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Small Business Economics: 4 Financial Tenets for a Lucrative Company

It’s often hard to identify exactly why one entrepreneur fails where another succeeds. But it almost invariably comes down to managing finances. Here are four financial tenets small companies should stick to for continued success.

1. Fiscal Discipline

It is, or should be, a numbers game. Successful businesses establish budgets, set priorities, and plan around data-backed sales projections. Your money should not be spent on travel, bonuses, or even marketing opportunities if they were not covered in the budget. Additional hiring should be a last resort. Perhaps most importantly, lines of credit should be used cautiously for immediate cash needs, not for funding ventures with an element of risk, like trade shows or a new marketing campaign.

2. Good Banking Relationships

Successful business leaders are always aware of cash flow between accounts payable and accounts receivable. You should never make a withdrawal before verifying that you’re in a good cash position. Keep your personal and business accounts entirely separate, and try to maintain a good relationship with your business banker both on paper and in person. Don’t overlook government resources for entrepreneurial cash needs.

3. Put Together a Financial Team

Try to build relationships with other entrepreneurs who succeed. You may benefit from the advice of people who’ve faced the same problems. Surround yourself with capable money-managers. Today’s companies need finance professionals who understand the connection between business investment and financial markets. The expertise of someone with an online master’s in financial economics can help with forecasting and timing the investments that provide the best returns. This degree is attainable online or in-campus for you or your loyal advisors to improve finance skills.

4. Invest in the Future

When profits allow, invest back into the business based on priority. By keeping in touch with staff and monitoring departmental productivity, you can better identify and prioritize areas where improvements are needed. This could be new technology like customer relationship management (CRM) software, cloud computing, or maybe hiring a particular skillset for marketing or IT. Just be sure to do the proper risk assessment of potential rewards and possible consequences.

To create a strong financial framework you have to be clear on your business goals. You need to understand how and where an injection of cash will best improve your bottom line in the long term, and where it’s coming from.

Emma is a freelance writer currently living in Boston, MA. She writes most often on education and business. To see more from Emma, say hi on Twitter @EmmaSturgis2

Emma Sturgis

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