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posted: 9/3/2012 6:00 AM

CFO advice: Watch the balance sheet, protect cash

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Pay a little more attention to the balance sheet, a little less to the income statement.

It also might be wise to protect cash -- which you may need if there's another downturn.

That's advice from two financial pros who provide short-term CFO support to small businesses: Tony Battaglia, controller-CFO adviser at BIK & CO LLP, a CPA firm with offices in Vernon Hills and Palatine; and David Olson, founder and owner of Virtual CFOs LLC in Woodridge.

Short-term CFOs can be an ideal solution for businesses that could benefit from the financial savvy a good chief financial officer typically brings but don't have the budget for a full-time commitment.

The suggestion to focus more on the balance sheet comes from Battaglia. "The balance sheet is what banks look at," he says. "Instead of paying a big dividend to the owner, keep more money in the business."

Planning for cash needs is at least as essential, however. Battaglia suggests that business owners "monitor and control their cash." It's important, he says, to "forecast cash needs in the short-term period and control the outflow.

"Do you have a real estate tax bill due next month?" Battaglia asks. Payment shouldn't deplete your cash resources.

Olson cautions that small businesses should protect cash even when good times reappear. "You don't want to get too far extended," he explains.

"What happens is that new orders come in; businesses increase inventory and hire more people to fill the orders -- and run out of cash" because they have spent too heavily to meet those new orders before payments come in.

Olson is one of the few who say it's possible to borrow from banks, though he acknowledges qualifiers. Your borrowing chances are better, for example, "if your business is a proven commodity and you can borrow on an asset-based basis," Olson says.

Bankers, Olson continues, are more likely to lend when collateral -- such as inventory and receivables -- backstops a loan request.

Still need cash? Battaglia suggests exploring grants and SBA loans -- and researching tax credits. "Ask your accountant if you qualify for any special small business programs," he says. "Challenge your advisers" to help find alternative ways to do business.

Battaglia offers two additional cash management suggestions. "Push your suppliers a little," he says. "Ask them, 'How can you help me?'" And, Battaglia adds, "You can delay payment a little."

On the other side of the ledger, you don't want your clients delaying payment. "I hate to say anything about the squeaky wheel, but talk to your clients," Battaglia says.

"You're not being intrusive to ask a client's accounts payable people when they pay invoices. Bigger businesses in particular have a set schedule. Make certain your invoice is in the docket on the client's payment schedule."

• Jim Kendall welcomes comments at 2012 121 Marketing Resources Inc.

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