Sooner or later business owners learn to appreciate the importance of applying smart cash flow strategies to their business. Knowing what to do and when to do it is driven by developing an annual cash flow budget supported by written reasons explaining the numbers used in the budget. Those valuable thoughts will be critical reminders for you later in the year.

Unfortunately, only a small percentage of business owners actually adopt this discipline. Classic excuses are "I don't have enough cash flow" or "I don't know where my sales are coming from so I can't prepare a budget". Not preparing an annual budget and tracking performance monthly can create some pretty significant 'pain' in operating the business. For example, annual insurance premiums or taxes are due and there is no cash to make the payments. You scramble and rob Peter to pay Paul. Problem is Peter has nothing so Paul has to go without. You know when cash flow is too much of a battle because you are probably not sleeping too well at night - worrying too much.

Solution? Prepare an annual budget and manage the cash flow of the business - monthly! No excuses. How? Use available templates such as the one available at and click on "SBA Cashflow Spreadsheet (Monthly)". This straightforward template will guide you through the process of budgeting and managing the cash flow of your business. All you need to do is add the numbers and explain why you are using the numbers you entered. SCORE can assist you. It is the development of the written explanation of the numbers that provides the business owner with the best understanding of the cash flow of the business. It is very important the business owner be directly involved in this process. Why? Because the business owner makes the daily decisions that create the cash flow. By understanding how cash flow works, the business owner is essentially considering each daily decision within the context of the cash flow budget...and measuring it monthly

There are two components to cash flow: how much and when? When completing the cash flow budget, don't' cut corners or make excuses. Be brutally honest with yourself. Don't commit to something you haven't thought through completely. Any 'fudging' will only come back to haunt you.

When completing the spreadsheet, always start with the expenses. We naturally tend to be more conservative when we are spending money and exaggerate our revenues. Sure, you may not 'know' how much an expense will be until you incur that cost. Revenues are like that, too. We don't know where our next sale may be coming from, but we know we have to have sales to meet our expenses. The budget will help focus on generating the most important number on the income statement - sales. You may need to reiterate the process five to ten times thinking through the expenses, figuring out how to boost revenues, etc. Tweak the supporting explanations as needed. The result is worth it and produces a well prepared budget for you and the lender.

Benefits? First, you and your sales team know the sales targets to hit. Result: a more profitable business. Second, a better chance to not only obtain a business loan, but also negotiate better terms. Third, you can negotiate better payment terms with your suppliers and best of all you sleep better at night!

To learn more attend SCORE's Simple Steps for Starting Your Business. Visit our web site or request a free mentoring session.

Tony Busch
Owner Priora® Cash Flow Management, LLC
SCORE Mentor