Author: Bob Press (TAP Financial Partners)   

For any small business owner, managing finances is similar to sailing a ship through unpredictable waters. It can be murky sometimes, and storms can spring up at a moment’s notice.

Here’s our advice on navigating the top financial concerns facing small business owners as they sail in search of clear waters.

Manage cash flow . . . it’s the lifeline of your business

A business can’t survive without cash. That’s why monitoring cash flow (i.e., the movement of money into and out of your business) is essential. Irregular or negative cash flow can spell disaster and quickly sink your ship.

To manage cash flow, forecast regularly and add to your savings when possible so you won’t be caught off-guard if you are suddenly low on cash. Send invoices immediately, and consider requiring a down payment before beginning services with a new client to help ensure liquidity. Finally, monitor expenses monthly and cut unnecessary expenditures. Sometimes, it’s the little leaks that sink a big ship.

Secure funding . . . it strengthens your company’s financial backbone

Businesses often don’t generate enough revenue to support growth, especially during the early phases. External funding can be a lifeline.

Typically, businesses finance through one of two ways – debt or equity. Debt comes from loans (traditional and alternative), while equity can come from investors, venture capitalists, and crowdfunding. Some businesses, such as minority-owned or purpose-driven businesses, may qualify for grants, which do not need to be repaid.

Deal with unexpected expenses . . . preparation is the key

Storms can arise quickly from a variety of directions, including equipment breakdowns, legal disputes, or, as many business owners are now keenly aware, global pandemics.

Having a robust emergency savings account is the first step toward managing storms. But that is often not feasible for small businesses, especially during the early phases. As they say, the best defense is a good offense. In this case, that means ensuring you are protected with an insurance policy, sourcing legal counsel who can act immediately in case of a sudden dispute, and performing routine maintenance on equipment and facilities to minimize downtime and disruptions.

Navigate economic uncertainties . . . control what you can

There’s a lot you can control in your business, but the global economy is not one of them. Geopolitical events, economic downturns, and recessions can impact your business.

Staying informed of global events is a great way to see what’s coming. Many business owners are laser-focused on their business and are caught off guard by events that could have been predicted. When facing a downturn, you’ll need to be flexible and adaptable, which could mean anything from downsizing to finding new revenue streams or even changing your business model.

Whether you’re in year one or 20 of your business, we know you always have money on your mind. TAP Financial Partners can help you make the most of the money in your business in various ways, such as helping you find funding, build your portfolio, or plan a merger. Get in touch with us to learn more.

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