One out of every three small businesses fails within the first two years, often due to poor financial management.
“The most anxious moments for small business owners typically aren’t about making a profit — it’s being short on cash,” said Jeff Schmidt, who leads PNC Bank’s business banking division.
Schmidt also said the key to managing a business is being able to analyze cash flow performance “so you can quickly figure out how to adjust to day-to-day changes.” These changes might include purchases, hiring a new or seasonal employee or reinvesting cash back into their business, as well as forecasting for the future. In a release for PNC Bank, he outlined an effective approach for small businesses to handle money:
- Develop a Liquidity Plan: Create a simple cash forecast to predict when payments will come in and go out.
- Create an Receivables Strategy: To accelerate payments coming in, give customers multiple payment options and motivate them to pay on time, e.g., offer discounts for early payments or penalties for late ones.
- Use Technology: There are more options than ever before to make your cash flow processes more efficient and effective, including online bill pay and payroll as well as remote deposit and merchant services.
PNC Bank offers Cash Flow Insight, a service that allows owners to have an online view of their current cash position. This allows owners to anticipate potential shortfalls and stay ahead of their current budgetary needs. Schmidt adds “Similar to Virtual Wallet® and Wealth Insight®,” this is another example of how we can leverage technology to help our customers more easily achieve their financial goals.
“Many small businesses struggle with planning and knowing what money is coming in and what’s going out,” said Josh Jones, president of an accounting and tax services firm in Pittsburgh. “Whether it’s the rent or utilities, Cash Flow Insight saves me time, shows me where the money is going and helps me to create a plan and work towards it.”