Business banking and finance mistakes to avoid

Ghraphic design image of an envelope with an invoice and an envelope with a bill - TAB Bank

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!

About the Author

Tyler Heap

Tyler has spent his career analyzing businesses from both an owner’s and lender’s perspective. His love for small business and the entrepreneur budded as he co-founded a business in college which paid for his education and resulted in the sale of the company shortly after graduation. Tyler worked for a manufacturer and distributor of sporting goods after graduating from college, where he managed the company’s finances and investor relationships. His banking career includes vast experience in relationship, portfolio, distressed loan, and underwriting management.

In his current role, Tyler is responsible for leading the underwriting, special assets, and collateral monitoring teams in conjunction with managing overall credit quality at TAB Bank. He received a double Bachelor of Finance and Economics from Utah State University. Over the years he has been an active participant in the International Factoring Association, Commercial Finance Association, Utah Bankers Association, and the Pacific Coast Banking School. Tyler is also an active member of his community through volunteering and donating to local charities, schools, and special cause groups.

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