| It doesn't matter how much product you sell; if you cannot balance revenues and expenses, maintain adequate cash flow, or have a solid system of collections, your business will struggle if not fail. This is "back room" information that every entrepreneur must consider before getting started. |
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Managing the Treasury
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Always invest
your company's revenues; operating funds can be put into
conservative overnight vehicles like repurchase agreements or
commercial paper. Typically, these investments will earn about 5%,
but remember, they're only for money that is readily needed. Funds
that are not required for daily expenses can be put into CD's or
bonds which earn a bit higher interest, about 6-8%. Keep in mind
that the higher the return on investment, the higher the
accompanying risk. That's why operating funds should always go into
the most conservative of investments. A financial institution or
advisor should be able to help you structure an effective portfolio
that provides for expenses while also helping money you earn to
grow. |
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