Small Business Boomers

A Small Business Team – Finance

by jim on February 13th, 2007

Congratulations, you are the Chief Financial Officer.

Look across the breakfast table.  Look in your check book.  Look in the mirror.  Call your bother.  For many small businesses the financial brain trust has just met.  For your business that may be enough, but probably not.  You don’t need much more and you don’t need it all the time, but you do need more.

A small business, as opposed to a hobby, should have rigorous financial records.  There are several good pieces of accounting software out in the market.  Everyone should take advantage of them.  I make an assumption that your business already has a personal computer of some kind.  If you don’t then you probably have a hobby and not a business.

With a decent set of financial records you can sit down and get a fair idea about your financial future just by reading the Accounts Payable and the Accounts Receivable.  Trends will jump out at you.  If you are using a software package it most likely has a built in graphing capability.  The graphs will tell you a great deal at a glance.

If you don’t have a business credit card you should.  The assumption here is that you will actually use it to run your business.  The reports the credit card company can provide you are also eye opening.

It is a bad idea to use your business credit card for personal expenses because that would be the same as using your business checking account for personal expenses.  Your tax person will get confused.  So will the nice lady from the IRS who will audit you and then you will pay more taxes than you should plus some kind of penalty.  Keep your personal transactions separate from your business transactions, a simple but vital practice.

Do you know what your credit score is?  Have you got an up to date copy of your credit report?  As the chief financial source of funds for your business you should, because at some point you will want to go to your local banker for a loan.  You will have to personally secure the loan and that is when all that credit score stuff comes into play.  Better to know before you ask a banker then after.

Does your banker know you?  Have you met with them?  Established a line of credit?  Asked about services that they offer small businesses?  Some banks are better than other when it comes to dealing with a small business.  Better to shop around before you need money or help then when you’re in a pinch.

What is you personal financial situation?  When was the last time you ran a personal balance sheet and income statement?  If it is more than 6 months ago, do it again.

Do you have a broker?  When was the last time you spoke with him?  Do you keep track of your other investments?  What free advice can you get from them?

If you have other financial backers, such as family members or friends, when was the last time you updated your financial situation to them?  You can think that it is none of their business until they want their money back.  If you have kept them up to date on the financial health of your business then chances are they will have more faith in you and not ask for the money at an inopportune moment.  Now, if you are thinking that my personal and business finances are nobodies business that is your decision, but remember nobody likes surprises.

Something to think about: have financial backers who bring more than money to the table.  Get a boomer with some kind of expertise in your business so that you can tap them for advice, as a sounding board for ideas and other intangible resources such as other business contacts.

Boiled down what does this all mean?  Be prepared.  Poor financial planning and lack of financial strength are the main reason businesses of all kinds fail.  Know your financial options; so that when surprises and opportunities happen you will be ready financially.  It’s up to the CFO.

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