How can you keep your small business financiers happy?

One thing I have found helpful that you need to disclose your cash flow problems in advance once you predict it and to explain when your cash flow will be helthy soo they can agree for rescheduled your debt

If there are any surprises, over-communication is best. You don’t want your financiers to be surprised after the fact by something like a blown debt covenant or another major financial issue. They can provide more proactive solutions than reactive solutions after the fact.

The biggest mistake a small business owner does is “overestimating the future”. You can’t predict your next big sale, you can predict you next big investment, certainly you can’t predict your next big loss! Hence be realistic about your budgeting and planning and certainly disclose the same to your financiers. Honesty is always valued more than a made up financial statement! Be real and embrace it in your business!

Transparency in communication and quick response times really goes a long way. Also, ensure that you are on the same page with growth and expansion plans to avoid any conflicts or clashes.

Communication is the cornerstone of any healthy relationship. Regular updates, both good and bad, create transparency and trust. This is where a project charter with key milestones is extremely important. I often schedule check-ins to discuss the business's performance, challenges, and milestones. This not only keeps financiers informed but also engaged in the journey.

Cash flow and liquidity management are key things which treasurers need to address on a daily basis. Failure to attend to these two issues will lead into serious financial problems even if the business is making huge profits. Efficient working capital management addresses liquidity issues in the medium to long-term in any business set up. Funding working capital needs using short-term instruments is one of the sure ways of running into liquidity problems. Long-term sources of capital must be used to fund the bigger portion of working. This usually improves cash flows and liquidity. Banks and other potential financiers prefer to fund businesses with a strong working capital and robust liquidity management structures.

Managing cashflow/ liquidity is very key. As much as possible match short term funds with short term assets and long term funds accordingly. A mismatch of short term funds is a sure way to illiquidity & sudden cashflow problems.

One good approach I learned was to receive cash by giving cash discounts on early payments by clients. It helps manage cash flow better. Doing more work as a discount is also good strategy but giving cash discounts in return of early payments help retain client as well.

The effective control of cash flows will be the key success of any business activity specially at the earlier stages, Simply key factors for the cash flows from operating activities may be managed by but not limited to: * Cash inflows: continues matching the budgeted figures VRS actual incomes while analyze causes of the material discrepancies and working on solutions to assure ability of meeting the liabilities associated to this section. * Cash outflows: setting the priorities according to the dues will lead to smooth operating cycle to meet obligations and opportunities for rapid growth while avoiding any overstated expenses as penalties, contracts cancelation,interests..etc, that may leads to understated business profit utilizing.

I agree cash flow management is crucial and ensures that the company has enough liquidity to meet its obligations and seize growth opportunities. Small Businesses must track their income and expenses, forecast future cash needs, and plan for unexpected expenses.

Small business financiers often look for growth potential. Presenting a clear growth strategy, backed by data and a well-defined plan, reassures financiers that their investment is on a promising path. A comparison of Key Performance Indicators (KPIs) ensures that you are in sync with the pulse of your business. Sharing your vision and the steps you'll take to reach your goals is crucial.

Absolutely, a crucial aspect often overlooked in aligning expectations is fostering a genuine connection beyond the contract. Understanding financiers' motivations and aligning values can strengthen the partnership. Leveraging their expertise beyond finances, being transparent about challenges, and seeking their insights can transform them into strategic allies, not just investors. The human touch complements the written agreement, fostering a lasting, mutually beneficial relationship.

A common pitfall is misaligned expectations. Not every money is good money and money can't solve business problems that require a leadership-oriented approach. Before the partnership is forged, it's essential to clarify the financier's expectations and the terms of the partnership. This alignment upfront minimizes misunderstandings down the road.

A simple 'thank you' goes a long way. Small gestures like acknowledging your financiers' support, sending updates on key milestones reached, or celebrating achievements together foster a positive, personal connection.

Certainly! It's crucial to emphasize the significance of aligning expectations between entrepreneurs and financiers to maintain a healthy and productive relationship. Aligning expectations is undeniably a critical component for a successful partnership between entrepreneurs and financiers. A written agreement or contract serves as the roadmap that establishes the terms and conditions governing the relationship. A comprehensive agreement provides clarity on the shared goals, roles, and responsibilities which is critical for business success.

Don't hesitate to tap into your financiers' expertise. They often bring a wealth of knowledge and experience. I've found that seeking their advice and feedback not only strengthens the partnership but also helps me make more informed decisions.

Invest in your financial/accounting systems and processes. Many entrepreneurs are understandably drawn to their products/services and customers. It's what pulled them into the business in the first place and what generates sales. Too often, however, financial discipline and systems take a back seat, often to the detriment of performance. The most successful and wise entrepreneurs do it differently. They recognize the importance of the numbers and, if numbers aren't "their thing," they figure out how to make it their thing through education, building a team and insisting on strong systems. It's a win-win for both the owner and the financiers creating more confidence in the information used to make decisions and drive growth.

Your "financiers" should be part of your Team and work in partnership with you and the rest of your Team. The Team could consist of: Accountant, Lawyer; Insurance Professional; Mentors; Financial Planners; Etc. The Team should be working together to help you as you run your business. Another important thing, be sure to meet you annual Financial and reporting Covenants, makes for a very happy relationship.

Don't ignore the reporting and Financial covenants that you agreed to with your Lender. Get your FYEs done on time and meet up with them at least once per year.