Evan Vitale Consulting: Small Business Financing: Becoming A Better Borrower

Thursday, August 14, 2014

Small Business Financing: Becoming A Better Borrower – Forbes

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As a young business owner I had a CPA friend who used to say, “Cash flow is king.” Of course he is right. One of the things any lender wants to know when a business owner applies for a small business loan is whether or not he or she will be able to repay the loan. James Good, of Small Business Payments Company, makes a great argument for why a simple way for small business owners to forecast their cash flow needs over the coming days, weeks, or months and the ability to successfully address those needs is critically important but difficult for many business owners. I couldn’t agree more. What’s more, addressing that need is not only crucial to running a business, but it could improve the odds of success when approaching a banker for a loan.

Small Business Payments Company isn’t a Lendio customer, but when I first heard about their Small Business Workbench, I wanted to hear more. Good and his colleagues come to the table with a banking background; and Acxsys Corporation, the parent company of this California-based startup, is owned by the eight biggest banks in Canada. I think it makes sense for small business owners to pay attention to something bankers feel will make a difference in the financial health of a small business—particularly if it helps make them better borrowers. Small Business Payments Company has a pretty impressive banking pedigree so I was paying attention.

With a foundation in cash management and small business, the Small Business Workbench sets out to make cash flow management less challenging for small business owners who aren’t formally trained as accountants or bookkeepers. “A big thorn in the side of almost every small business owner is the challenge of good cash management,” said Good. “Most small business owners didn’t start their businesses to become accountants and most of the tools previously available are very complicated and difficult to use for the uninitiated, or too basic to be of much value.”

Small business owners with the ability to accurately forecast their future needs with something simple to use makes it a lot more likely they’ll be on top of their cash flow. The more cumbersome and challenging to use, the less likely a business owner will. And, the greater the odds the control of their cash flow could spiral out of control.

I have to admit, my CPA’s advice fell on deaf (or at least muted) ears when I started my first business. I thought I knew what I was doing and understood the importance of managing my cash flow. I wish I didn’t need to say the lessons I learned were painful—and expensive. I wasn’t an accountant and made most (if not all) of the common mistakes every new business owner makes. Something like the Small Business Workbench would have been a great help.

Having faced the need to scramble to meet payroll or accurately forecast an upcoming cash shortfall would have been a great benefit to my business. Although there are numerous apps available that will help a small business owner with payroll, accounts receivable and payable, as well as inventory management, it’s the core functionality that enables a business owner to forecast cash positions that appeals to me the most.

A wizard walks you through a setup process, which then allows you to look into the future as far as you’d like. It makes planning for payroll, tax payments, and big purchases pretty simple. It also helps create an action plan to help adjust when meeting those obligations becomes problematic. The ability to see into the future is very appealing. If all a tool shows is what’s already happened, it’s not really providing the value it needs to.

That said, the way the apps offered within the Workbench sync with the forecasting tool, making forecasts that include things like payroll much more accurate.

It was obvious to me they took the time to design a tool that was pretty easy and straightforward to use. The Workbench seamlessly syncs with online banking data or accounting software which means there is no need to manually input a lot of information from your accounting software to get the most out of the tool.

I’m convinced this cloud-based tool is something that will help any small business owner get a better handle on his or her cash flow, help them understand what’s going on within their business, and ultimately make them a better borrower. What’s more, a small business owner can access this information at the desk or on a smart phone.

When so many small business owners are unsuccessful at the bank when looking for a loan, I’m a big fan of anything that will help make the situation better.

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