Today, we're diving into a topic that may not be on your radar just yet but is incredibly important for your financial future: insurance deductibles. We'll explore the concept, dissect why you should care, and discuss how you can make informed decisions about your insurance coverage. So, stick around as we unravel the art of adjusting insurance deductibles to your advantage.
What's an Insurance Deductible?
Before we dive into the nitty-gritty details, let's make sure we're all on the same page about what an insurance deductible actually is. Simply put, an insurance deductible is the amount of money you must pay out of your pocket when you make a claim before your insurance company steps in to cover the rest.
For example, imagine you're in a car accident resulting in $10,000 worth of damage, and your deductible is $500. Your insurance company will cut you a check for $9,500, leaving you to cover the initial $500. If your deductible were $1,000, you'd receive $9,000 instead. So, why...
On-site Consignment Inventory
On-site consignment inventory sits in your production line or on the shelf at the office. You don't pay for the stock until you use it to build your products or take it from the office storeroom. It lowers your cash investment in inventory because you don't pay for it until you use it.
To implement on-site consignment inventory, you will need a reliable supplier that:
Getting started with this is as easy as calling my friend Rob and saying, "Hi, Rob! Would you have one of your sales guys stop in and set up an on-site consignment inventory for one of my clients?"
During a Cash is Clear Mastermind recently, I was asked, "How do you calculate the cash conversion cycle?" My response...
"I don't calculate the cash conversion cycle for clients!"
It's not a good use of time because a single number does not mean anything in a vacuum.
What do I focus on instead?
I focus on the component parts of the cash conversion cycle and if they are optimized.
"Optimized" means they are the right terms, conditions, and business strategies to optimize the business.
For example, the cash invested in inventory starts the cycle for a manufacturer.
The automatic response and conventional wisdom is, "Reduce your inventory!"
My recommendation: Analyze your inventory to understand where there are too much, too little, and "just right" amounts.
You might find that overall, you have too little of a lot of your inventory and need more.
You'll also find obsolete inventory, overstocked inventory, and products that should be end-of-lifed.
You can also analyze...
Contrary to popular belief, the steps you need to make real changes in a company's cash flow is not in their financial reports.
Each of those reports may give hints on where to start looking for opportunities. They may show you the symptoms the company is dealing with, but they won't show the underlying cause of the problems.
The real opportunities come from understanding the stories behind the numbers.
Here are some keys to finding the underlying cause of the problem:
Can you imagine your banker handing you a $1,000,000 check just for changing the way you pay for purchases? Here’s the real story of how one company did this.
My good friend “Divver” (yes, that’s what we call him) is an incredible banker who is always looking out for his clients. So he took the time and effort to convince a business owner to shift his purchasing habits. The bank had a new purchase card program that gave cash back.
The owner took some convincing to see the wisdom of taking the time and effort to make the shift. The percentage was not much, but Divver knew that it would add up because of the size of the company.
For a full year, everything they could possibly put on the card they did:
After the first full year Divver delivered a check for $1,000,000.
When was the last time you took a step back and asked yourself, “Is there a better way to really grow my practice?” "Is the path I'm on leading me in the direction I want to go long-term?"
There are dozens of “quick fix” tactics competing for your time and attention, but will any of them drive your practice to the next level? Will any of them provide the work/life satisfaction you're looking for? Probably not, and here’s why:
They don’t address the root cause of job dissatisfaction or anemic growth.
While you’re trying to figure out your best social media channel, how to get found on the Internet, or the best way to get a promotion, you should be looking at:
There is no such thing as a “Magic Bullet” for increasing sales. A quick fix. A genius idea. The “one thing” that makes a business successful by generating huge sales and enormous profits.
I wrote about “There’s No Magic Bullet for Increasing Sales” and I was amazed at the response! There were two types:
So, I lied. There is a “magic bullet.”
In my article, I explain that even the best company's outstanding performance can't be explained by one single activity, department, promotion, product, etc. What I failed to mention is that there IS something that every company can do that ALWAYS leads to improvements, and long term, will lead to success:
Consistent effort to implement incremental improvements.
If you didn’t have a cash flow management model before, what are you waiting for?
Or do you still think you can actually manage your company with a P&L, balance sheet, and statement of cash flows? If you believe the best way to run a company is with backward-looking, historical documents, then you probably also think that the safest way to drive a car is through your rearview mirror!
History- yes, you can learn from it, and not repeat your mistakes, but it can’t tell you what’s coming down the road!
Cash Flow Management: Look forward!
What’s coming in?!
What sales are being made?!
Who owes you money that needs a reminder call?!
What are expenses today, next week, and next month?!
What will your bank balance be after you run payroll?!
Some people are saying, “But David, it’s too late!” It’s never too late to put good business practices into place unless you’re giving up without even trying.
Am I being too harsh? Maybe.
But sometimes it...
We need to be prepared for business loan delinquencies.
Special Asset departments of banks have been busy. Really busy. The Special Asset department of a bank is the group of people who work with problem loans. If you need to work with them, they will decide:
The Special Asset employee at the bank can become your best friend or a challenge to work with, depending on how you deal with them.
They want information.
They want explanations.
They want realistic forecasts.
They want action plans.
They want you to succeed so the loan is paid off.
How do they know that they'll get payments? The basic tool that is used is a 13-week cash flow model.
Solid, realistic sales forecast.
Expenses under control.
Planned payments to vendors.
I'd love to be connected to special asset managers. Please, introduce me if you know any.
E-mail me at [email protected]
I’ll never forget the day my father, Neil, stood on a box in front of the entire company. He was the President; I was 22 years old and was the entire “IT department.” 90% of the 150 employees worked in the factory.
He stood up and said, “Our company is in trouble, but we have a plan to survive and then grow again. Part of the plan is asking all employees to take a 10% pay cut.
“The senior staff will be taking a 20% pay cut.
“I know that this is not easy for anyone, but we commit to raising the wages back as soon as possible. Any questions?”
After a few complaints, a tall and broad man named “Big John” raised his hand. He said with a crack in his voice, “I’ve been laid-off twice. No one ever asked my opinion or gave me a choice.
“Thank you for asking. I support the reduction 100%.”
Everyone fell in line after that.
The company survived and wages were eventually restored.
The lessons I learned?