Big Challenge: Setting Yourself Up
For Financial Success

Excerpted from:
Inspiring Entrepreneurs: How to Build Your Business to its First Million

By: Carissa Reiniger, Founder & President of Silver Lining Ltd
silverlininglimited.com

Managing cash flow and securing adequate long-term financing is a major challenge for almost any entrepreneur. In fact, I was not shocked that 97% of our entrepreneurs listed financing as their number one challenge in building their business. It is a significant issue that many people are working to address and solve. Yet there are still few simple, easy options around financing.

That does not mean that this is an impossible feat – clearly at least 100 entrepreneurs have done it!

There are some basic concepts that you can think about to try to set yourself up for financial success and to try to diminish the heartache that cash flow problems often cause for a small business.

It is important to understand that you can invoice out a million dollars and not see a single cent from it if you do not plan properly.

You have to figure out what your growth will cost you. To grow, you need more people, more processes, more technology and more resources than you have probably thought of so far.

There will always be times when you have to be spending more than you are making to create this infrastructure.

So, be smart. Figure out how to make a million dollars in revenue work for you. The reality is that it is not bad to go into debt to grow your business. But what sets businesses that succeed apart from the ones that do not is how realistic they choose to be about their numbers. Many of the entrepreneurs interviewed, myself included, were so scared of our financial position that we ignored it. We didn’t look at the numbers accurately because we did not want to deal with the reality of what it was. Without living in complete reality and planning properly, finances will always be a problem.

In addition to thinking about overall revenues and expenses, thinking about cash flow is exceptionally important. How you manage the month-to-month cash flow in your business can ultimately result in success or failure. You can be making more money annually than you spend, but if most of the invoices you issue are paid late or your monthly hard costs are higher than the average monthly revenue you are bringing in, you might still end up without money in the bank. There is an art to figuring out how you can get your revenue in the door faster and keep your money in the bank longer.

The entrepreneurs we interviewed repeatedly stressed how important it is to think about what finances you need and what resources you have at your disposal so that you can build the right strategies for yourself.

First, figure out your cash flow:

Once you have built your cash flow projections, the day-to-day management of the money is imperative. I got myself into a lot more trouble than I ever needed to by not being completely aware of how high our Accounts Receivable or Payable were. There are many simple, inexpensive software programs that can help you manage your day-to-day cashflow and financial management. The key to ongoing financial management and cashflow is to monitor it regularly. With the aid of a great software program you can input all of your transactions and have reports ready to analyze at any time. Understanding your AR/AP, overall balance sheets and Profit & Loss Statements allow you to stay on top of your finances so that you can react if there is ever a problem. It is so important to know and understand this information and although it can seem scary and overwhelming there are always a lot of support materials, training and free resources that come with the software to help you learn how to use it best.