Sound financial management means knowing the firm's cash flow, forecasting cash needs, planning to borrow at the appropriate time and substantiating the firm's payback ability. Even a business with respectable sales volume is not protected against financial disaster, and it's often due to poor financial planning.
Too often small business owners feel that their knowledge of the line of business is sufficient to ensure their business is a success. You must figure cash flow over many months to construct a reasonable cash flow projection. One of the common failings of start-up companies is the lack of capital. Cash constantly flows into and out of a business.
Without a floating supply of cash, almost every business will experience problems associated with the lack of liquid cash. Bankruptcy can and does occur even with profitable businesses if there is insufficient capital to carry the business through a cash crunch. If you don't know how to develop a cash flow plan, ask for help.
As an entrepreneur, you want to minimize the risks and maximize your chances for business success. By seeking advice and assistance when it comes to financial planning, you are taking responsibility for the operational details that can make or break a business.
Service Corps of Retired Executives, or SCORE, was formed in 1964 as a nonprofit association dedicated to entrepreneur education and the formation growth and success of small businesses. Contact the Savannah chapter at 912-652-4335. For information go to www.scoresav.org