by Tyler Heap, Vice President, Senior Credit Officer
If you're a business owner, you likely have strong experience in your chosen field, whether a deep education, plenty of experience or a combination of both. Unless your company focuses on the financial sector, however, your experience with banking might only extend to a few college courses or your own personal savings and checking activity. That's why it's especially important to understand common business banking pitfalls and how to avoid them. Let's review some of these frequently seen but easily avoidable mistakes.
Not managing bills and ensuring prompt payment
As a business owner, you're well within your rights to follow the industry standard in terms of paying bills that vendors and suppliers send to you. After all, you likely have plenty of clients that don't pay immediately after they receive your bills. Following the established delay in your specific market or field is one thing, but going beyond those deadlines is another. Fit Small Business provided the reminder that effective management of debts is tied to responsible cash and time management. You'll also need a financial institution that you can depend on to provide consistent access to your accounts, making payment that much easier. After you address those needs, you'll benefit from a lack of additional charges like late fees and an improved reputation.
Not planning for cash flow issues
Cash flow is vital for all businesses, but especially smaller ones. Without the large cash reserves already on hand and accumulated assets that make it easier to secure traditional solutions to cash flow concerns, there's a greater need to find effective solutions for cash flow issues. Smaller enterprises need to have a strategy for ensuring they can settle their bills while waiting for their accounts receivable payments to arrive.
Small businesses that have seasonal swings, downtime between major projects or other significant but ultimately temporary cash flow issues can turn to effective options like A/R financing to smooth things over. This approach involves using your existing, unpaid accounts receivable invoices to secure a steady, quickly accessed line of credit. You won't need to put critical business assets on the line, just bills for services that have been provided but aren't yet paid. With this option ready to deploy in the case of uneven cash flow, you can rest that much easier.
Spending too much as you start your business
There are so many needs that arise as you ramp up your business, from staff to the assets that help you excel in your chosen field. The Balance said it's important to carefully consider all purchases, especially of brand-new equipment, as your company starts its operations. Alternatives to consider, when available, include purchasing used or refurbished equipment - from office computers to trucks and heavy equipment - and using free or less-expensive alternatives to more costly software and business tools. Controlling costs early on helps you maintain positive cash flow during your company's formative period.
Not finding the right banking partner
All financial institutions will provide basic services like checking and savings accounts, but that doesn't mean they're all equal. A truly dependable and invested partner offers more than just the basics. With a variety of services including checking, savings and money market accounts as well as CDs and extensive, personalized treasury management services, TAB Bank gives your company the range of financial services it needs. To learn about our offerings, open an account or find out more about how our treasury management services can help your business avoid common banking and financial problems, get in touch with us today!
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