Savvy Financial Strategies Key for Small Business Owners

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Small business owners juggling multiple demands with limited resources have to be strategic in financing their purchases.
Small business owners juggling multiple demands with limited resources have to be strategic in financing their purchases.

Maintaining a healthy cash flow and keeping a firm handle on expenses is considered sound financial management. For small businesses, however, it can be the difference between succeeding and struggling for survival. Making your money work harder is particularly important in times of economic uncertainty when small businesses are often faced with unpredictable sales and more stringent credit requirements.

Think ahead. Even the smallest businesses can no longer afford to roll the dice with casual "back of the envelope" calculations. Budgeting should be done routinely and systematically on both a short-term (weekly, monthly depending on company size) and a long-term (annual, 3 to 5 years) basis to forecast impending needs.

Don't silo. A company's cash position is tied to business operations, so it is wise to assess production schedules, overtime, supplier choices and delivery dates against cash availability and make adjustments regularly.

Expedite incoming payments. Speed up receivables collection by sending out invoices as soon as orders are shipped and ask customers to make electronic payments wherever possible. Always deposit checks the same day they are received.

Remember that inventory is not cash. The items on your shelves need to be sold to be transformed into cash, therefore you should do everything in your power to move inventory, including offering discounts or installment payments if necessary. ARA

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