Manage Your Financials Like a Pro

Bill Warner Monday, June 15, 2009

Wow, here is a great testimonial from Anita Campbell, a small business owner, about managing your financials. I wish every small business owner had this much discipline.

Cash is really king

The biggest mistake that small business owners make is not really understanding their cash flow. Unfortunately, the result is too often running out of money followed by business failure. All of this comes from properly accounting for all of your revenue, cost, expense, and other cash transactions. If you are doing this, you simply need to look at your cash flow statement to see where you are. There you can see where you stand with:

  • Money that is owed to you by customers
  • How much you owe others
  • The effect of depreciation
  • The gains from financing activities
  • Implications of changes in inventory
  • Cash implications on debt

If your ending cash balance is declining, you may be in trouble. Watch this metric like a hawk.

Look to the future

Equally important is your projection of cash flow for the next 6 to 12 months. I strongly urge you to develop a cash flow projection on your own or with the help of a professional financial person. You may be fine today, but the growth of your business may put particular strain on your cash position. Think ahead to see future cash crunches so you have time to find the financing that will carry you through it.

Filed Under: Financing a Company, Business Operations, Managing Business Financials



Bill Warner is the Managing Partner of Paladin and Associates, a business consulting firm in the Research Triangle Park area of central North Carolina, and is the Chairman of the Triangle Accredited Capital Forum, an angel investor network with over one hundred members throughout the southeast.

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