can speak from experience with the tax mistakes we saw in the past tax year, that many businesses do not follow this approach, and leave themselves exposed to unexpected costs, anxiety and frustration. That does not have to be you. Be diligent and make sure you have a tax CPA in your corner that is there for you today and tomorrow.

We are in a period right now that I would describe as renewal shock. Companies have renewed loans already, some are in process and many more will do so in the coming months. We have seen first hand a number of changes, in the renewal process, terms and even in some cases polite nudges out the door from existing bank relationships. Rates are clearly higher, but just as important, underwriting standards have tightened, meaning deals are just harder to come by than they were a year ago, potentially even at your current bank partner. Very few banks are “not lending”, so the more important question is “how” are they lending and what does that mean for your business.

I won’t bore you with a long economics lesson, but the economy overall has slowed and due to multiple factors, there is less money in the banking system to be lent to borrowers than there was 6 to 12 months ago. That means we are in a state of increased scarcity. The days of low cost, easy to obtain financing are in the past. Unfortunately, in some cases, that may mean your deal that was bankable last year is not bankable today. We are involved firsthand with clients in that boat that either have to settle for a different structure or potentially find non-bank financing.

How do they see you? Underwriting has tightened across the board. Many banks have gotten picky on industry and company profile, either because of a higher perceived risk level, a high concentration or a combination thereof. Do you know how your bank views your industry? You want to. A majority of the banks we see will be more aggressive for existing customers than new ones, which can be to your benefit. You need to know where you stand in their eyes. Odds are it will not be exactly the same as it was 6, 12 or 18 months ago.

How has the process changed? Be prepared for a lot more questions about your business, its financial performance, its customers and its future. We see business owners at times getting offended by the level of questions that can be asked. “They never asked that before” is a common complaint. You are in the majority if you are hearing that. Don’t be alarmed, use it as an opportunity to make a strong case why they should still love you. We have also seen deals take longer to get done. Allot more time accordingly.

How might the deal look? Rates are clearly higher overall, as core interest rates have risen, but the spread over the whatever index the bank is using is also higher than it was a year ago. Fees are much more common, including higher origination fees. Unused line fees on lines of credit are commonplace as well, so you could pay more to just have capacity. And meaningful deposits at the lending bank are a norm, even to the point that we are seeing significant covenants tied to cash balances on hand. Be prepared for terms you may not have seen in a while, if ever.

Based on all this, a few points of caution and steps to take.

• Understand the whole deal – there is much more to evaluate beyond rate. Evaluate the entire structure. Understand the all-in costs. And understand the requirements and covenants. You will likely have new covenants and more of them, so you want to understand how it affects your business.
• Ask to see deal points in writing as early as possible. The lending industry, like many others has struggled to source talent. We have seen too many instances where the relationship banker does not understand what the bank can actually get done and deliver on. They likely will not put anything in writing that has not been vetted to some level. You cannot afford to be on the receiving end of a prolonged no.
• Get out ahead of a renewal, as you might, like many, need to start looking for a new home. The good news is there are still plenty of deals that will get done. And companies are moving to new banks that are lending – you just have to stand out above companies competing for the same dollars.

The banking sector and its impact on small businesses has created a new constraint. Accept the facts, do your homework, and be proactive – that is your best chance to get the options you want. The ultimate solution may not be perfect, but an imperfect deal could still allow you to put dollars to work and drive long term value in your business. Don’t let the renewal shock and its hurdles cloud that big picture. Keep growing boldly.

We all know the dangers of a blind spot while driving down the road, where the vehicle that we cannot see could be lurking, and leading to a possible accident. Thankfully for our safety on the roads, today’s technology has compensated for the blind spots in our vehicles while driving. However, on the winding road of entrepreneurship, blind spots are still much more common than we would like. There is a number in your business right now that is a blind spot, and that blind spot could be doing damage right under your nose. What number is it? And what should you do about it?

What is it?

There is no magic uniform technology to expose the blind spot in your business. Like the human body, your business is unique – how it operates, its resources, its constraints and its culture. To narrow down that blind spot number, what is driving your business today? What are you susceptible to? What has changed in the market that is affecting you? Changes in collections can have a material impact on a company’s cash position. Could your days sales outstanding (DSO) be that number? Gage your team, what are they seeing? What is keeping them up at night? Are they seeing something on the ground floor? For example, even though sales are still increasing, perhaps fewer deals are entering the funnel despite sales efforts. Are you watching trends of how many new opportunities are being generated each month? Could this pending slowdown catch you by surprise? Is the team as efficient as they had been in the past? Revenue per FTE or revenue per sales or other department FTE can be a key indicator. Is this a sign of trouble? Another great way to look at data is in rolling 3 month averages. This smooths out the impact of one month, good or bad. Could a rolling three month trend tell you that your sustained growth rate is less than you think?

How do you monitor it?

First off, how good is your data? Is it reliable? Is it timely? You must start there. A blind spot is problematic, but a false positive or false negative based on bad information could be just as dangerous, creating a false sense of security or unneeded panic. Look at trending. And understand what is driving its movements. If DSO is that blind spot and it is deteriorating over time, is it uniform across all customers? Just a few large ones? The answer to that question will dictate the nature of the response. Empower the team to understand their role in improving the results.

How do you mitigate future blind spots?

Again, your team can be a great weapon here. Encourage their curiosity and candor to actively identify and raise flags to management at any time. Leverage the network of partners around your business. Your CPA firm and lender, among others, can provide a frame of reference of what is happening in the market and to companies in and around your industry. This can provide context, and a head start that allows you then to dig into your business.

Find that number in your business. Reflect, dig into the numbers behind the numbers, and get your team engaged. It is imperative that you can peer through the noise to accurately monitor this key metric and the information beneath it. Continue to be vigilant as new blind spots can emerge. By identifying and monitoring the right numbers, you can create your own early detection system, just like the blind spot warning system in your car. Don’t let that accident sneak up on your business.

It is critical for businesses to have the right strategic partners around it for lasting success. A key part of the network every business needs is an effective, trusted CPA to manage tax and other compliance aspects. The world of tax is very complex, and evolves far more often than people realize. Couple that with an evolving business, and the alignment of a business with its tax professional is essential. We have business owners tell us quite often things like, “I’m not totally happy with my outside CPA”, “I’m not sure how to leverage them” or “I’m not sure how to make the relationship work better”. It is a vital ally to have, so how do you get it right? Be educated, be engaged and be selective.

What to expect – An essential part of the relationship with a tax professional is that they are proactive. If you are not doing any proactive tax planning before the year ends, or getting tons of questions about the past year right before filing day, you likely have the wrong team. Conversations should be frequent throughout the year, both forward looking and past. At times you should have your own agenda, at times they should have theirs. They should be asking questions about where the business is and where it is going and bringing ideas to the forefront. You may suddenly be eligible for tax deferrals or credits that were not relevant in the past. And on the flip side, you need to do your best to keep them informed of big changes in the business. They need that context. You should get to know them, and they should get to know you. There should be no big surprises in either direction. And in the long run, it will save you time and money, so do not worry about paying for that extra couple hours of meetings, with the right fit, the ROI is many times over. This iterative conversational component is a mutual commitment and what you should insist on and nothing less.

Match up expertise – There are tons of tax professionals that have wide bases of experience. There is nothing wrong with that. You do want someone who is comfortable and competent with business you are in, its size and the geographies in which you operate and the tax considerations accordingly, of not just today, but tomorrow. The needs evolve over time. We have often seen the classic case where what got you to point A is not what will get you to point B. Tax is no exception. Ask questions of your current CPA and who their clients are today. Do the same if interviewing new ones. A client of ours materially grew a B2C arm, only to find out their tax firm was not skilled in sales tax. That is a problem. We recently had a horror story with a technology company that has developed patents and made huge investments over the years that had not only not taken advantage of, but not even aware of tax benefits around research and development. Given that CEO’s business, I have no idea how that was never a topic of conversation. Don’t assume they can handle it all. Ask, and ask tough questions. Make sure the capabilities are there. This is not a one-size fits all.

Match up fit – This is a key partner. Do they align culturally with you? Do you communicate well with each other? Do you feel they understand you and vice versa? This is often overlooked, but no less important. Can you be vulnerable with them? Much of the time, the same CPA will handle both personal and business tax matters, and even if that is not the case, there is still crossover. Can you share worries and excites you and not hold back? They also need to fit with your team of strategic partners. They need to communicate with your financial planner, your legal advisors, lenders and other external stakeholders. If they don’t “fit”, their effectiveness will be limited. You cannot afford that.

Finding the right CPA has certainly become harder, with firms merging and longtime CPAs retiring. With the right expectations and commitments, the right CPA for your business is within your reach, and could be the one you already have, with just a simple reset conversation needed. Some of this may seem like such common sense. I can speak from experience with the tax mistakes we saw in the past tax year, that many businesses do not follow this approach, and leave themselves exposed to unexpected costs, anxiety and frustration. That does not have to be you. Be diligent and make sure you have a tax CPA in your corner that is there for you today and tomorrow.

We are in a period right now that I would describe as renewal shock. Companies have renewed loans already, some are in process and many more will do so in the coming months. We have seen first hand a number of changes, in the renewal process, terms and even in some cases polite nudges out the door from existing bank relationships. Rates are clearly higher, but just as important, underwriting standards have tightened, meaning deals are just harder to come by than they were a year ago, potentially even at your current bank partner. Very few banks are “not lending”, so the more important question is “how” are they lending and what does that mean for your business.

I won’t bore you with a long economics lesson, but the economy overall has slowed and due to multiple factors, there is less money in the banking system to be lent to borrowers than there was 6 to 12 months ago. That means we are in a state of increased scarcity. The days of low cost, easy to obtain financing are in the past. Unfortunately, in some cases, that may mean your deal that was bankable last year is not bankable today. We are involved firsthand with clients in that boat that either have to settle for a different structure or potentially find non-bank financing.

How do they see you? Underwriting has tightened across the board. Many banks have gotten picky on industry and company profile, either because of a higher perceived risk level, a high concentration or a combination thereof. Do you know how your bank views your industry? You want to. A majority of the banks we see will be more aggressive for existing customers than new ones, which can be to your benefit. You need to know where you stand in their eyes. Odds are it will not be exactly the same as it was 6, 12 or 18 months ago.

How has the process changed? Be prepared for a lot more questions about your business, its financial performance, its customers and its future. We see business owners at times getting offended by the level of questions that can be asked. “They never asked that before” is a common complaint. You are in the majority if you are hearing that. Don’t be alarmed, use it as an opportunity to make a strong case why they should still love you. We have also seen deals take longer to get done. Allot more time accordingly.

How might the deal look? Rates are clearly higher overall, as core interest rates have risen, but the spread over the whatever index the bank is using is also higher than it was a year ago. Fees are much more common, including higher origination fees. Unused line fees on lines of credit are commonplace as well, so you could pay more to just have capacity. And meaningful deposits at the lending bank are a norm, even to the point that we are seeing significant covenants tied to cash balances on hand. Be prepared for terms you may not have seen in a while, if ever.

Based on all this, a few points of caution and steps to take.

• Understand the whole deal – there is much more to evaluate beyond rate. Evaluate the entire structure. Understand the all-in costs. And understand the requirements and covenants. You will likely have new covenants and more of them, so you want to understand how it affects your business.
• Ask to see deal points in writing as early as possible. The lending industry, like many others has struggled to source talent. We have seen too many instances where the relationship banker does not understand what the bank can actually get done and deliver on. They likely will not put anything in writing that has not been vetted to some level. You cannot afford to be on the receiving end of a prolonged no.
• Get out ahead of a renewal, as you might, like many, need to start looking for a new home. The good news is there are still plenty of deals that will get done. And companies are moving to new banks that are lending – you just have to stand out above companies competing for the same dollars.

The banking sector and its impact on small businesses has created a new constraint. Accept the facts, do your homework, and be proactive – that is your best chance to get the options you want. The ultimate solution may not be perfect, but an imperfect deal could still allow you to put dollars to work and drive long term value in your business. Don’t let the renewal shock and its hurdles cloud that big picture. Keep growing boldly.