News & Insights from republic bank

Navigate Small Business Challenges

Running a small business is no simple feat, and it comes with a number of challenges that are evolving all the time. Instead of getting bogged down by these challenges, it’s important to stay ahead and understand what you can do to navigate small business challenges and set your business up for success.

A few of those challenges include understanding cash management and building cash flow, keeping up with the books, and balancing quality and business growth.

What is Cash Management?

Simply stated, cash management is all about building and maintaining cash flows and is a critical part of any business’ financial stability. Cash flows refer to the total amount of cash being received and spent within an organization (or revenues and expenses) and are typically categorized under operations, investing, and financing.

Financial reporting of cash flows helps businesses determine whether they have positive cash flow — or their liquid assets are increasing — which enables them to pay necessary expenses, reinvest in the business, reimburse shareholders, and maintain strong overall financial performance.

It can be difficult to execute good cash management without keeping regular tabs on the state of cash flow, which is why all businesses should analyze their cash flows using a cash flow statement. This statement reports on the sources and application of all cash or cash equivalents within a company over a set period of time. This helps management and investors identify a company’s ability to pay debts, cover operating expenses, etc.

Keeping up with Bookkeeping

Whether a business works with a financial professional or handles bookkeeping internally, it is a critical component to maintaining good financial health and growing the business. Keeping track of financial records can seem like a daunting task, but it should be addressed periodically and consistently throughout the year.

Failing to do so can bring about challenges in applying for loans, resulting in a loss at the end of the year, and even mean the difference between success and failure in a business. The mistakes and errors that can come from disorganized books can greatly impact your learning of how to navigate small business challenges.

Ultimately, one of the best ways to handle the complexities of bookkeeping is to work with a tax preparer or financial advisor who can help keep track of credits and debits, income and expenses, profitability, assets and liabilities, and more. Professional guidance also helps avoid potential errors that could be costly.

If bookkeeping is done internally, organizations should understand these important components:

  • The chart of accounts, includes the general ledger, balance sheet, and income statement. The categories within a chart of accounts should be consistent each year to compare profitability and determine the financial health of a business.
  • Cash accounting, where expenses and revenues are recorded when cash exchanges hands, compared to accrual accounting, in which revenues are recorded when earned and expenses when incurred.
  • Debits and credits, where each account (assets, equity, revenue, liabilities, and expenses) is recorded as an increase or decrease in value.

Balancing Quality and Growth

Firstly, businesses must determine what quality means to them, whether it’s meeting customer needs or producing high-quality products, etc. They should identify which aspects of the business are most important for meeting that quality and then determine how they can also use those priorities for business growth. This also means understanding how much growth a business can manage without sacrificing quality.

Here are a few tips for balancing the delicateness of quality versus growth:

  • Instead of waiting for problems to occur and mitigating quality issues, be proactive with quality improvement strategies.
  • Keep up with the latest industry trends and continue to expand your knowledge and skills.
  • Build a team that shares the same goals and visions to enhance productivity, quality, and continued success.
  • Create detailed procedures and guidelines for meeting quality standards and ensure all team members understand and execute these procedures.
  • Set realistic goals that enable modification and improvement over time.

Ultimately, running a small business has its challenges no matter what. However, it’s important to be patient yet proactive, celebrate wins and learn from losses, and set up for success through continuous learning. The team members at Republic Bank of Chicago specialize in helping them navigate small business challenges and succeed. If you have questions about managing a small business, you can reach out to us at 800-526-9127 or request to speak to one of our bankers.

Get Connected

Please enter your details below and one of our experts will connect with you shortly.

Get Connected

Please enter your details below and one of our experts will connect with you shortly.