Research sponsored by small business coaching firm Advicoach found that as many as half of entrepreneurs running their own firms use personal credit cards to compensate for poor cash flow caused by a lack of funding or revenue.
According to Brian Miller, COO and president of Advicoach, common areas of small business expenditure include inventory, operations, marketing and sales, technology and human resources. Enterprises typically dedicate more than 50 percent of their revenues to the purchase of goods and services, so a little cash flow management can go a long way.
Miller notes that monitoring cash inflows and outflows is a pressing managerial task for entrepreneurs. Responsibilities related to cash flow should be ignored and pushed aside at a business owner's peril, as just a few short months of unbalanced revenues and expenditures can be enough to bring a company to its knees – especially at a time when, thanks to the recession, the economic climate is still shaky.
It's your job to oversee cash flow
One of your responsibilities as the owner of a small enterprise is to know the best sources for meeting additional cash needs in order to keep your company running even when you're feeling the pinch of decreasing revenues, rising expenditures or the perfect storm of both. Part of this involves developing and maintaining good relationships with those in the financial services industry – for example, representatives at your local community bank.
Community banks are the way to go
In fact, when it comes to securing commercial loans and other lines of credit, community banks such as My Bank may be your best bet, according to a study from Raddon Financial Group's National Small Business Research cited by CNBC. The study revealed that just 9 percent of small enterprises that primarily used a community bank felt their institution was not making credit available, compared to more than one-quarter (27 percent) of those using a top-five bank.
Additionally, researchers found that small business owners were more satisfied with community financial institutions compared to larger banks. This probably has a lot to do with the fact that community banks take the time to get to know their customers and are more equipped to offer financial tips and business banking options that are customized to the needs of small companies.