With the Great Recession at last fading in the rearview mirror, what are the most important things a small-business owner must remember to stay on the road to success?
You may be visionary or exceptional when it comes to dealing with people. Unfortunately, traditional qualities of leadership are not always enough.
Because weak financial management can lead even great ideas to fail, the successful entrepreneur must find a way to be the CEO as well as chief financial officer. He or she must lead and ensure that the financial discipline essential to business survival is maintained.
What are the CFO sensibilities a successful entrepreneur needs to cultivate? Here’s our road map:
• Be meticulous in bookkeeping and financial reporting, and be aware of what key documents are telling you. Financial statements and key ratios are tools that can help you anticipate problems and adjust quickly. Use them or fly blind.
• Plan, and do it in writing. A written business plan forces you to come to grips with your place in the market and the value you bring to your customers. It makes you thoughtful about both threats and opportunities. Finally, it facilitates realistic forecasting of cash, credit and profit.
• Evaluate your credit needs honestly. Make sure terms and repayment sources are aligned. And because credit decisions can make or break a business, take the time to research what’s available from the SBA and from lenders. Help yourself by mastering the details.
• Adopt practices to ensure that funds are managed with integrity. Don’t have the same person approving invoices and writing checks. Keep payroll and hiring separate to prevent “ghost employees.” Require two signatures on checks and make sure at least two people have to sign off on everything.
• If you don’t have a succession plan, start one now. Too many owners wait until their options have narrowed or it is too late. Think ahead about taxes and the creation of a trust. Your heirs will thank you.
If this list seems daunting, remember you don’t have to manage these functions alone. You already may have more help than you realize.
A CPA who does nothing but prepare tax returns is underutilized. A banker who walks away after getting your signature is underserving you.
Recognize your resources, and utilize them. Build a network of valued advisers and consultants.