Quincy Miller, EVP Head of Business and Commercial Enterprise Banking Sales,
RBS Citizens Financial Group, Provides Tips on How Small Businesses Can Better Manage Cash Flow
Did you know small businesses make up 99.7 percent of U.S. employer firms and employ 49.4 percent of private sector payrolls? As we celebrate National Small Business Week, it’s worth recognizing that small businesses are the lifeblood of the American economy, form an integral part of communities and are often a barometer of local and, on a larger scale, national economies. With this in mind, it’s important that these vital small businesses not only sustain themselves but also drive growth by implementing best practices for cash-flow management.
Since 2008, many business owners have faced an uphill battle, with uncertainty on all sides making many companies reluctant to invest. Today, five years after the recession started, an increasing number of small businesses are seeing the green shoots of growth and talking to their bankers about opportunities to start investing again in their growth. As a result, U.S. banks increased their lending to smaller companies four percent from last year to this January, indicative of economic recovery.
Recently, the Small Business Association (SBA) has supported this trend by speeding up the time frame to get financing on projects, adding more collateral flexibility and bringing an end to the “personal resources” test that made it difficult for business owners who had accumulated personal savings to receive SBA loans. The SBA also administers a Congressional grant, which provides funding to SCORE, a nonprofit association dedicated to helping small businesses – including expert tips on how to manage cash-flow.
These changes are a step in the right direction to help small business owners receive the funding they need not only to survive but to flourish. Providing cash management tools that help owners get the maximum value out of their dollar as they transact with customers and suppliers is also vital.
This last piece – a strategic approach to managing cash flow – is one of the subtler but more important takeaways from the downturn for many small businesses. More and more companies have come to realize that their banks can do more for them than simply lend money. Banks can help owners avoid leaving cash on the table that otherwise could be reinvested in their businesses.
With National Small Business Week providing an opportunity for business owners to reflect on opportunities to enhance their businesses, here are four key actions a business owner can take to help improve cash flow:
1. Consider remote deposits
Remote deposits allow a business owner to deposit a check into an account from a remote location without having to physically deliver a check to the bank. Before remote checking, banks had to exchange physical checks – which often took a long time. Now they can send digital images of a check to another bank to accelerate the payment process. For those new to remote deposits, this is a fantastic way small business owners can cut down on paperwork, disruption and maintain a free flow of capital.
2. Review your payroll process
Getting this right is crucial to your cash flow. Just as importantly, getting it wrong could impact your legal duties as an employer and affect the morale of your employees. Irrespective of your size, a structured payroll system not only streamlines your ability to maintain a regular and measured flow out of the firm but it also helps protect you from incurring fines from the IRS. The SBA has put together 10 steps to help employers set up a structured payroll system.
3. Manage incoming and outgoing payments
It may seem obvious but you would be surprised at the number of businesses who don’t keep track of incoming and outgoing payments. You really don’t want to wake up one morning to a huge bill you had simply forgotten about, or complete a job but forget to get paid for it. It might sound simple but keeping track of all anticipated incomings and outgoings can avoid surprises.
4. Open a business credit card
You shouldn’t mix your personal expenses with business expenses or rely on your personal credit to qualify for business financing. If you need to grow and invest, the last thing you want is your personal credit holding you back. Keep it simple, keep it separate and don’t put your expansion plans in jeopardy. Opening a business credit card helps you to build credit for your business.
As owners and hopeful entrepreneurs look to National Small Business Week as an opportunity to learn more about managing their businesses, we are excited to spend this time talking to our customers and helping with their businesses. With that in mind, we congratulate small businesses across the country on the progress they are driving, and commend them on their great contributions to the recovering economy.
Quincy Miller is EVP Head of Business and Commercial Enterprise Banking Sales at RBS Citizens Financial Group.