Running a small business means wearing many hats, but keeping track of money might be the most important one. After two decades of helping companies grow, former banker Mitja Sadar has seen what works – and what doesn’t – when it comes to managing business finances. As founder of Pink Elephant Solutions, he’s learned that small companies face unique challenges compared to their larger counterparts. The good news? You don’t need a Fortune 500 budget to build solid financial foundations. What you do need is a clear understanding of what matters most when cash gets tight.
Managing Cash Flow Effectively
Small businesses can’t play the same financial games as big corporations. “Cash is king and cash is your life,” Mitja puts it bluntly. “If you run out of cash, you shut down.” While big companies have plenty of options when they need money, small businesses often don’t have that luxury. Someone needs to keep a close eye on the bank account – usually the owner. But watching the balance isn’t enough. “You need somebody to monitor the bank account, to know where you stand and to do a cash flow projection,” Mitja explains. He recommends looking ahead one to three months, since longer projections often miss the mark.
Keeping Money Moving
Bills pile up fast in any business. Mitja breaks it down simply: “You’ve got money coming in and money going out. Accounts payable, accounts receivable needs to work,” he says. “If you don’t pay your bills you’re going to be cut off. If you don’t issue invoices, you’re not going to get the money coming in.” Getting this wrong isn’t just inconvenient – it can kill an otherwise healthy business. Miss too many payments, suppliers cut you off. Forget to bill customers, the cash dries up. Either way, you’re in trouble.
Organizing Financial Records
Early-stage companies don’t need fancy accounting systems. “In the early stages you don’t need audited accounts,” Mitja notes. But you do need to track everything for taxes. His practical solution? “Get something like a Google drive or online storage where you drop all the invoices once a month, organize them, sort them with an accounting tool.” Things get trickier as the business grows. Owners start losing track of all the money moving around. That’s when you need better systems. Big companies solve this with regular reporting – comparing actual spending and income against budgets and expectations.
Preparing for Business Expansion
Eventually, most businesses need outside money to grow. That’s where corporate finance comes in. “Corporate finance is basically sales, but sales to the investors,” Mitja explains. Whether you’re looking for investors to buy in or trying to get a loan, you need these skills. But getting the money isn’t the end of the story. “Once you get either equity or debt investors, you suddenly have a whole bunch of reporting obligations,” Mitja warns. Investors want updates and reassurance their money’s being well spent.
Keeping Investors Happy
This is where investor relations becomes crucial. As Mitja puts it, “It’s basically a function that’s saying okay, we will keep investors informed, we’ll keep them excited.” There’s a practical reason for this effort: “So that whenever we need more money from those investors or additional investors, we can tap them and we can obtain the money.” Good investor relations aren’t just about keeping current investors happy – it’s about making sure you’ve got somewhere to turn when you need more capital down the road. Small businesses might not need a whole department for this, but they do need to take it seriously.
Mitja’s approach cuts through the complexity of business finance to focus on what really matters: watching the cash, paying bills on time, keeping good records, and maintaining strong relationships with anyone who might fund your growth.
To learn more about Mitja Sadar and Pink Elephant Solutions, check out his LinkedIn profile.
