Small Business Development Center
At Chemeketa Center for Business & Industry
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Category Archives: Financial Statements

Five things to do when money is flowing out the door

By Chemeketa SBDC

If you’re a business owner and your books are full of red ink and your bank account is bone dry, here are some issues to consider going forward.

Take a hard look at your resources. Is it really true that you have no money, or is it true that you just aren’t willing to rob Peter to pay Paul? Does it mean that you’re not going to hit revenue targets, or that you don’t anticipate having cash on a certain date? If you can honestly and accurately describe your situation using numbers (without drama) it won’t solve your circumstances, but it will give you a true picture of where you truly are so you can start working toward solutions.

Do a thorough assessment of your internal capacity. Running a business is a serious matter, and it can leave a business owner feeling burned out and exhausted. You may feel like you have nothing left to give, but do you perhaps have almost nothing (meaning there’s a little bit left)? There is a difference between truly being at the end, and almost being there. If there’s something left, then keep going. If not, make peace with it and move on to your next opportunity.

Look at your worst-case fallback plans and consider doing them. These are the ones you might have thought about in the early days when you were getting your business started. They include things like getting a job in order to sustain your business, taking out a second mortgage, selling your home and living with relatives. These are drastic measures, but is it time to think about implementing one of them? If you haven’t engaged one of them, then ask yourself why not. Either times aren’t desperate enough, or your heart’s just not in it. Ask yourself the tough questions.

Consider what you would do in a difficult life situation where money was flowing out the door. Take your passion for your business dream out of the equation and look at the situation from the standpoint of its being a medical emergency or a job loss. What would your options be? How crazy would you be in trying to solve things?

Put your last efforts into a killer marketing campaign. You need customers and cash flow, so right now is likely the time to double down on marketing. If your business needs to be pulled out of the fire, then throw caution to the wind and go for it.

Business owners should get comfortable with the numbers

By Chemeketa SBDC

How do you feel about math and numbers? If you’re like a lot of business owners you either don’t like them, don’t understand them, or don’t pay attention as closely as you should. You know you should have a handle on all of this but can’t find the motivation to get any further.

Lots of business owners have some form of math anxiety. Couple that with an aversion to accounting and you’ve got a real problem on your hands.

But here’s the raw truth: your business runs by numbers and if you don’t know how to read them you are flying blind. It’s time for you to step up and make the decision to get the training and knowledge you need to make that happen. You need to understand what the numbers mean and what the relationships between them. You don’t need to love it, you just need to be competent. And you need to do it now!

You already know that numbers will tell you if you’re making a profit or not. But numbers will also tell you whether you can afford to buy a new piece of equipment or hire someone. They’ll tell you how your marketing campaign is contributing (or not) to your bottom line. How good your sales are. Whether your costs are increasing, etc.

You can’t sit around and wait for your bookkeeper or your accountant to bring you up to speed on these things. It’s your responsibility. You need to dive into your financial statements and bring these things to light yourself. So how do you do that?

First, decide that it’s worth your time and attention and that it’s a priority. Really, isn’t it more than time for you to know this stuff? Consider all the decisions you’re making now based on guesses and hunches, and then imagine making those same decisions based on hard facts. What might you do differently? I’ll bet probably plenty.

Second, look around for educational opportunities. Community colleges have accounting, bookkeeping, and other types of financial courses. There are free online sources like educational websites. Hit your public library and check out one of their books on any of these subject areas. They have lots of titles; find one that’s written so you can understand it. Google a term like “cash flow” and then go to a site that looks to have lots of definitions. Look up the concept on Wikipedia. Ask people you know who are good at this and see if you can’t get a little tutoring.

Keep working on this a little at a time. You’ll be amazed at how even a small increase in your understanding in this area will transform your thinking as a business owner. Your business will thank you.