Don’t believe the headline, then you probably don’t run a small business. Ask any business owner and they will tell you about the constant struggle to have enough cash on hand at all times. It is even more complicated today as customers pay by credit cards and if you are a B2B (business to business) company then you are usually selling on terms of 30-days or more.
As such, small business owners must be adept in financial management. This doesn’t mean you need a MBA in finance to own a small business. But there are a few tricks you can use to better manage your cash.
To start with, financial management is not rocket science. But understanding the basics go a long way to ensuring your business is a success. This includes how to open and manage a business banking account and how to keep proper books.
Ok, ok, bookkeeping is not fun. But it is a necessary step and doing it will give you a better understanding of the financial position of your company. In this way, you can make decisions with confidence.
Even if you keep good books, you have to approach financial management as something to be communicated with everyone in the business. Locking reports in your computer doesn’t help. It is the basic idea of out of sight, out of mind.
As such you should view your financial reports as an opportunity to share important operational information with your employees. Now this does not mean that your employees need to know to the dollar what is in your bank account. But sharing critical information is a way to educate everyone about the business. After all, your employees rely on your small business for their livelihood, so you should help them understand the impact of their actions.
Another part of financial management is that it helps you to prepare for potential shortfalls. In this way, you will know when is the right time to take out a loan and what type of loan is the best fit for your business.
At the end of the day, any financing should fit your business, not the other way around.
Lenders like Mulligan, understand how small businesses work and they have programs which will provide the right fit. Maybe you need a working capital line or a merchant cash advance. These small business lenders have the programs you need to borrow with confidence and then repay at terms which work for your business.
Even if you are new to financial management don’t worry as there are a number of resources to help small business owners. Some of these include training programs at local colleges and even support from the Small Business Association (SBA).
In the end, financial management is just too important to leave to chance. One quick tip is to map out how much money you need to pay for an average week’s sales. Then look at how fast you will get paid.
If you are running a restaurant, then you are in luck as you can get payment terms from your suppliers, while you get cash (or credit) from your customers today. This means that you should have a fairly easy time predicting your cash needs.
If you are running a manufacturing business it can be a bit trickier as you will need to measure the impact of the credit terms you are giving to your customers. However, don’t get overwhelmed. You can use the resources mentioned above to help better manage the financial position of your business. Or you can look at the hundreds of options on the market today.
When it comes to getting financing, the most important key is your ability to prospective lenders everything they need to know about your business. This is where your financial management skills come.
Let’s face it the days of running a cash-only business are gone and such you can just rely on checkbook accounting to manage your business. You need to appreciate that financial management is a matter of life and death.