Small businesses and cash flow: and emotion

September 10, 2012 · Filed Under women and work, Work 

I participated in a fantastic webinar sponsored by American Express OPEN and SmartBrief a couple weeks ago. The topic: how small businesses manage their cash flow. You can listen to an archived version here- I really recommend it for the sage advice of B2B CFO’s Joe Worth, a seasoned CFO and small business financial expert. What the discussion tapped into for me was the intense emotional process a small business owner has to go through, because (at least for me) money IS emotional. Debt is bad. And when you start a small business, you’re going to have to get over that. Personal debt is something we’re taught to avoid. But small businesses usually NEED debt to grow. That can do wonders on your psyche.

Here is my not so sage advice:

Cash flow is the most important thing a small business owner should focus on. I find in our current climate where we glorify the venture capital-funded entrepreneur and the pre-revenue startup that got funded for a million dollars we minimize the importance of cash flow. But if you don’t have a solution to your cash and you don’t have venture capital, you have no business.

The best piece of advice I ever got was from my husband, who is also a small business owner. He said, “Always know what your cash is doing at any given moment.” This means knowing how much cash you have in the bank, your A/R, A/P, forecasts, etc. 

If you don’t know how much cash you have at any given moment, how much you will have in one month, 3 months, you can’t be strategic and grow your business if you don’t know what your cash situation is! And then all the strategy and planning goes out the window because they are scrambling for cash.

Every week, pull your A/R, A/P and sales forecast. Try to take the emotion out of it. Fortune favors the prepared! What’s your backup plan if a client doesn’t pay? Do you have a line of credit? A credit card? And before you take on
any additional debt, can you look ahead and see you have the A/R, or the solid sales pipeline? Add up the potential value of your sales pipeline. What deals are likely to close? How much are they worth?

Small business debt isn’t a bad thing – we all need backup plans to grow and make it through the lean times. The key is being honest with yourself and having a plan.

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