Best practices for small business success

From managing cash flow to planning for growth, business owners constantly face important decisions that shape their short- and long-term financial health. After decades of working with successful business owners, our business specialists have found they all follow key best practices: building banking relationships, forming a solid financial team, and practicing sound cash flow management.

Engage with your bank’s business specialists.
Bankers don’t just process transactions. They are business specialists invested in providing solutions to your most pressing challenges. Smart, healthy businesses collaborate with their bank to better understand their overall financial picture in order to plan and make more informed decisions.

Just as you see a doctor for an annual checkup, consider meeting regularly with your banker to review your company’s finances and avoid surprises. For startups, we suggest quarterly check-ins during the first year. For established businesses, an annual mid-year review is a good time to meet. This timing enables companies to make any recommended adjustments before year’s end.

During these meetings, plan to review these topics:

• Revenue and expenses: Are you expecting any changes to profits or losses next year? Are you making new investments in technology, employees or capital?
• Goals and challenges: What are your sales goals? Are there any new competitors entering the market?
• Cash position: How is your cash flow and liquidity? Do you have enough reserves on hand? What debt are you carrying?
• Diversification: Are you generating revenue from a single client or product? Do you have diversification plans?

Build your financial team.
Every business needs a solid financial team focused on its finances so you can concentrate on running your business. These professionals can help with future financial planning, protect what you’ve built, and position your company for growth. The team typically includes an accountant, your banker, a business attorney and an insurance advisor.

• Skilled accountants don’t just file taxes; they also take time to understand your company’s goals and help your business prepare for future borrowing needs or expansion plans.
• Trusted bankers work hand-in-hand with you and your accountant to review performance indicators, such as late receivables, profit margins and expenses, that impact cash flow. The banker-accountant relationship can also facilitate a smoother, more strategic future lending process.
• Experienced business lawyers can assist in deciding your business structure and help negotiate more favorable contract terms.
• Local insurance advisors can help you find coverage that fits your needs and budget without unnecessary red tape.

Improve cash flow management.
Cash flow and liquidity are the heartbeat of any business and are the difference between simply surviving and confidently growing. Managing these components well means having enough accessible funds to cover daily operations, payroll and unexpected expenses without disrupting long-term financial stability. Best practices begin with accurate forecasting, which involves having a good grasp of cash flow and identifying potential shortfalls before they occur. Commerce Bank’s business specialists recommend having at least six months’ worth of operating expenses to cover gaps.

Banking platforms like CashFlow Complete help businesses gain better control and visibility of their cash flow by bringing all financial data such as accounts, transactions, receivables and payables into a single, unified view. Businesses can get paid, pay invoices and reduce fraud with this automated tool that integrates with their existing accounting software.

The bottom line.
With a strong banking relationship, a trusted financial team and reliable cash flow, you can build a healthy business and be better prepared to face challenges and take advantage of new opportunities. The more you plan and stay connected with your advisors, the stronger your foundation will be to support the growth of your business for years to come.