How many times have you told yourself, “If I had known this before, I would have done things much differently?” Probably quite a few. Running a business is a bit like a trial by fire. You don’t know what you don’t know until it matters. And by that point, it really matters. But what if you could have fewer of these moments by ensuring you’re covering a few business essentials for owners? That’s what this guide is for. Below, we’ll explore the most important things business owners should have, but often don’t, and how to get them in place.
Top 7 Things Business Owners Should Have, But Often Don’t
The items below reflect areas where many business owners gain clarity only after running into challenges. Having these pieces in place earlier makes it easier to anticipate pressure and respond with intention.
1. A Cash-Flow Forecast
Are you relying on your profit and loss (P&L) statements, bank balance, or sales records to gauge your financial health? These are helpful, but they don’t provide a complete picture. For instance, P&L statements are backward-looking. They tell you where you’ve been, but not what’s coming. Meanwhile, your sales records tell you what you’ve earned, but not what you’ll actually bring in or when it’s coming. Your bank balance doesn’t, either. Plus, it misses what needs to be paid and when expenses are due.
Forecasts Are Crucial for Effective Cash Flow Management for SMEs
This gap is what catches many business owners off guard. In fact, nearly 90 percent of small businesses report experiencing cash flow challenges, according to the U.S. Chamber of Commerce. It’s also why 82 percent of small business failures can be traced to cash flow management issues, per Forbes.
Creating a Cash Flow Forecast and Stress Testing it is Simple
If you want to know what’s coming and prepare for it, create a cash flow forecast.
- Establish a Short Forecast Window: Focus on the next 30 to 90 days, since this is where most cash flow pressure shows up and where adjustments are still realistic.
- List Expected Cash Inflows: Base this on when customers actually pay, using historical payment behavior rather than invoice dates or stated terms.
- List Known Cash Outflows: Include fixed and recurring expenses such as payroll, rent, inventory purchases, taxes, insurance, and debt payments, along with any large planned one-time costs.
- Compare Timing: Look at when cash comes in versus when it needs to go out to identify gaps, not just whether inflows exceed outflows overall.
- Apply Basic Stress Scenarios: Run cash flow stress tests to see how common disruptions, such as delayed customer payments, increased labor or inventory costs, or a temporary drop in sales volume, impact your liquidity.
- Review and Update Regularly: Revisit the forecast and your cash flow KPIs consistently so changes in timing, costs, or volume are reflected before they create pressure.
- Take Action as Needed: If you spot a potential shortfall, identify ways to address it and take action before you hit a crisis point.
2. A Clear Map of Where and When Cash Gets Delayed
Chances are that your cash flow forecast will uncover a shortfall at some point. In fact, more than half of all small businesses say uneven cash flows are among their top challenges, per the latest Small Business Credit Survey (SBCS) by the Federal Reserve Banks.
Identifying Your Friction Points Makes it Easier to Reduce the Pressure
When you spot a shortfall or gap, explore what’s causing it and take steps to address it before it hits.
- Extended Payment Terms: Many businesses operate on net 30 payment terms. This is common in the professional services industry, staffing, and security. But with major upfront expenses like labor, even 30 days can be too long to wait. And, if you’re in an industry like trucking, manufacturing, or oil and gas services, even longer cycles can be considered normal. This is often too much strain for small businesses that have comparatively low volume and likely a modest emergency fund, if anything is set aside at all.
- Late Payments: Nearly half of all business-to-business (B2B) invoice payments don’t arrive on time, per Atradius.
- Invoice Disputes and Errors: Missing information, approval delays, or documentation issues can push payments back.
- Seasonal or Volume Swings: Many businesses experience seasonality, where volume rapidly increases. It can take a while before cash inflows catch up with the rising expenses.
- Rapid Growth: Similarly, businesses experiencing rapid growth and those receiving large orders or new contracts often face a gap while waiting for inflows to align with increased expenses.
In many of these cases, invoice factoring can ease the strain. Rather than waiting for your customers to pay, a factoring company like Charter Capital purchases your invoices at a slight discount and provides you with most of the value upfront. Because factoring companies manage collections for you, and employ customer-friendly tactics that accelerate payments, and can help you make more informed decisions when offering trade credit, most businesses not only speed up the payment timeline, but also reduce bad debt.
3. Built-In Safeguards Against Common Financial and Cyber Risks
Many business owners assume fraud, scams, and cyber threats happen to other companies. In reality, these risks are widespread and increasingly targeted. Over 60 percent of businesses report being targets of scammers, according to Better Business Bureau polls.
Common Risks Often Catch Business Owners Off Guard
Knowing the biggest risks and scams is the first step in prevention.
- Payment and Funding Scams: Fraudulent funding offers, fake vendors, or requests that create urgency and pressure for quick decisions.
- Email and Invoice Fraud: Spoofed emails, altered payment instructions, or fake invoices that redirect funds.
- Account Takeovers: Weak passwords or reused credentials that allow unauthorized access to financial or email accounts.
- Data and System Breaches: Phishing attempts or malware that compromise customer data or disrupt operations.
Follow Business Risk Management Basics
Reduce risk by applying cybersecurity best practices, addressing lax online security, and ensuring you have the right insurance policies.
- Verification Procedures: Confirm changes to payment instructions, banking details, or vendor requests using a second communication channel.
- Multi-Factor Authentication: Require additional verification for email, banking, accounting, and payroll systems to reduce account takeover risk.
- Defined Approval Thresholds: Set clear rules for who can approve payments, funding agreements, or financial changes and when additional review is required.
- Employee Awareness: Make sure anyone handling payments or data understands common scam tactics and knows when to slow down and ask questions.
- Insurance: Many business owners assume their general business policy will cover most issues. In reality, a business owner’s policy (BOP) is generally a bundle of general liability, commercial property, and business interruption insurance. While these are invaluable, they don’t typically cover cybercrime. Explore cybersecurity insurance as an add-on.
4. A Complete View of Operating Costs, Including Hidden and Creeping Costs
If your business feels more expensive to run than it used to, you are not imagining it. Three-quarters of small businesses say rising costs are a major financial challenge, per the SBCS. Factors such as inflation, tariffs, and labor costs have added to the strain.
Hidden and Creeping Costs Are Easy to Miss
In some cases, the rising costs that business owners have faced literally emerged overnight. However, others crept in slowly and will likely continue to do so. These are the ones that are easier to miss.
- Labor-Related Increases: Overtime, higher wages, added benefits, training time, and turnover costs rise as staffing needs change.
- Inventory and Supply Cost Increases: Higher unit costs, minimum order requirements, storage costs, or shipping and fuel surcharges fluctuate over time.
- Vendor and Subscription Creep: Software tools, services, and recurring fees accumulate as the business grows and evolves.
- Compliance and Administrative Costs: Licensing, insurance adjustments, regulatory requirements, and professional fees expand with scale.
- Inefficiencies That Grow with Volume: Manual processes, errors, rework, and delays cost more as transaction volume increases.
Build a More Complete Cost Picture
Start by reviewing how costs change as your business operates and grows, then apply tactics that make managing costs easier.
- Review Costs Over Time: Compare current expenses to prior periods to spot gradual increases rather than focusing only on month-to-month totals.
- Look Beyond Direct Costs: Include indirect and operational expenses that support revenue but are not tied to a single sale.
- Tie Costs to Activity: Pay attention to which costs rise as volume increases so you understand how growth affects margins.
- Revisit Assumptions Regularly: Costs that made sense at a smaller scale may not make sense as the business evolves.
5. A Decision Filter for High-Impact, Hard-to-Reverse Choices
High-impact decisions may seem routine when you’re making them. In fact, you might feel like you just seized an opportunity or found relief for your business. However, these often come with consequences that don’t show up until the decision is already locked in.
Some Decisions Carry Long Tails
Certain choices tend to create lasting effects, even when they seem like short-term or quick fixes.
- Funding and Credit Commitments: Financing structures, repayment terms, and guarantees can affect cash flow and flexibility long after the initial problem is solved.
- Pricing and Contract Terms: Discounts, payment terms, and service commitments are often hard to unwind once customers expect them.
- Hiring and Staffing Decisions: Bringing on employees, contractors, or entire teams without fully understanding the long-term cost and management impact can impact the business for years to come.
- Technology and System Changes: Tools and platforms that shape workflows, data access, and reporting can change the trajectory of growth.
- Customer and Vendor Concentration: Relying heavily on a small number of customers or suppliers increases exposure if something changes.
Use a Decision Filter Before You Commit
A decision filter gives you a moment of clarity before you move forward. This helps ensure fewer decisions create surprises later.
- Time Horizon Check: Consider how this decision affects your business in six months, one year, and beyond.
- Cash Flow Impact: Look at how the decision changes timing, especially during slower periods.
- Flexibility Test: Ask how difficult it would be to reverse or adjust the decision if conditions change.
- Second Perspective: Involve a trusted advisor or partner for decisions that cannot be easily undone.
6. Continuity and Succession Plans
Most business owners focus on growth and day-to-day operations, not what happens if something unexpected interrupts the business. Only about one-quarter of businesses are prepared for disasters, according to the U.S. Chamber of Commerce Foundation. At the same time, disruptions are not rare events. One in five service firms and two in five manufacturers say supply chain disruptions have recently impeded their business activities, according to the Federal Reserve Bank of New York.
Many Types of Disruptions Can Expose Gaps in Continuity and Succession Planning for Small Businesses
Continuity issues often arise through events that business owners do not initially associate with long-term risk. And, unfortunately, even small disruptions can have a major impact on your business.
- Owner Absence or Illness: Temporary or extended absences can leave key decisions, approvals, or relationships unmanaged.
- Supply Chain Interruptions: Vendor delays, shortages, or logistics issues may disrupt production or service delivery.
- Technology and System Failures: Outages, data loss, or cyber incidents can slow or halt operations.
- Disasters: Anything from inclement weather that might prevent employees from reaching the office or that might make the office unsafe to earthquakes and floods makes disaster planning a must.
- Key Employee Loss: Sudden departures that remove institutional knowledge or operational oversight often create friction and bottlenecks in essential processes.
Put Continuity and Succession Plans in Place
Small business continuity planning and succession planning may seem complicated due to the infinite number of potential disruptions. However, even though disruption types may differ, core solutions and preventive measures are often shared.
- Resilient Business Model: Think of planning as a journey and not a destination or something to check off your list. Fold resilience into your business model at every turn.
- Critical Role Identification: Document which decisions, relationships, and processes cannot pause without impact.
- Temporary Authority and Access: Define who can step in to approve payments, manage operations, or communicate with customers if needed.
- Process Documentation: Capture essential workflows so operations can continue even if someone is unavailable.
- Longer-Term Succession Planning: Outline how ownership, leadership, or control would transition if circumstances change permanently. Ensure details are formally agreed upon in a business partner buy-sell agreement.
7. Professional Advisors for SMEs
Advisors can seem like overkill or unnecessary when things appear to be working. The problem is that by the time expert guidance feels urgent, options are typically more limited.
Many Challenges Can Arise When Advisors Aren’t Involved Early
Most of the commonly overlooked business practices and essential tools for business owners covered so far are about providing you with enough context to make informed decisions. However, nobody is an expert in everything. When you don’t have a strong advisory team, you’ll likely face some of the challenges outlined below.
- Tax Surprises: Unexpected tax bills, missed deductions, or compliance issues can be expensive and have lasting consequences.
- Contract and Legal Issues: Agreements signed without fully understanding long-term obligations, liabilities, or exit clauses may lead to lasting relationships that don’t serve the needs of your business in the long run.
- Funding and Cash Decisions: Financing choices made under pressure without fully evaluating alternatives or consequences can eat into cash flow and profit, making it harder for your business to grow and thrive.
- Growth Transitions: Hiring, expansion, or ownership changes can outpace the business’s structure or controls.
Build an Advisory Bench
You don’t need a large internal team or even a board of advisors unless your business model requires it. Instead, focus on building relationships with key professional advisors who can become familiar with your business over time. Involve them in key decisions as your business grows, and reach out to them as problems arise.
- Outsourced Support: Explore ways to outsource work that is not directly tied to the products or services you offer. For instance, by working with a third-party payroll service, you can ensure all withholdings and payments are handled correctly without adding to your headcount. Many businesses also free themselves from chasing invoices by either using invoice factoring or hiring a dedicated collections company.
- Accounting and Tax Help: Find a CPA who understands your business model and can help you plan ahead. If your accountant is not a tax specialist who can help you minimize liabilities, find someone who can fill this role separately.
- Legal Guidance: Get set up with an attorney who can review contracts, advise on risk, and flag issues before they become disputes.
- Financial Perspective: Connect with a financial professional who can help evaluate funding options, cash flow implications, and long-term commitments. Consider getting set up with a backup funding source, like factoring, before you need it, so you’re prepared for shortfalls before they hit.
Make Sure You’re Prepared with Factoring
Invoice factoring fits into many parts of this business foundations checklist because it’s versatile, doesn’t add debt to your balance sheet, pays out quickly, and is much easier to qualify for than traditional financing. It can serve as a safety net in lean times and periods of high growth and sit quietly in the background as an option when you don’t need it. Plus, when you partner with a top factoring company like Charter Capital, you aren’t tied into a long-term contract and can count on competitive rates and excellent service. To learn more or get started, request a complimentary rate quote.
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