Decisions Small Business Will Face in 2005

What are some of the important financial decisions that small business owner will face in 2005? There are numerous issues such raising capital, accounting and bookkeeping, cash flow management, poor inventory management, over investments in fixed assets, poor credit arrangements, unexpected growth, and other economic factors that will affect a small business’s finances. The U.S. Small Business Administration has seen lots of small businesses com and, unfortunately, go. According to the SBA, over 50% of small businesses fail in the first year and 95% fail within the first five years (“Why Small Businesses Fail”, 2005, p. 1). With this fact in mind, one should seriously consider gaining a thorough understanding of finances and the effects it will have on their businesses.

In dealing with raising capital, one should consider how important his/her credit profile is to the loan equation. A small business should always strive to stay in good standing with all creditors, not only to gain favorable credit, but sometimes to gain cost cutting deals from just being a good customer which ultimately affects profits/losses.