Best Practices for Business Owners in an Uncertain Economic Environment

Friday, October 18 at 02:00 AM
Category: Business Banking

 

By Carolyn Kennedy, CTP, Executive Director of Treasury Management for Arvest Bank

Recession is a word we are hearing from the lips of newscasters, market watchers and even my pastor on a recent Sunday. This represents a real fear, for the first time in a long time, that our economy may no longer be slowly and steadily growing.  

In July, the Federal Reserve decreased the primary credit rate by 25 basis points to 2.75%. This was the first rate cut since the height of the financial crisis in 2008 and it isn’t likely to be the last. But what does it mean, really? 

It means businesses in our region may be faced with steeper challenges if their growth plan relies too exclusively on increased consumer demand as the economy grows. Fortunately, I don’t think this is a widespread problem, but the question remains, during this time of rate and other economic uncertainty, where do you focus? Simple: Focus on the fundamentals. 

Invest in really understanding your customer’s needs now and how changes in the economy may impact those needs. 

You might have really done something amazing for your customers once, but if it doesn’t continue to meet their changing needs, it runs the risk of becoming obsolete. Are you continuing to provide the products and customer service your customer expects? Is your business model too dependent on economic growth? How do you make your approach stand out? 

Don’t be afraid to change and adapt. 

During times of economic slowdowns, many business owners have a tendency to adopt a mindset of “waiting it out.” That works when you have some idea as to how long the slowdown might last, but I doubt anyone really expected the Great Recession to endure as long as it did. It might seem counterintuitive, but an environment of economic uncertainty is a great time to take that well planned leap of faith.  

If there is a venture you’ve been investigating and dreaming about that would diversify your revenue streams without alienating your existing customer base, now might be the right time to get serious about it. If you’re not innovating and growing, you may be slowly dying. What new approach do you wish you had already adopted? 

Ensure you still have your working capital optimized. 

While an influx of new capital may be needed to launch a new product line, it helps to validate that you already have your prior investments of capital deployed efficiently. When a venture capitalist invests in an existing business, one of the main things they focus on, regardless of the business model, is how well the existing working capital (money currently invested in the operations of the business) is being utilized.  

While each business is unique, optimizing the use of your working capital is universally important. Whether it’s paying down debt or making money on short term and long term cash investments, getting as much capital out of your operations and putting it to work for you is key. 

There are a few metrics you can use to identify and diagnose where your best opportunities for optimization may reside. How long are your Days Sales Outstanding (DSO)? How long are your Days Payable Outstanding (DPO)? How long are your Days Inventory Outstanding (DIO)? 

Of course, what “good” looks like for DSO, DPO and DIO is relative and varies by industry — you know your business cycle better than anyone else. What’s most important is the trend over time for your business.  

We all know that there are cycles to our economy, and when it is growing we all benefit, but the fundamentals of good business don’t change with those cycles. Absolutely, you need to make smart decisions about where you get capital and at what rate. In addition, the fundamentals of understanding your customer, making smart business plan improvements and optimizing the cash you have invested in your business are always winning strategies. 

Carolyn can be contacted via email at ckennedy1@arvest.comThis article originally appeared in the Sept. 30 edition of the NW Arkansas Business Journal. It is published here with permisssion.

 

Tags: Business Banking, Financial Education
 

Roommates: How To Share Expenses (And How Not To!)

Thursday, September 26 at 09:00 AM
Category: Personal Finance

Thinking about getting a roommate? Or two, or three? Splitting rent and expenses can be the smartest way to get a lot more out of your money and build some savings for your future.

Living with roommates is not for everyone. And there can be disadvantages to sharing your space. But the financial advantages, alone, may outweigh any drawbacks if you have the right roommates.

So who are the right roommates? They’ll be people you think can work out household issues together. You’ll each need to be willing to communicate openly. And you’ll need to treat each other with respect, even when personal needs clash.

Once you’ve found the right people, how do you set up for success?

Here are six keys tips for starting off right: 

  1. Decide ahead of time who pays for what. Sit down with your roommates well before move-in day and plan it out. List all the expenses you can think of, and decide together how you’ll handle them. Who will owe what share of what? Who will collect it from the others on what date? And who will actually make the payment to the landlord, utility company, internet service, Netflix, etc.?

    Also decide together how you want to handle general household needs like paper towels, dish soap, trash bags and cleaning supplies.

    Smart tip: Wait to pay the rent or bills until you have your roommates’ shares in hand. Don’t pay out of pocket, just in case they don’t come through on time.
     
  2. Post due dates on a central calendar. Hang a calendar in a common place to remind everyone when bills are due. List how much each roommate owes, and mark it off when it’s paid. Or use a free online system like Google Calendar.
  3. Know your schedules. If you are all students, it makes sense to have a basic understanding of your daily routines. This is especially helpful when roommates have different sleep schedules, or if you have certain times of the day for study.
  4. Use Arvest to Arvest Transfers. If you and your roommate both bank at Arvest, you can also make free Arvest to Arvest Transfers to each other’s bank accounts. These process immediately, when made by the 8 p.m. cutoff time. Or, you can set them up to process on a future date or recurring date. And you can do it all straight from your Arvest Go mobile app or Online Banking With Blue IQ.

    One extra advantage of paying friends digitally over using cash: You’ll have the digital record of exactly when you paid them and how much.
     
  5. Don’t try to split the couch. Keep in mind it’s much easier to own furniture, electronics and appliances individually, instead of buying them together. Example: Maybe you bring the couch and your roommate brings the TV. Then when you move out, you each take what you brought. No hassles over what it’s worth or who gets what.
     
  6. Beware of groceries. From many people who’ve been there, consensus is that it’s too complicated to share everyday food and grocery bills. Mostly, because people like to eat different things. Also, it’s too hard to calculate fair share. How do you measure who drinks what portion of the milk? And preferences are personal: Your roommate likes generic ketchup, but you can’t stand it!

    It likely works best to keep your weekly groceries separate. But that’s not to say you won’t find ways you like to collaborate. Example: Your group might enjoy planning certain meals together that you’ll all chip in for.
     
  7. Do your part to communicate. It’s just natural that at least minor annoyances or tensions will come up between roommates, even if you’re best friends. A good mindset to have is to just expect this. Then you can be prepared to do your part by communicating calmly and fairly.

When everyone shows respect and goodwill, you can almost always negotiate systems and solutions that work for everyone. So look forward to life as a roomie and all the savings benefits!


 

Tags: A Spin on Spending, Financial Education
 

3 Things to Consider When Buying Generic

Wednesday, August 07 at 02:00 PM
Category: Personal Finance

Love them or hate them, generic brands have been around for decades and are here to stay. But they have come a long way since they made their entrance in the market thirty-plus years ago. Strolling around your local grocery store aisles today, you will see a wide variety of colorful packages and enticing names on products that appear to more closely compare with their name brand counterparts. With ever-growing options for groceries from fresh and frozen food to health and wellness products, it can be difficult to determine when it is worth it to buy generic. Below are some factors to consider to make the most of your money and effort when shopping.

Price

The appeal of generic brands is the cheaper price. Consumers often reach for the store brands to save money and meet their family’s needs, but it may not always be the least expensive option. Be sure to calculate the price per unit when comparing products even if the packages look the same. Some stores place the unit price on the label, but if they don’t, use a calculator. Divide the price of the item by the number of units in the package (i.e., ounce, cup, etc.). Also, check coupons and store circulars for savings on name brands and find stores that will double or triple those coupons or allow you to stack using manufacturer, store, and even online or app coupons and rebates. A little extra research may yield even greater savings.

Taste

Taste is ultimately a personal preference. A Consumer Reports taste test* found that store brands were equal or superior to name brands in many staple grocery categories and are an average of 15-30 percent lower in price. Check the ingredients and nutrition in generic or store brand items to see how they compare to the name brand item. If you are craving a unique flavor or if you have a particular loyalty to a brand, the name brand may be the better option. If the ingredients match and you don’t have a brand preference, go with the less expensive option. If you’re having trouble deciding between generic and name brand options, consider buying both and conducting your own taste test at home.

Quality

Historically, name brand products were perceived as higher-quality premium items compared to generic or store brands. Today, however, generic brands offer more premium items and more product choices than ever before. A recent survey* indicated that 75 percent of consumers perceive store brands as equal or better in quality compared to name brands. New generic products are available in “healthier” categories such as organic, plant-based, vegan and natural. Generic brands are required to meet the same standards as name brands and are tested by independent companies before they become available for purchase. So even if you’re trying to eat healthier, high-quality foods, generic brands might save you some money.

Which Products to Buy Generic

Below are a few staple grocery products* that are nearly always worth buying generic – they are typically as good or better than their name brand counterparts and usually cheaper.

  • Milk and Juice
  • Seasonings and spices
  • Frozen fruit and vegetables
  • Canned vegetables and beans
  • Baking and cooking supplies (baking mixes, flour, sugar, salt)
  • Snack foods (spreads and dips, dried fruit, pickles and olives, nuts and cookies)
  • Fresh produce
  • Cereal

When choosing between generic brands and the equivalent name brand products, consider price, taste and quality. Generic products are usually the cheapest, but it can save you even more to check coupons and specials on name brand items. Compare ingredients and nutrition and, if you can, sample multiple products to see which taste you prefer. A generic label doesn’t always indicate a lower quality and might even exceed the name brand. A little time and research might satisfy both your taste buds and your wallet.

Links marked with a * go to a third-party site not operated or endorsed by Arvest Bank, an FDIC-insured institution.

Tags: Financial Education
 

How to Identify Student Loan Assistance Scams

Wednesday, August 07 at 02:00 PM
Category: Personal Finance

Arvest Bank is warning consumers about student loan assistance scams.

In these types of scams, borrowers receive phone calls, emails, letters, and/or texts offering them relief from their federal student loans or warning them that student loan forgiveness programs would end soon. Usually, the so-called student loan debt relief companies offering these types of services don’t offer any relief at all. Often they’re just fraudsters who are after your money.

Here are some signs to help you identify a scam by a student loan debt relief company:

  • They require you to pay up-front or monthly fees for help. It is illegal to charge an up-front fee for this type of service, so if a company requires a fee before they do anything, that’s a huge red flag—especially if they try to get your credit card number or bank account information. In some cases, they may even step in and ask you to pay them directly, promising to pay your servicer each month when your bill comes due. Free assistance is available through your federal loan servicer.
  • They promise immediate and total loan forgiveness or cancellation. No one can promise immediate and total loan forgiveness or cancellation. Most government forgiveness programs require many years of qualifying payments and/or employment in certain fields before your loans can be forgiven. Also, student loan debt relief companies do not have the ability to negotiate with your federal loan servicer for a “special deal” under the federal student loan programs. Payment levels under income-driven payment plans are set by federal law.
  • They ask for your Federal Student Aid (FSA) ID. The U.S Department of Education or its partners will never ask you for your FSA ID password. Your FSA ID is used to sign legally binding documents electronically. It has the same legal status as a written signature. Do not give your FSA ID password to anyone or allow anyone to create an FSA ID for you. If a company has access to your FSA ID information, they can make changes to your account without your permission.
  • They ask you to sign and submit a third-party authorization form or a power of attorney. These are written agreements giving the third party legal permission to talk directly to your federal loan servicer and make decisions on your behalf. Debt relief companies often want these authorizations so that they can change your account and contact information, so you don’t realize that they aren’t actually paying your monthly student loan bill.
  • They claim that their offer is limited and encourage you to act immediately. Student loan debt relief companies often try to instill a sense of urgency by citing “new laws” or discontinuing programs as a way to encourage borrowers to contact them immediately.
  • Their communications contain spelling and grammatical errors. While many of the communications sent out by these companies look very formal (for example, fold-and-tear letters with safety patterns), they often contain spelling and grammatical errors. If you notice unusual capitalization, improper grammar, or incomplete sentences in the communication you receive, that’s a red flag.

What should you do if you’ve already shared your information or paid one of these student loan debt relief companies? You need to complete the following tasks:

  • Log in to your Department of Education account and change your FSA ID. Do NOT share your new FSA ID password with anyone!
  • Contact your federal loan servicer to revoke any power of attorney or third-party authorization agreement that your servicer has on file. You should also make sure no unwanted actions were taken on your loans.
  • Contact your bank or credit card company, and request that payments to the company be stopped.
  • File a complaint with the FTC*.
  • File a report of suspicious activity through the Federal Student Aid Feedback System*.

 Links marked with * go to a third-party site not operated or endorsed by Arvest Bank, an FDIC-insured institution.

 Source: https://studentaid.ed.gov/sa/repay-loans/avoiding-loan-scams

 

    

Tags: Financial Education
 

Auto Loans: Bigger Down Payment or Paying Off Other Debt?

Thursday, June 20 at 01:00 PM
Category: Personal Finance

When you take out a loan for a car, some people argue you should put down the biggest possible down payment, so your monthly payments are lower and you can pay it off quicker. Others advise prioritizing paying off other existing debts over making a big down payment. In reality, the solution that’s right for you depends on your financial situation.

You can get a low APR car loan with little or money down (with good credit). Use savings to pay off credit cards or other debt, not as a down payment. Buying a car, new or used, is a financial commitment. You can make a down payment, reducing the amount you’ll have to pay monthly on the vehicle. But what if you have more pressing debt, like credit card or student loan debt?

Does it make sense to sign up for a car payment plan and use the short-term cash to pay other debts first? We’ve analyzed the pros and cons of each choice. Read more here*.

 

*Link is a third-party site not operated or endorsed by Arvest Bank, an FDIC-insured institution.

Tags: Financial Education

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