From the start of a company ... "You know, the first year you're just trying to keep the doors open. You're a one-man operation so you're kind of close to everything...I always thought, gosh, more sales, you're in hog heaven."... to managing growth...

"But managing growth is almost as tough, if not tougher than, start-up. If you don't have enough working capital, increased sales can really give you a problem because of the (increased) receivables, because of the commitments (to suppliers) coming due before the money comes in." Via The Challenges of Managing A Small Business

...cash flow is the pervasive financial management issue for small business owners. It manifests itself in ongoing capital, managing inventory, extending credit to customers and managing accounts receivable.

Many small businesses struggle just to make ends meet, especially during the start-up period. A "hand-to-mouth" existence often continues beyond the first year. Often, a little juggling is required:

"I looked at the checkbook this morning and it didn't look real healthy, and I know Friday's payday. I do have a little job we can start tomorrow, weather providing, and I know I'll make enough off that job plus what I already have to make payroll this week. Then I'll put off another job that I probably shouldn't, because it's a job that I know I won't get paid for within thirty days." Via The Challenges of Managing A Small Business

Inventory

Inventory is a pivotal area for non-service business. "You maintain your profit margins by turning your inventory quicker," explained a sporting goods distributor.

The key to success is maintaining good inventory, the appropriate amount and a good mix of merchandise. "Don't keep any dead inventory around," continued the same retailer. "If you've got bad merchandise, get rid of it. Keep a clean inventory, a saleable inventory." The ideal thing is to be able to turn your inventory more often.

Careful control will also help. "To help cash flow," explained a different owner, "I monitored my inventory as carefully as I could."

Be Careful Extending Credit

Another challenge to successful financial management is extending credit to customers -- a necessary part of many businesses. Customers often expect it. However, many owners find it difficult to evaluate the credit risk of potential customers. One suggested "looking at their financial statement, and then trying to make a good decision." Another thought is a good idea to evaluate risk based on the amount of potential business: "If a guy wants work done, yes, I'm going to check him out."

Manage Accounts Receivables

Monitoring accounts receivable to assure a steady cash flow is a universal concern of small business owners. "Cash flow's the biggest problem," said one owner. "If you can't keep track of your receivables and follow upon them, you'll always have a cash flow problem.

Cash flow is also an area where the experts are full of helpful advice: "Keep a close eye on your receivables. Don't let them go too far out. I've got suppliers that give me 30 days and on the 31st day, they'll call. Stay on top of who owes you money and don't let it slide. You don't want to make more sales, necessarily; you want to get paid for what you sell first."

"The basic thing we did was to make sure that when a job was completed, the invoice was out in the mail the next day. We also followed the job through to make sure there weren't any problems. Using this two-step approach, our receivables usually came within the terms of a normal 30-day period. This kept our cash flow steady." Via The Challenges of Managing A Small Business

Many small business owners use professional services to help manage the financial aspects of their businesses. Accountants are the most frequently relied-upon advisors; many businesses also tap the expertise of a lawyer, especially when incorporating their business or purchasing an existing one.

"There's an image factor involved with that, too," commented one owner. "Your professional services are the best money you'll ever pay for. Law is extremely complex. Accounting is extremely complex. People who think they can handle that in their own businesses are really fooling themselves."

More interviews and tips like these can be found at The Challenges of Managing A Small Business