In Pursuit of Profession: Running on empty?

It’s time. You’ve run the numbers, have the financing in place, and solidified your resolve. You are ready to quit your day job and hang out your own shingle. Or maybe you’ve already made the leap; you’ve recently opened your business and you’re still riding that wave of momentum that new businesses have.

And then it happens.

There’s that feeling you get out of nowhere. It’s that same feeling you had as a kid stepping up to the plate for the first time in little league, or standing on the edge of the high dive for the first time. It’s trepidation. If your business is still just an idea, you second guess yourself. Can I really sell the amount I need to make the numbers work? Every day? Every month? Every year? Suddenly the drive to your current day job doesn’t seem so bad. You can continue to handle your overbearing boss until you find another job, right?

If you already own the business, you dive back into your spreadsheets incessantly to look at the numbers. You double check just how many units you need to sell this month and the necessary margin you need to generate. The second guessing continues. Did I make the right choice? Can I make this business work now — and for years to come?

For new business owners, or those that want to open a business, it’s easy to get overwhelmed by the finances and feel, “run by your business.” And with cash flow being the lifeblood of any business, it’s also critical that new business owners understand the need to keep track of your finances. A recent Small Business Trends article listed the following seven tips for managing your business finances:

▪ Find a good local credit union. Even if you already have financing in place to open your business, local credit unions have a good understanding of local businesses and are willing to provide loans to local businesses at various points of the business life cycle. Having relationships with multiple lenders and financing people is always a good thing.

▪ Choose the correct accounting software. Keeping track of the debits and credits is critical. Quickbooks is a popular option, but is there a better option for your unique situation? Small Business Trends suggests that small business owners visit www.findaccountingsoftware.com and fill out their detailed questionnaire to find the best product for you. Best of all, it’s free.

▪ Consider hiring a bookkeeper. A bookkeeper can help you cross all the T’s and dot all the I’s or, in this case, make sure those debits and credits balance. The American Institute of Professional Bookkeeper’s has a free bookkeeper’s test on their website that small business owners can use in their search for the right bookkeeper. Visit http://www.aipb.org/testrequest.php for more information and to get the test.

▪ Accelerate cash flow with mobile payment systems. A recent Pew Research Center study found that 65 percent of respondents believed that by 2020, mobile payments will have almost entirely replaced the need for cash or even credit cards. A recent Federal Reserve study found that most Americans carry less than $20 in cash. And another study from Business Insider found that mobile transactions grew by 118 percent over the past five years. If those figures aren’t enough to tell you that you need to have a system in place to accept mobile payments, here’s one more: according to a recent global survey of 2,300 companies and consumers conducted by Ingenico ePayments, it found that among business respondents with annual revenue growth of 11 percent or more, 43 percent have an app that supports mobile purchases and payments, compared with 32 percent of slower-growth businesses. In other words, the fastest-growing companies are also the most likely to accept mobile payments.

▪ Look into factoring receivables. Wait. What? Factoring, which is also known as “accounts receivable financing,” happens when a company needs to accept cash quickly on their receivables, rather than waiting the typical 30 to 60 days it takes for customers to pay their bills. Here’s how it works, courtesy of RTS Financial: “Factoring is a transaction in which a business sells its invoices, or receivables, to a third-party financial company known as a “factor.” When you factor an invoice, the factoring provider advances to you a percentage of that invoice value, usually within 24 hours. The factor will then pay you the balance of the invoice, minus fees, after it collects payment from your customer.” And did you know there’s an International Factoring Association? You do now! Visit www.factoring.org for more information.

▪ Understand your various budgets and expenses. Are your capital costs moving down over time? Are your operational cost staying steady? Are they dropping? Or are they going up? Taking a look at how these costs move around over time is essential to the long range outlook of the business. This is where a qualified, experienced accountant can help.

▪ Find a trusted mentor. Speaking of getting help, there’s perhaps no better decision you can make if you’re thinking of starting a business or as a new business owner than having a trusted mentor in place. I’ve mentioned the SCORE organization many times in this column over the years and for good reason. There is no better resource in place that’s a one-stop-shop for all entrepreneurs and small business owners. SCORE mentors have years of experience in various industries. They offer one-on-one guidance with everything from how to write a business plan to help with marketing and sales. They also offer workshops throughout the year on various topics, including their next workshop on…wait for it…Economics of Small Business, which is Saturday, September 16. I talked with Certified SCORE Mentor Mike Reid about what attendees can expect at the workshop. “One of the keys [to starting a small business] is understanding how much the business has to produce in order to hit breakeven when revenues balance with expenses. A byproduct of this is understanding how much working capital will be needing to make up for the shortage of cash flow in the early months. Businesses usually underestimate what it will take to launch the business,” said Reid. “We want small businesses to understand they don't have to tackle the challenge of starting or running a business by themselves. We have 40 mentors with diverse backgrounds that can assist the small business owner.”

This story was originally published September 3, 2017 at 9:00 AM with the headline "In Pursuit of Profession: Running on empty?."