Call Don today: 951-533-4966

Blog

Don Welker's Financial Minute

Dec 13, 2016, 4:02 PM

#


I was recently reading a list of famous quotes from Ben Franklin when I was struck by how timeless much of his advice is. While the business world has changed tremendously, these truths about business success have not.

“If you would know the value of money, go and try to borrow some.”

Borrowing money for your business is not easy. For example, according to Biz2Credit’s October 2016 Small Business Lending Index, in October 2016 big banks approved just 23.5% of small business’ loan requests, small banks approved 48.7%, alternative lenders approved 59.5% and institutional lenders approved 63.1%. In other words, 37 to 76% of applicants got turned down.

As I’ve written about before in “Is Your Loan Package Ready for the Spotlight ,” lenders are quite picky about what loans they’ll approve. Managing your cash flow is therefore vital. Making the most of the cash you have minimizes your dependency on lenders.

“Remember that credit is money.”

Maintaining a strong credit rating is like having cash in the bank. Businesses extend credit to those who pay their bills on time. If you can prove your creditworthiness, vendors will be more likely to give you favorable terms, and lenders will be more likely to approve your loan requests.

Of course, you also need to be aware of the flip side of this issue. Do something to wreck your credit worthiness, and you can quickly find yourself unable to access the money you need to run your business.

“Beware of little expenses; A small leak will sink a great ship.”

On one level, this advice gets back to the need to have a budget and financial controls in place. But on another level, this is about managing the mentality and culture.

For example, one area that’s often out of control is office supplies. There’s a storeroom stocked with a nine-month supply of paper and pens. Employees are allowed to “redecorate” their desks with designer in-baskets, and soon everyone wants to personalize their workspace in this way. You get the picture.

While excess spending on office supplies probably won’t sink the ship, this “no limits” attitude will quickly spread to much bigger expenses...and before you know it, your bottom line really is affected.

Conclusion

Want to augment Ben Franklin’s advice with the advice and counsel of an experienced CFO? Give me a call! As a part-time CFO, I’m here for you.



Loading Conversation