One of the most important tasks for small business owners is a year-end checkup of their companies’ financial health. It’s even more critical now as the economic downturn persists.Revenue and tax projections are still a focus when owners meet with their accountants or other tax professionals, but credit and cash flow may now be even more crucial considerations. And owners may find they need to look deeper into the way their companies operate, pay bills and receive payment than they’ve had to do in the past.
As many banks tighten their lending, small businesses “have to revisit their entire credit strategy,” said Gordon Spoor, a certified public accountant in St. Petersburg, Fla.
Many companies might be tempted to take whatever cash they have and pay down any outstanding credit lines, leaving themselves debt-free. But Spoor advises against that move —- if a bank freezes or cuts back a company’s line of credit after the cash has gone to pay down debt, then the business will suddenly find itself with fewer options.
“They should hoard some cash right now,” Spoor said.
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