Getting to Grips with Business Finances is Key to Long-term Success

Anyone who’s heard the phrase “cash is king” understands that when the cash runs out, the game is over. Cashflow in a business setting is equally important too. Your business can have all the stated revenues in the world, but if it’s tied up in future receivables on 60-day credit terms with no money coming in and only expenses being paid out, hitting a cash crunch is almost inevitable without sufficient cash reserves to start the business.

Managing money well inside a business ensures its survival in many cases. Mess up the management of the business finances and companies have to scramble by using factoring to get invoices financed before they are fully paid, borrow on future credit card billables, or take short-term business loans to make it through.

Here are a few tips for getting business finances in proper order.

Focus Just as Much on Receivables as Sales

As a newer company with little working capital, you must keep a close eye on credit terms with customers or clients. It certainly helps to have reasonable credit terms with suppliers, but if you’re paying upfront for materials and only getting paid on 30-day terms when each manufactured product is later sold, your cash flow is going to be stretched to breaking point.

Look to reduce credit terms to customers. Wherever possible, sell online where even business customers are used to paying at the point of sale. Reserve generous credit terms to companies placing the largest orders. With that said, be careful, as the orders get larger because any business can go into receivership taking your stock and debt balance with it. Check credit reports regularly with customers who are seeking credit terms (or that already have them) to avoid future problems with payments.

Lower the Cost of Borrowing to Fund Working Capital

Look at all options available to the business to fund working capital needs. If the business is expanding but strapped for cash, consider taking on a strategic investor if you’re willing to give up part of the ownership to avoid risking the company with leverage. However, if you’re comfortable taking on debt, then look at all options open to the business. This includes business-based crowdfunding platforms, traditional banks that are open to lending to businesses, and private investors who see value in providing loans to growing small businesses in lieu of investing in them directly.

Learn About Managing Business Finances Better

Studying an online master's in finance at Northeastern University is an interesting option if you want to learn more about the financial side of the business. The Northeastern University Online program is designed to enable full-time employees to study for a valuable financial-related degree (there’s an MBA track to the degree as a secondary option) while staying at their job. The Northeastern Online structure makes access to lectures and keeping up with online classes easy to do while having other responsibilities.

When the business finances are under control, owners have an easier time focusing on other areas to drive growth. There’s sufficient working capital to deliver on promises to customers, employees get paid on time, and everyone’s happy.