The day-to-day operations of your business may leave little time for in-depth planning and analysis. However, a quick temperature check of your business’ financial health can help you be sure that you are on track and meeting your goals.
One Tool for Keeping Up with Your Business’ Financial Health
Managing a cash flow document is a great way to keep your finger on the pulse of your business and identify any potential issues before they happen. Cash flow is anticipating income that you have coming in versus the money you have going out in terms of expenses. When forecasting your income and expenses, it’s important to consider when you will collect payment or need to pay vendors. A credit business, for example, may need to pay vendors before they collect payments.
This should be a living document that you update regularly to help you keep ahead of your business needs. Mapping out cash flow for a 12-month period can help you identify shortfalls – or when your expenses exceed cash coming in, before they happen.
Forecasting can also help you anticipate when you may need credit, meaning you can work with your bank ahead of time, rather than ad hoc needing to rush to get a line of credit last minute.
Finding an Institution That Understands You
A good relationship with your bank and commercial lender might be important to your business’ financial health which is why sometimes the best time to approach your bank is before you need them. This is also a great time to ask them what information is necessary to open a line of credit or secure a loan. The answers to these questions will help you prepare for shortfalls or other financial needs.
Perhaps one of the best things about working with a lender you trust is their experience. They can offer free, valuable advice and may even introduce you to leaders of businesses that complement your own.
Key Financial Health Documentation
The best thing you can do to help your lender understand your business and goals is to provide as much information as possible. The following documents are useful in a discussion with your lender:
Understanding how your business is doing, and is projected to do, helps your lender know exactly how to help you and help plan for your future. Just like in any endeavor, working with a lender you trust and who knows your business and industry can help make that road a little smoother.
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