8 Workarounds to Manage Your Cash Flow if Finance is Not Your Strong Suit

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It could save your company.
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Whether you are a startup or a small to medium enterprise (SME), you will always need financial savvy to function and grow or you will fail.

Unfortunately many business owners are not adept at numbers at all. Usually they are designers, marketers, programmers or even sales people. If you count yourself in that category, read on because this is vitally important for your company’s survival.

First of all, you are not alone. My first job out of graduate school was in investment banking. One of my first tasks was to write a private placement memorandum to raise capital for a savings and loan customer.

I had no idea what I was doing. I was an econ major and while I was great at math and even taught statistics to undergraduates, I didn’t know how to even read an income statement let alone crunch numbers that would be a necessary part of my job.

Luckily, my office mate and later one of my closest friends had just graduated with an MBA from the Anderson School of Management at UCLA. She taught me how to read and analyze financial statements.

I still remember her teaching me about balance sheets, which are not intuitive at all when you think of it. 

“Remember, a balance sheet is just a snapshot in time,” she said. “It will change from day-to-day.” And for comparison she explained, “An income statement is an accumulation of a period of time.”

Thank you, Michelle.

Ensuring you have enough money to start, survive, manage and grow your company comes down to one main thing: financial acumen. 

And if that is not in your skill set, fear not, I’ll give you some workarounds. 

Analyze Your Financial Statements and Make Changes Accordingly

The purpose of analyzing your financial statements is to see where you are falling short or trending down. 

Where can you cut expenses? 

Should you raise your prices? 

Are your gross profit margins high enough? 

Can you decrease your cost of goods sold? 

What about payroll, taxes, interest rates, benefit costs, rent, legal fees, etc.? 

I know there are a lot of things to understand and scrutinize, but the good news is, there are a lot of areas where you can positively affect your cash flow and future. 

What if you don’t know how to read or do an analysis of a set of financial statements – like me when I started out in my career?  

I’ve had clients who didn’t even know if they had an accurate set of financial statements. (They didn’t.)

Well, if that’s the case, here are some actionable workarounds and a roadmap to follow.

1. I always say that a good controller or bookkeeper should be your first hire. In our first company, my partner and I hired a controller as our first administrative employee. And we were both in finance! (Okay, I violated my next point, but we were newbies.) Even though we were both financially literate, we were doing other things in the company like operations, design and sales. Hence our first hire. 
2. Consider a partner that is a finance or accounting person. Partners should have a skill set that complements yours. Don’t partner with someone because you like them or they share your vision. Choose a partner based on their skill set. If you’re in design or sales, choose someone strong in finance or accounting.
3. Take a couple of accounting courses at your local college or online. Do the work. Even if you have a finance partner, you should still know the basics of accounting and finance. I cannot stress this enough. If you don’t or won’t put a priority on this, you probably won’t make it.  
4. Hire a very capable outside accountant (get referrals from successful businesses you know) to help you set up your financial reporting and do your year end numbers. No. Quickbooks and the like is not enough. You need to know where everything goes within Quickbooks.
5. If you just don’t have the time or bandwidth to take a class, have your outside accountant teach you. You’re giving them your business. It’s the least they can do.
6. Your board of advisors or mentors can help as well. 
7. Start banking with a smallish regional bank and make your banker your best friend. Take him or her to lunch. Keep them informed of your progress. Ask them for help in regards to what they need to see financially in your company. ​
8. Have fun. Schedule a year end party where you go through all your results and give yourself credit for learning how to do that. 

If you can’t do an analysis or even read a financial statement, learn to. No excuses. 

And remember, the truth is always in the numbers.

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