What legal regulations do I need to know about cash management and reporting for opening my own business?

Question:  I was laid off about six months ago, and instead of going back to work for someone else, I’ve decided to launch my own business.  What do I need to know about cash management to help ensure that my business won’t fail?

Response:  You’re wise to be asking this question now, and not later when you may be struggling to keep things afloat.  Good cash management can be the important difference in businesses that succeed and businesses that fail. In fact, many business analysts tell clients that cash management is more important than creative ideas or securing funding.  If an entrepreneur can learn the basics to managing their cash assets, they will be able to help their business grow and thrive while withstanding the unexpected setbacks and economic variations that challenge every business venture. 

The starting point for good cash flow management is developing a cash flow projection. Smart business owners know how to develop both short-term (weekly and monthly) cash flow projections to help them manage daily cash, and long-term (annual, 3-5 year) cash flow projections to help them develop the necessary capital strategy to meet their business needs. They also prepare and use historical cash flow statements to understand how they used money in the past—something for you to think about when you’ve been in business for a few years.  It is also very important to keep good relationships with banks and other credit sources in preparation for any cash flow challenges that may happen sometime down the road.  For more information, consult with an attorney experienced in small business law.

Answered by Jan Hill

Additional Resources:

www.fms.treas.govwww.fms.treas.gov

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