What are your top financial concerns right now?

As I work in my consulting practice with early to mid stage technology, Internet and life sciences firms, my comments will relate to this market. I worry a lot now about the failure of entrepreneurs in this market to adequately plan for contingencies and have adequate funding to realize the potential in their firm.

In a bad economy, having adequate cash resources to accomplish a plan is critical. Further, the amount of cash needed will be influenced significantly by delays in the plan schedule, whether in completing the new product or in the time needed to bring in the revenues that will provide positive cash flow. In my experience, entrepreneurs may inadequately fund their company by believing in their own plan. For reasons that may not be exactly predictable but in the aggregate for small companies always seem to happen, the schedule for new products will slip or customer revenues will be delayed. Spending plans laid when times were thought to be good deplete cash resources that will not be there when revenues are delayed. Also the time needed to complete a new round of funding may be assumed to be three months, but in fact be six to nine months. How does a company stay alive during such a period?

I also worry about the quality of accounts receivable, an important part of any firm’s cash flow. I see customers with their own cash flow issues using their vendors for free financing. This is true with giant companies as well as mom and pop businesses and is being done as a business strategy. Worse are the firms that are on the brink financially but are buying on credit anyway without the vendor knowing. There is little shame in a business collapsing with vendors on the hook. The credit approval process, a joke in many firms, is critical to turning a sale into cash.