The Winning Way – Calculate Part 2

Know Your Numbers – Carrying Charges

In this post we continue to look at how you, as a business leader, can achieve more when you know your numbers.  (Read Part 1)

Cash Flow Management is a key factor for most businesses but often balancing the movement of funds within your business is challenging.  Determining whether you should pay for products or services in one large payment or take advantage of a multi-pay option may feel like a “no-brainer” but at what cost?

What carrying charges are you incurring?

The goal of a vendor is to get you to buy their product or service.  This is the same for you in your business.  Many vendors offer you an opportunity to opt-in to a “multi-pay” situation rather than paying a large lump sum.  In retail this may be in the foBudget Expensesrm of a “buy now, pay later” scheme.  Many service providers to small businesses offer you the ability to pay for a program monthly, or in 2, 3 or 4 payments.   Those multi-pay options may be labelled “easy pay” or “cash flow friendly” but don’t lose sight of the fact that whenever you opt for a later payment, you will incur carrying charges.

There is no right or wrong answer unless you look at each situation individually and determine the value of the product or service, its ability to help you achieve your business goals and the impact on your cash flow.  I flex between the two options, depending on circumstances, but I enter a multi-pay agreement with my eyes wide open.

Let’s look at the cost of multi-pay options.

One program I recently reviewed targeted top level leaders.  This program offered a full range of training modules – both in person and virtual, tools and resources as well as some private covalue price ID-100287427 Stuart Milesaching sessions. The full cost of the program was $54,000 but if you chose the monthly option, you would pay a total of $64, 850 – a full $905/month or  $10,850/year more.  This may feel like its an extreme example but it clearly demonstrates the impact of carrying charges.  I have seen carrying charges of $1200 on a $5000 ticket item (a 24% surcharge).

Consider this…

If you are interested in purchasing a product or service from a vendor, such as a training program or coaching, what are the carrying costs you will incur if you do not pay at one time?  If you paid at one time, what impact would that have on your cash flow – this month & for the next 3+ months?  Can you pay off the balance at any time if revenues increase?Do you have other sources of money which you can use and have a lower carrying cost than the vendor is charging?

The Winning Way – Calculate Part 1

Know Your Numbers – Recurring Charges

When September began I had numerous subscriptions and annual expenses (like insurance) come across my desk.  As I was already spending time decluttering filing cabinets and electronic files,  I thought it would be a good time to really take stock of my own business so that I could tweak my goals as I enter the final half of my fiscal year.  I  regularly lead clients through this process but, like any specialist, I don’t always set aside the time to do the same for myself.

This lead me to thinking about my chapter of the best selling book “The Winning Way“.  In my chapter I share three key attributes to ignite the leader within. One of those attributes is the ability to know your numbers.

 “When you know your numbers, you have a unique method of measuring your own success, and the effectiveness of the methodologies you have in place.  Key performance indicators (KPI’s) allow you to better understand how well the systems deliver the results you want to achieve. ” 

As a business leader, whether you are a business owner or executive, manager or a project leader, you probably have to manage a budget, a team (in-house or out-sourced), suppliers, inventory and more. To effectively do your job, you need to know your numbers at different points in a week, month, year, or in the project. My question to you – how well do you know your numbers?

Over the next week, I will share with your my deep dive into my own numbers and saved myself thousands of dollars!   Asking yourself these questions could save you too!

 What are your recurring expenses?  What value do they bring to your business?

Every year I sign up for different programs, journals, magazines, which incur recurring charges – either monthly or yearly.  These expenses are automatically billed to a credit card and I acknowledge them when they are on my statement, but frequently forget about themcircles-free in the months between.

I have now taken stock of all of the subscriptions and other recurring expenses I incur each month.  Mapping it out provided me with a visual map of when the expenses occur and how much they are.  I was then able to review each expense and evaluated whether I used it, how often etc.  I also looked at other options.  Frequently other companies may have introduced some new features to their product line which better fit your needs.

In my review I realized I wasn’t using 3 of the services I pay for each month.  I had the subscriptions for “just-in-case” situations.  I realized it was better to pay the slightly higher cost for one-time use rather than having a low recurring expense and therefore I cancelled the three services – saving me $500/year.  Another recurring expense is an annual fee with no refund potential.  Again, I realized it was costing me  more than I realized and the quality and options I could now get in that package were no longer worth that pricetag.   I have now calendarized the renewal date so that I can cancel this subscription.  This will save me another $500/yr.

Download my Recurring Expense Tracker to review your recurring expenses.  How much can you save your business?

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