Financial Management
I was once consulting for a photography business owned by
three people. After taking a look at their bank statement, their
bills due (accounts payable), and the bills due them (accounts
receivables), I called the owners into an emergency meeting. I
explained that they were about to have a cash f low problem so
serious that meeting their bills as soon as next month could be a
problem. They looked at me suspiciously and asked, “Well, how
do you know this?” I explained that I had looked over their
finances and did some simple calculations. Unconvinced, they
asked, “Has the bank bounced any checks?” It hadn’t (yet). “Well,
then how can we have a cash f low problem?”
It seems almost too obvious to mention, but a business has to
manage its financial affairs to stay in business. A business having
difficulties paying its bills will have difficulty obtaining products
and services it needs to function and is obviously on tenuous
grounds. Keeping an eye on finances and planning in advance for
bills due are essential for maintaining good standing and good
credit. Waiting until the bank bounces checks is hardly a good
planning strategy. For most businesses, financial management involves
a bit more than merely paying bills. Issues like managing
credit prudently, getting paid on time, and general management
of money are discussed in detail in Chapter 9 (as usual from the
point of view of the lifestyle entrepreneur).
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