At many small to medium-sized modern machine shops, the owner often takes on various roles. One of the more challenging titles a shop owner may hold is Chief Financial Officer.
Ensuring the security of your company’s finances is one of the most important things you can do. But if you’re like many of our members, you didn’t train as an accountant before opening up your shop. And that can leave you feeling insecure about your company’s financial health—you’re never sure if you’re making the right choices or even how to improve your decision-making abilities.
At NTMA, we understand how difficult it is to take on all the responsibilities that come with running your business. It’s okay not to know everything. But as a leader, it’s your job to get the right team in place to support you, especially when it comes to finances. You can’t make strategic decisions without knowing exactly where you stand financially. Luckily, NTMA is here to help!
How Improving Your Finances Helps Your Machine Shop Grow
Your company finances must be organized if you want to grow your business. Whether it’s expanding your offerings, hiring new team members, or investing in a second location, you need capital to do it. Understanding how money flows through your business is crucial to making wise investments. “Can I afford it?” is a question many shop owners ask, but it’s impossible to determine the answer by simply checking your bank account.
A shop with well-organized finances will regularly receive and review its financial statements: income statement, balance sheet, and cash flow, for example. If you’re talking with a bank about a loan or line of credit, you’ll also need detailed projections on future cash flow, outstanding liabilities, receivables, and orders.
Your EBITDA (earnings before interest, taxes, depreciation, and amortization) is another number you’ll want to know: It’s a key economic indicator of your organization’s financial health. Any person or entity assessing your loan candidacy, considering buying your company, or mulling over other investment opportunities is going to want this number.
5 Key Financial Resources for Modern Machine Shops
If you’re feeling overwhelmed by the idea of bringing your company’s finances up to speed, you don’t have to do it alone. With the right people in your corner, your modern machine shop can thrive, and you can focus your attention on growing your business.
We advise turning to these resources for finance support:
- Banker. Having a good relationship with your banker will come in handy when you need cash immediately. Still, many modern machine shop owners undervalue this relationship. Some may be intimidated by the thought of initiating and nurturing the connection, but doing so could be as simple as meeting quarterly to discuss your financial projections or asking for advice on future investments. Although banks will only grant loans if companies meet their requirements, maintaining a personal relationship with your banker will only help your situation.
- CPA. Most small to medium-sized modern machine shops could benefit from a closer relationship with their CPA. CPAs are often pigeonholed as tax professionals, but they often provide valuable financial insights. A trusted CPA could help you with tasks like getting your financial statements in order, learning QuickBooks, and conducting a thorough financial review at the end of the year. It’s worth asking your CPA if they offer these services and how much they charge—professional support will always get you further than relying on a friend or family member for your accounting needs.
- Personal financial advisor. When you run a small company, your business can only be as financially healthy as you are. Too many shop owners invest most of their money into their businesses without planning for their own futures. Everyone can benefit from hiring a personal financial advisor—business owners especially. These experts can help ensure that your financial interests are aligned personally and professionally.
- Bookkeeper. A bookkeeper is an excellent resource for business owners who can afford one. Bookkeepers track critical financial metrics to help you make critical decisions or inform long-term strategy. They act as another set of eyes on your finances and can provide accurate and honest assessments. At some point, it’s best to outsource this critical role to a professional so you can focus on running your business.
- NTMA. At NTMA, we’re huge champions of professional networking. When you join a local NTMA chapter and start attending meetings, don’t be surprised if you come across bankers who sell financing for machining equipment or peers with trusted recommendations for specific financial professionals in your area. Leveraging these connections can make a significant difference in your business.
If you want to get your finances in order but don’t know where to start, NTMA’s affinity partner, EBITDA Growth Systems, can help. They’ll analyze your business as it is today, determine what it will look like when running optimally, and identify the gap between where it is and where it needs to be.
Their expert management team offers coaching, consulting, accounting, and training—all at a surprisingly affordable rate. NTMA members enjoy a discount on these services; however, they’re available to anybody who needs them.