Running a business is hard work and there are a number of critical priorities at any given time.  It can be difficult to prioritize in the midst of everyday reality.  It can also be difficult to measure success.  One of the most common issues I’ve run into is that if a business is too focused on revenue or profit without assessing the cash impact of their growth, they can find themselves in a precarious cash position.  Always keep an eye on your cash balance and upcoming events that may strain your resources.  A few suggestions:

Tip 1: Keep the cart in front of the horse

Let actual revenue drive infrastructure investment whenever possible.  In other words, try to keep your expenses below your inflows.  This is especially true in a new business or a business with new funds from a loan or equity infusion.  If you can make do with part time resources vs. full time employees and virtual office space in the short term, these early sacrifices should help preserve your working capital in case revenue growth doesn’t keep pace with your forecast.

Tip 2: Negotiate Everything

You may be surprised to realize that nearly every expense is negotiable from your office rent to your office supplies.  If you are evaluating a contract that will represent a material expenditure for your business, engage the assistance of a professional to help ensure that the terms of the contract are reasonable.

Tip 3: If you’re not a bank, don’t act like one

Always bill promptly upon completion or a service or delivery of a product to minimize the time it takes for you to collect cash payment.  If you are working with a client that appears to be a credit risk, seek a retainer.  If it’s a big project, set up a payment schedule with a deposit, interim billings and a final payment upon completion.  Then FOLLOW UP on past due receivables.

Tip 4: Don’t be tempted by year end close out sales

Timely advice, I hope.  If you don’t need it, don’t buy it.  On the other hand, if a product that you use or sell quite a bit of goes on sale and you have the space for it, that’s a different story.  Buy what you can afford without straining the bank account, and track use of it to see if the return is good.

Tip 5: Leverage “Other People’s Money” when it makes sense

Credit can be scary for a small business because it means you will need to generate sufficient cash in the future to service the debt.  On the other hand, if you’ve got good credit and funds are available at a rate lower than your average return, accessing these resources will allow you to grow your business more quickly than relying solely on the cash your business provides organically.