Making Cents of Your Investments
Developing sustainable relationships is the secret sauce to every successful business—and that includes a business owner’s relationship with their company’s finances. Are you innovating your investments? Finding ways to boost your bottom line? Maximizing earnings requires time and attention many small business owners just don’t have. And it shows: approximately 20% of new businesses fail during their first two years and 45% fail in the first five years, according to the U.S. Bureau of Labor Statistics. Only 25% of new businesses make it to their 15th anniversary. Banking for your business not only ensures your business’s survival, but it ensures your company flourishes in an ever-evolving market.Â
Local community banks, unlike massive banks, are often better poised to offer more personalized advice because of their local ties. Since they’re invested in the community, that means they tangentially benefit when your business succeeds.
Ahead, two local banks offer advice on hot topics, including personalized fintech solutions and cash conversions to help ensure your business heads into 2024 on the right foot.
Bill LaVigne
COO, The Bank of Elk River
How do community banks use fintech to empower small business owners?
Financial technology firms have emerged as key players in leveling the field between the nation’s largest banks and their smaller community counterparts. This transformation is not only redefining the industry—it’s expanding banking options, allowing small business owners to have their cake and eat it, too.
Where big banks once held the reins due to their vast resources, fintech innovations offer cutting-edge solutions that empower community banks to provide services tailored to the unique needs of small business owners. With seamless digital platforms, mobile apps, and online lending solutions, community banks can now match their larger peers in user experience while offering the personal touch that small business owners value.
Fintech partnerships have enabled community banks to tap into advanced data analytics and streamlined processes, helping them to make more informed decisions faster and cater their services to individual customer needs. This personalized approach enhances customer satisfaction and retention, creating a competitive advantage against the impersonal, cookie-cutter nature of big banks.
The synergy between fintech and community banks is a win-win situation. This partnership not only equalizes opportunities but also nurtures the growth of small businesses by providing accessible and personalized financial solutions. As a result, community banks, fintech organizations, and small business owners are poised to thrive.
Steve Bishop
President and CEO, Minnesota Bank & Trust, a division of HTLF Bank
How can you use the cash conversion cycle to optimize working capital?
The time it takes your business to convert inventory or other resources into cash from sales is measured in the Cash Conversion Cycle (CCC). Creating CCC efficiencies can increase working capital without generating additional revenue.
There are three important factors that affect your CCC:
• Days Inventory Outstanding (DIO) measures how quickly your business converts materials into products. Releasing additional working capital into the CCC allows your business to purchase needed inventory. Access to additional working capital may also allow your business to take advantage of potential supplier discounts.
• Days Sales Outstanding (DSO) tracks how quickly your business collects payments after sales. Optimizing receivables processes will accelerate collections, allowing your business to access these funds quicker and reduce errors, costs, and fraud.
• Days Payable Outstanding (DPO) reflects the time it takes your business to pay suppliers. An effective payables strategy increases float, thus increasing payables outstanding and releasing additional working capital into your CCC.
The goal is to shorten your CCC by reducing DSO and increasing DPO, increasing positive cash flow. An important first step is comparing your CCC to competitors within your industry. Our team can provide industry benchmarks and help analyze your CCC to unlock trapped cash.
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