Every business needs cash in order to survive. Knowing how much cash is in the business allows the business owner or manager to make payments when they are due. If a business runs out of cash it will not be able to keep producing goods or services and will have to close down. Understanding why cash flow for small businesses matters is a vital management skill.

There has to be enough money available to pay bills as they arise, whether these are for fixed costs like rent and salaries or variable costs like utilities. If a supplier has provided goods or services with the expectation of being paid after a set number of days, the supplier must be paid on time, or might not wish to deal with the business in future. Similarly, employees or other parties might not upset at delayed payment. Since businesses need the goodwill of employees and suppliers, it is important to maintain good relationships with these stakeholders.

Money coming into the business will generally be received from customers paying for goods or services as they are received; for example a customer leaving a hair salon pays on departure. However, sometimes it is customary to supply goods or services on credit. Supplying on credit means that the bill is not expected to be settled immediately, and a number of days will elapse before the bill is overdue. In addition to this, monies are sometimes received from customers before goods or services are supplied; this is typical for online transactions. So there are three streams of money flowing into a business – cash in advance, cash from trade creditors and cash at the point of purchase.

The totality of these three streams, properly managed, should result in the business having enough cash to meet its own payment obligations. In order to properly manage its cash, the business manager must collect data to indicate future income and likely outflows.

Good record-keeping will assist the business owner to quickly obtain the cash value of expected outlays and expected receipts, and the expected dates on which these values may be realised. The owner can then plot these figures on a calendar, and will immediately see if problems may arise. For example: June 1, 1000 receivable, 800 payable, balance 200, June 2, 1000 receivable, 1100 payable, balance 100. Note that the balance arises from the cumulative amounts and tells the owner the exact amount of cash expected to be available on the evening of the relevant date. Ongoing cash flow management requires the owner to ensure that the targets for incoming cash are reached, and the amounts payable are not exceeded.

Sometimes problems arise with customers not making payments when expected. If this happens, the business manager must take steps to overcome the negative cash flow impact, by following up all amounts due to the business, or by slowing down business outgoings, negotiating later payment terms for the business debts, arranging an overdraft or loan for the business, or even asking the owners to inject further capital.

Once cash flow difficulties are spotted, it is absolutely imperative that these are not ignored. Action will have to be taken to rapidly redress any deterioration in cash flow. A prerequisite to this action is having relevant data to rely on for decision-making.

Small businesses need to manage cash flow in order to survive and grow, so making sense of cash flow systems and information is an essential part of managing a small business.

Author Jules Vandermint describes herself as an “obscure writer.” Jules writes about just about anything including past articles about , poly bags and ziplock bags.

When sellers offer financing, it doesn’t mean they will be stuck carrying monthly payments for years to come. In fact, a professional Note Finder can show them how to increase the value of a note before it’s created, by offering guidelines an attorney can use to create a note with qualities Note Buyers look for. This results in a note that can be liquidated for cash, quickly and safely.

Misconceptions from the Seller

Many folks avoid owner financing because they don’t think it’s a viable solution for selling their home. If they can’t walk away with enough money to provide the down payment on another property, they’ll be powerless to replace the property they’re selling. But in reality, many notes created through owner financing are quickly sold for top dollar. Actually, if the note is created with the buyers’ purchasing criteria in mind, the seller could walk away from the closing table with cash in hand! This means that the net result is almost exactly the same as with a normal real estate sale. In the cases where Note Holders do encounter difficulty in selling their monthly payments, it’s typically because the note was not created with the end in mind: to sell the note. This is why you should involve a professional Note Finder even before the note is created.

Plan ahead to make a note “a great deal”: Create your note with the Note Buyer’s needs in mind

If the note holder of a private note needs a large amount of cash quickly, they will want to sell the note as soon as it has been created. And in order to quickly find a buyer, the note must meet general buying parameters:

*Enough Money Down

* Excellent Credit Score

* An interest rate of 8% or more

* Term due in 15 years or less

If no down payment collected and the interest rate is low, the note would be great for the new property owner, but not for the Note Buyer. In a “Zero money down” real estate transaction, lenders worry that the buyer could walk away. So to compensate for little money down, lenders generally set higher interest rates so they get more money per payment. Unfortunately, Note Buyers do not have the ability to change the terms on the note. So when there is little or no equity in the property, all offers to purchase the secured note will be discounted substantially in order to compensate for the buyer’s chances of default. The downside is that a heavily discounted buyout offer often means the seller can’t get the money she needs from her note.

Notes that can be sold

Usually in the current market, the home buyer’s down payment should be a minimum of 10% of the sale price. This payment immediately creates equity in the property to serve as the buyer’s safety net in the event of a default. A competitive interest rate is important because it will make it easy for the buyer to purchase the note and yield the desired profit without big discount to the Note Holder. Finally, keep in mind that people typically prefer notes that follow a traditional term (amortized over 120 months, 180 months, etc). A two-year, interest-only balloon term is a perfect example of a note that many buyers would avoid. But remember, all notes are good notes at the right price. Of course, there are no guarantees of a expeditious sale. But it’s easier to obtain an attractive offer for the Note Holder when the note is written with the buyers’ needs in mind. Please contact me directly with specific note information so that I may suggest a private finance solution that will be optimal for your needs.

Learn much more concerning Real Estate Notes. Stop by John Manzanet’s site where you can find out all about Real Estate Notes and what they can do for you.. Check here for free reprint licence: Seller Financing Secrets! Creating A Note!.

When the owners of real estate notes liquidate their investments the resulting sales will almost always require some kind of discount. Here’s an easy explanation of the Investment to Value (ITV) method that many Note Buyers use to determine their pricing.

Most experienced Note Buyers have predetermined guidelines in mind that serve to narrow their focus to the notes that are likely to fit their buying preferences. Still, many buyers will purchase almost any note if the price is right – in other words, if the financial rewards are in line with the associated risk. To compensate for added exposure buyers adjust their pricing guidelines downward, which results in a higher yield.

Many buyers gauge their risk in a deal by considering their Investment to Value (ITV) percentage. ITV measures the amount of protective equity the Note Buyer has by comparing her purchase price to the property value. The amount of protective equity in the property is calculated by subtracting the ITV from 100. The lower the number or percentage the safer it is for the Note Buyer.

When a Note Buyer thinks that acquiring a note may be a risk, one potential resolution is to make a lower offer that decreases the ITV. A lowered ITV results in more protective equity for the Note Buyer.

An ITV-based buying example

Consider a house valued at $100,000 that secures a $95,000 note. If the Payor in this situation had poor credit or a history of missing payments this would be considered a risky situation. Since there is only $5,000 in equity any Note Buyer would want a mitigating factor to offset the risk involved in this purchase.

A smart way to improve this deal from the buyer’s perspective is to make a discounted offer. If a buyer offers only $60,000, the ITV would be 60 percent, giving the buyer a 40 percent of protective equity. That $40,000 of protective equity could help her to make a profit, even in a foreclosure situation. If the buyer incurs extra costs when foreclosing and reselling the house, the $40,000 of protective equity should more than cover the extra expenses.

Note Buyers always have to look after their interests. Consequently, notes with little equity and a poor payment history are most likely to see deeper discounts in order to achieve enough protective equity for the buyer. This protective equity will help ensure that Note Buyers can recoup their funds if Payor default leads to foreclosure.

Also, depending on how much the Payor also has invested in the deal. For example, if the purchase price of the home is $100,000, and the person only puts down $1,000, then the investor won’t feel that the payor has all that much invested in the property and the possibility of default is greater as opposed to the payor having invested a much greater amount. We call that “Teeth in the Deal”. How invested is the payor in actually wanting to keep the property.

John Manzanet is a formidable expert in the Real Estate Note and Structured Settlement Note Business. For information on How to Create your Real Estate Note, visit John Manzanet’s Web site. This article, Sell Your Structured Settlements With Confidence has free reprint rights.