Every business, it seems, cites people as being its most important resource. Why? Because any business, regardless of size, is only as good as the people who work there, from the owner and managers to the newest entry-level staffer.

As an employer, you want to hire and retain employees most qualified for the positions within your company. To do this, you need to define who you are looking for, and what is expected of them once they are on board.

Policy standards are a must. Begin with a personnel manual that explains your policy for hours, overtime, fringe benefits, sick leave, annual leave, training, dress code, personnel reviews, grievances, termination, and retirement. Every employee should have his or her own copy of this manual. In addition, consider giving every job applicant a copy for review.

Each position within the company, including your own, should have a job description that outlines the responsibilities and duties of such position. This job description should also include a list of the objectives of such position with specific and measurable goals. Each description should also include reporting relationships. The job description provides you and the employee a clear road map for the expectations of the position, from the standpoint of both workload and expertise required to accomplish the job.

Job application forms for your company should be simple and focus on relevant employment history, including names of supervisors and references you can contact. Provide space for the applicant to summarize career accomplishments.

At the interview stage, you want to learn as much as possible about the person’s job skills, work ethic and personality. Ask specific questions that require more than a yes or no answer. The more dialogue you have, the more you learn about the applicant. More information will help you make an informed decision.

Always check references.  Competent and friendly employees make a positive statement about your business to customers. An applicant who interviews well and has a sterling resume may be the ideal fit for the job. References will validate your impressions and expand on areas not covered in the interview. This is also a way to learn more about potential weaknesses as well. What a reference says or does not say gives you clues as to the character and skill of your candidates. Take all this information into account before you form your final opinion of a given candidate.

If you are interested in developing staffing guidelines, policies, and application and interview procedures, contact SCORE a nonprofit organization of volunteer business counselors who provide free and confidential to advice to present and future entrepreneurs.  To reach the Grand Rapids SCORE chapter, call 1-616/771-0305, or go online at www.grandrapids.score.org.

These ASK SCORE articles are submitted by the Grand Rapids Chapter of SCORE where there are 40 SCORE counselors ready to serve you and your business needs. To reach the Grand Rapids office call 1-616/771-0305, or find a counselor online at www.grandrapids.score.org

SCORE, Counselors to America’s Small Business

Every business, it seems, cites people as being its most important resource. Why? Because any business, regardless of size, is only as good as the people who work there, from the owner and managers to the newest entry-level staffer.

As an employer, you want to hire and retain employees most qualified for the positions within your company. To do this, you need to define who you are looking for, and what is expected of them once they are on board.

Policy standards are a must. Begin with a personnel manual that explains your policy for hours, overtime, fringe benefits, sick leave, annual leave, training, dress code, personnel reviews, grievances, termination, and retirement. Every employee should have his or her own copy of this manual. In addition, consider giving every job applicant a copy for review.

Each position within the company, including your own, should have a job description that outlines the responsibilities and duties of such position. This job description should also include a list of the objectives of such position with specific and measurable goals. Each description should also include reporting relationships. The job description provides you and the employee a clear road map for the expectations of the position, from the standpoint of both workload and expertise required to accomplish the job.

Job application forms for your company should be simple and focus on relevant employment history, including names of supervisors and references you can contact. Provide space for the applicant to summarize career accomplishments.

At the interview stage, you want to learn as much as possible about the person’s job skills, work ethic and personality. Ask specific questions that require more than a yes or no answer. The more dialogue you have, the more you learn about the applicant. More information will help you make an informed decision.

Always check references.  Competent and friendly employees make a positive statement about your business to customers. An applicant who interviews well and has a sterling resume may be the ideal fit for the job. References will validate your impressions and expand on areas not covered in the interview. This is also a way to learn more about potential weaknesses as well. What a reference says or does not say gives you clues as to the character and skill of your candidates. Take all this information into account before you form your final opinion of a given candidate.

If you are interested in developing staffing guidelines, policies, and application and interview procedures, contact SCORE a nonprofit organization of volunteer business counselors who provide free and confidential to advice to present and future entrepreneurs.  To reach the Grand Rapids SCORE chapter, call 1-616/771-0305, or go online at https://grandrapids.score.org/

from Ask Score

The advantages of having a business Web site have been well documented. For some customers, your site is the first place they will gain awareness of your company. From there, the opportunities appear endless.

An effective Web site is one that is meeting both your business’s needs and the informational needs of visitors to the site. Assuming that you already have established a Web site, how do you think it’s doing on both fronts? Clearly, an unproductive Web site will be a waste of your money and your visitors’ time.

Here are some factors for objectively evaluating your site-to see it not only through the lens of your business goals but also through the eyes of a prospective customer. It should:

• be current. Making regular changes to the home page is vital to sustain the interest of regular visitors.

• be located easily using the major search engines. ·

• have working hyperlinks to other relevant sites, such as a trade or professional association whose members are potential purchasers.

• be easy to navigate. The files and graphics should be small enough that most visitors can download them quickly. Links within the site should make it easy for a visitor to get back to your home page.

• offer customers and prospects relevant information-that is, material that will help them understand your products and services and their potential value to them.

• be a secure site, if you are conducting e-commerce on it.

• personalize or customize information for different segments of your market.

• use cookies or other features to capture information about your site visitors and their buying habits without costing them significant time.

• offer customers an easy way to contact you with questions or feedback without their having to leave the site. And you should be able to respond promptly.

To sum up, you want your Web site to work for your visitors if your larger goal is to maximize your business potential. So every now and then, step back and become the person you’d like to visit your site.

Join us on our next webinar on March 24th called How To Fund your business. You can register by clicking the following link: https://score.tfaforms.net/17?EventID=a105a000005qpfv

TolearnmoreaboutthemanydimensionsofmarketingontheWorldWideWeb,contactSCORE. SCORE counselors donatetheirtimetoconsultwithandmentorentrepreneursprovidingfreeandconfidentialbusinesscounselingtoAmerica’ssmallbusiness owners.Call the Grand Rapids SCORE chapter at 1-616/771-0305,orfindanonline counselorat https://grandrapids.score.org/.

As the owner of a small business, you may think it has little in common with a large corporation. While it is true that you will likely rely more on trade credit, bank financing, lease financing and personal equity, your long-term investment decisions require the same kind of analysis used by large firms. The key is understanding those factors that affect financial decisions, how they apply to your business’s short- and long-term goals and strategies, and any other influences that may be unique to your situation.

Working capital is the difference between current assets and current liabilities. Lack of close control on working capital is one cause of business failure. The small business owner must be constantly alert to changes in working capital, the reasons for them, and any resulting business implications.

It is helpful for the owner to think of working capital in terms of its six components:

1.  Cash and equivalents. This most liquid form of working capital requires constant supervision.  A good cash budgeting system addresses many important considerations: whether the cash level is adequate to meet current expenses as they come due; timing of cash inflow, cash outflow and peak cash needs; amount to borrow to meet cash shortfalls; and the timing of repayment of loans.

2.   Accounts receivable. Almost all businesses extend credit to their customers. Make sure the amount of accounts receivable is reasonable in relation to sales and that receivables are being collected promptly. Identify slow-paying customers and have a strategy for dealing with them.

3.   Inventory. Inventory often constitutes as much as 50 percent of a firm’s current assets. Is the inventory level reasonable compared with sales and the nature of the business? Know the rate of inventory turnover compared with other companies in your type of business.

4.   Accounts payable. Financing by trade is common in small business and is one of the major sources of funds for entrepreneurs. Understand whether your business’s payment policy is helping or hurting your credit rating. Know the timing pattern between payment of accounts payable and collections of accounts receivable.

5.   Notes payable. Notes to banks or other financial sources represent a popular alternative financing source. Note whether the amount of borrowing is reasonable compared to the equity financing of the firm. Look at when payments are due and whether the money will be there to make these payments on schedule.

6.   Accrued expenses and taxes payable. These are obligations of the firm at any given time and represent expenses already obligated, even if payment is not yet issued.

If you would like to discuss business financing, understanding financial statements or budgeting, contact SCORE “Counselors to America’s Small Business.” SCORE has volunteer business counselors who provide free and confidential advice to small business. For the SCORE chapter nearest you, call 1-800/634-0245, or find a counselor online at www.score.org.

All SCORE counseling is offered as a free and confidential community service. There are 389 SCORE chapters around the country assisting entrepreneurs. While counseling is always free-of-charge, local SCORE chapters also offer small business workshops and seminars for modest fees.

To learn more about SCORE and its counseling services, call 1-616-771-0305, or visit the Grand Rapids Score chapter at grandrapids.score.org. email your questions to the Grand Rapids Chapter of SCORE  at score@grandrapids.org.

Running a successful business centered on doing something you love is the dream of many entrepreneurs. What could be more gratifying than making a living sharing your talents and skills with others?

On the Internet, you’ll find a long list of articles and resources offering advice and insight specifically geared toward hobbyists who want to take the step and go from “passion” to “profit.” 

It’s not difficult to find success stories about everyday people—from photographers to interior designers to carpenters and others—who have turned hobbies and interests they were passionate about into viable businesses. 

That’s encouraging if you’re contemplating making the transition from hobbyist to small business owner. It’s important to know, however, that not all hobbies (and the people participating in them) may be well suited for entrepreneurship.

Here are some essential points to consider as you explore the feasibility of your hobby becoming a sustainable business:

• Will you still enjoy doing the work after you have to do it (versus having the luxury of doing it only when you’re inspired to)?
• Are you willing to put yourself out there? It’s one thing to work on your hobby for your own satisfaction and another to put what you produce out there to be scrutinized by others. 
• Will people (and enough of them) be willing to pay for what you create?
• Do you have the knowledge and capacity to both create your product or service AND take care of the other administrative and operational responsibilities that come with starting and running a business?

SCORE mentor Dennis Wright from the Orange County, California chapter suggests you take the following actions as you assess the viability of your hobby becoming a business that supports you and your family:

“Once you complete your research and have the answers to those basic questions you’ll be ready to start drafting a business plan,” explains Wright. “A written plan is important because it helps identify the time, energy, and money necessary to take your hobby to another level.” 

If you need assistance in determining if you and your hobby are suited for small business, there are resources out there to help you. Consider taking advantage of the free mentoring services from SCORE, a nonprofit association offering a wealth of information resources, training, and free counseling designed to help entrepreneurs nationwide build productive, profitable businesses. 

A SCORE Counselor can serve as a sounding board and will provide valuable unbiased feedback on how to improve things. The SCORE Counselor can also look at the business from the perspective of a bank or other investor, and raise questions you may have overlooked.

All SCORE counseling is offered as a free and confidential community service. There are 30 counselors in the Grand Rapids office of SCORE. Call 616-771-0305 for an appointment with a knowledgeable counselor or e-mail us at score@grandrapids.org.

SCORE, Counselors to America’s Small Business

The Business Model Canvas is an entrepreneurial tool that enables you to visualize, design, and reinvent your business model. Swiss business theorist and author Alexander Osterwalder developed it. For many startups, using the tool can help them develop a clear view of their value proposition, operations, customers, and finances. As a small business owner, you can use it to identify how the different components of your business relate to each other. That’s powerful when deciding where you need to focus your time and attention as you start and grow your business.

“Many start up entrepreneurs and small businesses are so busy trying to get started and survive that they spend little time planning. When they do try to plan, they are often confused and don’t know where to start,” explains Bruce Gitlin, SCORE mentor and business development expert. “This tool sets an overarching framework for developing a business strategy, a detailed business plan, and/or a prioritized action plan.”

According to Gitlin, the Business Model Canvas can help move entrepreneurs to address specific risks and acquire more information (about competitors or a market niche, for example).

The Business Model Canvas has nine different areas of focus that make up building blocks in a visual representation of your business. 

• Key Partners—Who are the buyers and suppliers you need to form relationships with? What other alliances will help you accomplish core business activities and fulfill your value proposition to customers?
• Key Activities—What are the most important activities you must engage in to fulfill your value propositions, to secure distribution channels, to strengthen customer relationships, to optimize revenue streams, etc.?
• Key Resources—What resources do you need to create value for your customers and sustain your business?
• Value Propositions—What products and services will you offer to meet the needs of your customers? How will your business be different from your competition? What challenges will you solve for your customers?
• Customer Relationships—What types of relationships will you forge with your customer segments? What are the relationship expectations of each customer segment? How are they entwined with the rest of your business model?
• Customer Segments—What sets of customers will you serve? Which are most important to your business?
• Channels—Through what means will you reach your targeted customers and deliver your products and services to them? Which are most cost effective? How are the channels integrated?
• Cost Structure—What are the key costs your business will face? Which resources will cost the most? Which activities will cost the most?
• Revenue Streams—How much will you charge for your products and services? What are customers willing to pay for? How will customers pay? How much will each revenue stream contribute to your overall revenue?

According to Gitlin, gaps in planning stand out when using the tool, making it effective for entrepreneurs who are new to starting and running a business. 

“The Business Model Canvas helps visualize what is important and forces users to address key areas. It can also be used by a team (employees and/or advisors) to understand relationships and reach agreements.” 

Further advice on the Business Model Canvas is available from SCORE, a nonprofit association offering a wealth of information resources, training, and free counseling designed to help entrepreneurs nationwide build productive, profitable businesses. 

A SCORE Counselor can serve as a sounding board and will provide valuable unbiased feedback on how to improve things. The SCORE Counselor can also look at the business from the perspective of a bank or other investor and raise questions you may have overlooked.

All SCORE counseling is offered as a free and confidential community service. There are 30 counselors in the Grand Rapids office of SCORE. Call 616-771-0305 for an appointment with a knowledgeable counselor or e-mail us at score@grandrapids.org.  

Rather than building a small business from the ground up, buying an existing company offers the opportunity to move along the path to entrepreneurship more quickly. With all of the startup tasks already taken care of, a staff in place, an established customer base, existing vendor relationships, and processes and procedures laid out, you have a head start. 

But that doesn’t diminish the importance of doing your research before making the decision to buy a business. Acquiring an existing small business requires substantial examination so you avoid the many pitfalls that befall eager entrepreneurs who leap before they look.

According to William Comiskey, a SCORE Mentor at the Southwest Florida SCORE Chapter, “Investing in a business is the same as investing your savings in a mutual fund or stock portfolio to secure both your future and possibly your retirement. You study and review the past performance and the current condition and seek help and advice from professionals on the prospects for the future.” 

Before purchasing an existing business, you need to get answers to some critical questions:

Why is the current owner selling the business? Seek the truth. If the business is in a declining neighborhood or the owner has caught wind of an upcoming market change that will negatively affect revenues or cost structure, you might put yourself at risk of failure from circumstances beyond your control. Uncovering the real reasons for a sale may be difficult. Be wary and realize that smart business owners don’t often walk away from profitable endeavors unless they have strong personal reasons (illness, retirement, etc.), or they have received offers that are too good to refuse.

How is the business doing financially? If it has been losing money or hasn’t been generating a satisfactory profit, you’ll want to dig deeper into the reasons why. Unless you’re confident you can operate it more profitably than the current owner, you might end up with a sinking ship on your hands.

What sort of reputation does the business have? When you buy an existing business, you’re getting the brand reputation along with it. That will either work for or against you. Turning around an existing business’s poor reputation will be difficult and could take years—and it might even be impossible depending on how negatively the company is perceived by customers, suppliers, and the public. 

If the business has a favorable reputation, find out what has made it so. A strong reputation based on personal relationships between the owner and customers might not easily transfer to you. Be particularly cautious of this if the business relies primarily on a few key customers or suppliers. 

Are you getting everything you need to seamlessly take over running the business? Find out if the purchase will include essentials such as: leases and contracts; customer lists; patents, trademarks, service marks, and trade names; key employees who are vital to the business; and other important components. 

As Comiskey suggests, you don’t have to embark on the process alone. Consider tapping the expertise of professionals (such as SCORE mentors) who can help you assess the opportunities and risks of buying an existing business. 

Further advice on the purchase of an existing business is available from SCORE, a nonprofit association offering a wealth of information resources, training, and free counseling designed to help entrepreneurs nationwide build productive, profitable businesses. 

A SCORE Counselor can serve as a sounding board and will provide valuable unbiased feedback on how to improve things. The SCORE Counselor can also look at the business from the perspective of a bank or other investor and raise questions you may have overlooked.

All SCORE counseling is offered as a free and confidential community service. There are 30 counselors in the Grand Rapids office of SCORE. Call 616-771-0305 for an appointment with a knowledgeable counselor or e-mail us at score@grandrapids.org. Visit their website at www.grandrapids.score.org.

Ask SCORE

SCORE, Counselors to America’s Small Business

Everybody has a bad day at work at least now and then. If you’re not careful, those bad days can become the norm rather than the exception for your small business. Without a positive attitude among everyone involved with your business (including yourself), a business suffers in tangible and intangible ways. Employees with poor attitudes affect customers negatively, discourage other workers from doing their best, and fail to perform to their own level of capability. Customers can sense when the person helping them is indifferent about their work, and they may wonder if it extends through the entire company.

When examining employee attitudes, start with your own. Be genuinely interested in the other people you work with—not only employees but also customers and suppliers. Respect your employees’ dignity. Let them know that they are important to you and your business and that high performance will be rewarded.  Help employees identify realistic approaches to making them feel fulfilled by their jobs. While you want to be sensitive to the emotions of employees, do not ignore poor performance.  When an employee does not perform up to standards or has made a mistake, meet with him or her in private to discuss the issue.

Include your employees as team members. Ask for their suggestions and respect their ideas-even if you do not always agree with them. When you implement an idea contributed by an employee, remember to give the employee credit. This practice helps all employees see their value to the company the way you see it.

Allow employees input into the business operation when you can reasonably do so. For example, if your small business were to conduct an employee survey, would you then be willing to respond by making changes in the business? If left unaddressed, the problem areas that surface within companies and can lead to employee dissent and hinder productivity in subtle and not-so-subtle ways.

If you would like to discuss employee surveys and team-building, contact SCORE “Counselors to America’s Small Business.” SCORE is a nonprofit organization of volunteer counselors providing free, confidential advice to entrepreneurs. For the Grand Rapids SCORE chapter, call 1-616/771-0305, or find a counselor online at https://grandrapids.score.org.

Every business, it seems, cites people as being its most important resource. Why? Because any business, regardless of size, is only as good as the people who work there, from the owner and managers to the newest entry-level staffer.

As an employer, you want to hire and retain employees most qualified for the positions within your company. To do this, you need to define who you are looking for, and what is expected of them once they are on board.

Policy standards are a must. Begin with a personnel manual that explains your policy for hours, overtime, fringe benefits, sick leave, annual leave, training, dress code, personnel reviews, grievances, termination, and retirement. Every employee should have his or her own copy of this manual. In addition, consider giving every job applicant a copy for review.

Each position within the company, including your own, should have a job description that outlines the responsibilities and duties of such position. This job description should also include a list of the objectives of such position with specific and measurable goals. Each description should also include reporting relationships. The job description provides you and the employee a clear road map for the expectations of the position, from the standpoint of both workload and expertise required to accomplish the job.

Job application forms for your company should be simple and focus on relevant employment history, including names of supervisors and references you can contact. Provide space for the applicant to summarize career accomplishments.

At the interview stage, you want to learn as much as possible about the person’s job skills, work ethic and personality. Ask specific questions that require more than a yes or no answer. The more dialogue you have, the more you learn about the applicant. More information will help you make an informed decision.

Always check references.  Competent and friendly employees make a positive statement about your business to customers. An applicant who interviews well and has a sterling resume may be the ideal fit for the job. References will validate your impressions and expand on areas not covered in the interview. This is also a way to learn more about potential weaknesses as well. What a reference says or does not say gives you clues as to the character and skill of your candidates. Take all this information into account before you form your final opinion of a given candidate.

If you are interested in developing staffing guidelines, policies, and application and interview procedures, contact SCORE a nonprofit organization of volunteer business counselors who provide free and confidential to advice to present and future entrepreneurs.  To reach the Grand Rapids SCORE chapter, call 1-616/771-0305, or go online at grandrapids.score.org.

From SCORE Grand Rapids

The advantages of having a business Web site have been well documented. For some customers, your site is the first place they will gain awareness of your company. From there, the opportunities appear endless.

An effective Web site is one that is meeting both your business’s needs and the informational needs of visitors to the site. Assuming that you already have established a Web site, how do you think it’s doing on both fronts? Clearly, an unproductive Web site will be a waste of your money and your visitors’ time.

Here are some factors for objectively evaluating your site-to see it not only through the lens of your business goals but also through the eyes of a prospective customer. It should:

• Be current. Making regular changes to the home page is vital to sustain the interest of regular visitors.
• Be located easily using the major search engines. ·
• Have working hyperlinks to other relevant sites, such as a trade or professional association whose members are potential purchasers.
• Be easy to navigate. The files and graphics should be small enough that most visitors can download them quickly. Links within the site should make it easy for a visitor to get back to your home page.
• Offer customers and prospects relevant information-that is, material that will help them understand your products and services and their potential value to them.
• Be a secure site, if you are conducting e-commerce on it.
• Personalize or customize information for different segments of your market.
• Use cookies or other features to capture information about your site visitors and their buying habits without costing them significant time.
• Offer customers an easy way to contact you with questions or feedback without their having to leave the site. (And you should be able to respond promptly.)

To sum up, you want your Web site to work for your visitors if your larger goal is to maximize your business potential. So every now and then, step back and become the person you’d like to visit your site.

To learn more about the many dimensions of marketing on the World Wide Web, contact SCORE. SCORE counselors donate their time to consult with and mentor entrepreneurs providing free and confidential business counseling to America’s small business owners. Call the Grand Rapids SCORE chapter at 616-771-0305 or find an online counselor at https://grandrapids.score.org.

From SCORE 

If you operate a home-based business, there are more demands on your time than time to go around. But there’s one business activity you can’t afford to defer if you want to stay in business: marketing.

For any small business, marketing has many facets, and it’s a more complex proposition than just selling what you’re already offering customers. Marketing is the set of activities that attracts customers to your product. In a home-based business, that’s not going to be signs in front of your house and a parade of customers coming through your doors every day. The challenge is to adapt sound marketing techniques to your business’s unique circumstances and offerings. And that takes time.

Here are six tips for making time for marketing:

1. Convince yourself that marketing is worth the time. When you don’t think a task will contribute to your bottom line, it’s easy to go on to the next item on your to-do list. If marketing is outside your so-called comfort zone, examine why you feel that way.
2. Have a marketing plan. Invariably, a good plan is at the heart of personal productivity. Examine your business goals and determine how marketing can help fulfill them. As a new business owner, you may need a crash course in marketing. If so, that becomes part of your plan.
3. Be open to new ideas. How are competing businesses getting noticed by customers? If they’re using techniques or media you never considered, take time to study and learn about new approaches. Experiment with marketing ideas that are low cost and low risk.
4. Dedicate the time. By reserving the time, you’re less likely to procrastinate. Once you’re committed to marketing, block out time for it just as you would any other important task. Whether the task is market research or cold calling, know what you want to accomplish-in that period of time, and anticipate the distractions that are most likely to interfere.
5. Stay connected. Take time to be at meetings and other gatherings of your professional and community groups. Yes, this presence takes time away from other business activities, but it keeps you in front of prospective customers and creates opportunities for you to sell yourself as well as your business. A home-based business is especially likely to benefit from this exposure.
6. Celebrate your marketing successes. Pay attention to when your marketing pays off. You’ll discover that as effective marketing leads to better exposure and more sales, it becomes easier to justify the time you spend to promote your services.

“Work smarter, not harder” is an expression that applies to marketing as well as other facets of entrepreneurship. Make time for marketing, use that time wisely, and you’ll hone your competitive edge. For more insights on making a home-based business succeed, contact SCORE “Counselors to America’s Small Business.” SCORE is a nonprofit organization of more than 10,500 volunteer business counselors who donate their time and talents to assist entrepreneurs in starting, growing and operating small businesses.  All counseling is free and confidential. For the SCORE chapter nearest you, call 1-800/634-0245, or find a counselor online at www.score.org.

All SCORE counseling is offered as a free and confidential community service. There are 389 SCORE chapters around the country assisting entrepreneurs. While counseling is always free-of-charge, local SCORE chapters also offer small business workshops and seminars for modest fees.

To learn more about SCORE and its counseling services, call 1-616-771-0305, or email your questions to the Grand Rapids Chapter of SCORE  at https://grandrapids.score.org/.

As the owner of a small business, you may think it has little in common with a large corporation. While it is true that you will likely rely more on trade credit, bank financing, lease financing and personal equity, your long-term investment decisions require the same kind of analysis used by large firms. The key is understanding those factors that affect financial decisions, how they apply to your business’s short- and long-term goals and strategies, and any other influences that may be unique to your situation.

Working capital is the difference between current assets and current liabilities. Lack of close control on working capital is one cause of business failure. The small business owner must be constantly alert to changes in working capital, the reasons for them, and any resulting business implications.

It is helpful for the owner to think of working capital in terms of its six components:

1.  Cash and equivalents. This most liquid form of working capital requires constant supervision.  A good cash budgeting system addresses many important considerations: whether the cash level is adequate to meet current expenses as they come due; timing of cash inflow, cash outflow and peak cash needs; amount to borrow to meet cash shortfalls; and the timing of repayment of loans.

2.   Accounts receivable. Almost all businesses extend credit to their customers. Make sure the amount of accounts receivable is reasonable in relation to sales and that receivables are being collected promptly. Identify slow-paying customers and have a strategy for dealing with them.

3.   Inventory. Inventory often constitutes as much as 50 percent of a firm’s current assets. Is the inventory level reasonable compared with sales and the nature of the business? Know the rate of inventory turnover compared with other companies in your type of business.

4.   Accounts payable. Financing by trade is common in small business and is one of the major sources of funds for entrepreneurs. Understand whether your business’s payment policy is helping or hurting your credit rating. Know the timing pattern between payment of accounts payable and collections of accounts receivable.

5.   Notes payable. Notes to banks or other financial sources represent a popular alternative financing source. Note whether the amount of borrowing is reasonable compared to the equity financing of the firm. Look at when payments are due and whether the money will be there to make these payments on schedule.

6.   Accrued expenses and taxes payable. These are obligations of the firm at any given time and represent expenses already obligated, even if payment is not yet issued.

If you would like to discuss business financing, understanding financial statements or budgeting, contact SCORE “Counselors to America’s Small Business.” SCORE has volunteer business counselors who provide free and confidential advice to small business. For the SCORE chapter nearest you, call 1-800/634-0245, or find a counselor  online at www.score.org.

All SCORE counseling is offered as a free and confidential community service. There are 389 SCORE chapters around the country assisting entrepreneurs. While counseling is always free-of-charge, local SCORE chapters also offer small business workshops and seminars for modest fees.

To learn more about SCORE and its counseling services, call 1-616-771-0305, or email your questions to the Grand Rapids Chapter of SCORE  at score@grandrapids.org.