Issue link: https://docs.hic.us/i/403552
interest free loan, and it also provides your business with a high level of financial security. Another function of such a reserve, is to put aside money for future expansions and acquisitions. As well, you will better prepared to deal with large annual expenditures such as insurance premiums or incomes taxes. When your business first starts showing a profit, it is tempting to go out and buy yourself a big-ticket item such as a new car as a reward for all of your hard work. Don't do it, at least not it the beginning. Put the money in a reserve account. Reinvest In Your Business In addition to putting money into a reserve account, reinvest in your business. Chances are there are things on your wish list that you really need, but haven't been able to afford. As you start bringing in revenues, put some of it back into the business. Of course, make sure that you are investing in things that enhance your business, especially products that can improve your efficiency and/or quality. Also consider paying down debt. It takes a certain amount of discipline to do this. It's actually easier in the beginning than further down the road, when you must depend on business income to provide your living expenses. Control Your Cash Flow Cash flow is a major concern for any business. As long as you have more money coming in then going out (in real-time, not just on paper), then you are able to handle your financial affairs in a positive manner. However, if you are unable to bring in enough money fast enough to cover your expenses, then you are operating in a negative cash flow mode. This is a significant problem, because many businesses can show profitability on paper, but end up in a negative cash flow situation because the anticipated revenues, which are real, just don't come in fast enough. Unfortunately, the bills have deadlines, but the revenue doesn't. As an Embroiderer, you can promote positive cash flow by the following: Set Payment Guidelines It's imperative that you get paid quickly. Most small shops cannot afford to offer credit terms to their customers. Ideally, you will receive payment in advance. Full payment is preferred, but a deposit of 50% may be sufficient. Accepting credit cards, will also ensure quick payment. NOTE: See Chapter 6 – Working Capital for more information about payment options. www.hsi.us care@hsi.us 70