The relationship with your business banker is a very important aspect of running a successful business.
How is this applicable to cash flow management?
The answer lies in the fact that if you have a line of credit, business loan, or any other type of financing, or may need to apply for such in the future, the relationship with your business banker will be critical to your success.
If you develop a relationship based on trust and mutual respect, he/she will become your champion inside the bank. Because of that role, getting loan approvals or solving temporary problems, becomes an easier task.
You will obviously need to be financially stable and profitable, but having a champion inside the bank, will make your life easier.
Importance of Communication
We advise our clients to communicate with your business banker at least once per month, even if it is simply to say hello. You may also use this time to update them on any business developments, both god and bad.
We also advise, that you send them your monthly financial statements, even if they are not asking for them. It is better to provide too much information than leave them with an empty file on your business.
This is the first step in building trust and keeping your business banker current on how your business is performing.
Should you have a problem, (financial, operational, or anything that will affect your financial performance), communicate with your business banker as soon as possible. Don’t try to hide the problem until the point where both of your options are limited.
The last thing that they need, is to find out about a problem from an outside source or after the problem is out of control. They have people to report to and no one likes to be surprised, least of all your business banker or their team leader.
Take some time to analyze the situation and determine what the appropriate corrective action will be. Once you have determined the action plan, call your business banker and have him/her come in to discuss the situation.
By taking a proactive approach, you will gain not only credibility, but you may also gain some time to implement your corrective action plan.
If you need to borrow money, by using this approach, you may have a better chance of getting approved for increased lending to your company.
Obviously, your current financial situation, along with your historical performance history will play a large role in accomplishing this, but business is still based on personal relationships.
One item that you should prepare, is a cash flow statement. Use your current budget and add sections to provide information on how the money will be used and when it will be paid back.
This information is crucial to successfully borrowing money, if that is the corrective action needed to get you through this rough patch. All banks want to know, how much money is needed, how it will be utilized, how it will be paid back and when.
Make certain that your cash flow analysis is accurate, makes financial sense, and can be accomplished as presented.
Add footnotes if necessary, to provide additional information or assumptions contained within the report.
We have used this approach in successfully managing banking relationships in both good and bad situations.
The bottom line is that your business has to deliver the financial results needed to get your business back on the right track or to receive additional funding.
Having a good working relationship with your business banker will go a long way in providing you with the means to work your way through a cash flow shortage or crisis.