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Smart Entrepreneurship: Small Business Financial Management

Small Business Financial ManagementGuest Post by Barbara Greenwald of Sheinwald Financial Strategies.

 

I define “Smart Entrepreneurship,” as the willingness to plan ahead, adjust your plan as you go along, know your own limitations and when to consult others, only take risks that you understand and can afford to take, deliver your product or service with the utmost quality and professionalism, and always manage your business functions (especially your financial management) well.

Owning your own business requires research, planning, dedication, persistence, problem solving, and resilience. Whether it is generating revenues, keeping the cash flow going, maintaining employee morale, or managing the growth of the company, the buck stops with you.

My insights are gleaned from 30 years of lending money to small businesses. My efforts as a financial strategist are always to provide guidance that will contribute towards a smoother ride. If owning your own business were an easy path to success, however you define success, then everybody would be doing it.

Do you have 6-12 months cash to support both your personal and business cash requirements? 

You want your business to be a source of pride and fulfillment, not a source of worry and distress. Why not strive to be in a position where you can minimize any worry about money? Properly managing financial risk is one of the most important elements of running your business.

Having sufficient resources will permit you to concentrate on generating sales, hiring and training the right employees, and implementing operations. All too frequently businesses are going along and a cash flow shortage suddenly occurs when a receivable doesn’t come in when expected; or when a business expands rapidly. To better understand when revenue growth will eat cash, ask your accountant, your banker, or a financial strategist like myself. .

Depending upon the size of the business and the pace of its growth, a periodic financial check-up with an expert is advisable. Just like your personal health, if you don’t catch a problem early enough, it can be much harder to resolve in a favorable manner. It’s advantageous to be proactive and keep the financial health of your business fine-tuned.

What do the right financial advisors mean for your future success?

If a company doesn’t have its books set up properly to reflect its financial status at any given point in time, and it has not selected an accountant to pull regular financial statements, the owner won’t know if the company is making money, losing money, or breaking even, and will not have the financial reporting to make sound financial decisions when future opportunities or other challenges present themselves. Lack of knowledge about a company’s financial status is one of the biggest financial risks a business owner undertakes.

Questions to ask yourself:

  1. Do you have an accountant and an accurate accounting system kept current?
  2. Have you found a banker who will follow your business progress and be prepared in advance to set up a financing facility?

What is your plan if you find that you are making progress towards increased growth and profitability, and you find you need more capital?

If you cannot identify sources for cash for the fixed overhead for your personal and business expenses for at least six months, which might include a spouse’s salary, consider a back-up plan. Finances can operate on a shoestring and even transform you into a better money manager, but can also create a more nerve-wracking experience and a greater possibility of failure.

The most important message I can deliver is to understand the financial risks you are undertaking, the business implications, and your own personal risk tolerance. It is important to only take risks you can afford to take to preserve the long term potential of your business venture.  Cash provides the maximum flexibility to get through downturns in your business or the economy. In the end, everything starts and ends with finance.

If you are a Government Contractor, please join me for my upcoming talk:
Tuesday, May 8: “Financing for Government Contracting: The Importance of Timing” presented by Barbara Greenwald, Sheinwald Financial Strategies. Held at the Alexandria Small Business Development Center, 625 N. Washington Street, Suite 400 from 9:00 – 11:00 AM. Register online or call 703-778-1292 for more information.

Photo courtesy of Andres Rueda

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