When a business has cash flow issues, a key issue that comes up every day is money.

As a partnership, you have a shared responsibility to discuss issues on principles without arguing in an ad hominem manner.

Your company is doomed if you ever attack your partner’s character or sarcastically belittle the person’s traits. It’s an unproductive way to try to undermine your partner’s argument. Neither party wins.

Whenever there are arguments, it’s important both persons clean off their street. No person is always 100 percent right.

What’s a partnership to do in money matters?

Whether its setting a budget, hiring people or investing in equipment, partners can’t avoid money discussions.

A good financial system is vital for your business.

Not only will a properly prepared financial statement tell you what’s transpired in your business, it will give you a snapshot regarding your future (see Primer for Best Practices in Preparing Financial Statements).

Your mindsets should be focused on productive judgment and sensitivity. Otherwise, financial disagreements last too long and result in negativity and sarcasm.

The Greek word for sarcasm, sarcaz0, means to tear flesh. Is that what you want? Probably not.

For entrepreneurs, other than good communication, the most difficult part of launching a business is preparing financial projections.

“Eight out of 10 companies fail in the first two years due to insufficient cash,” warns esteemed financial consultant Roni Fischer (see Budget Planning Tips for a Micro Business).

For productive discussions about money, here are seven steps:

1. Discuss financial philosophy before forming the partnership. Your financial habits and mutual goals should be discussed in advance.

A discussion about philosophic principles is vital. Running and growing a business is a dynamic process because of changing conditions — internally and externally in the marketplace. Mutual agreement in advance on money principles is imperative to lay a foundation for success.

Each prospective partner should be able to anticipate with 90 percent accuracy on how the other person will behave in any developing situation. Negative surprise will kill your partnership.

If you spot any red flags in your prospective partner’s comments, don’t make the mistake of thinking you can change the other person. The individual’s judgment was formed a long time ago.

Issues that evolve over time might be a catalyst for disagreement. The trick is to take all steps to preserve your relationship. You must first remember it’s important to reach a fair compromise – with win-win negotiating skills.

You’ll want both parties to feel positive after the negotiation is complete (see the 22 dos and don’ts for successful negotiations).

2. Keep the focus on transparency. Financial discussions aren’t as sexy as other topics. But make sure financial planning remains part of your business operation and vision.

Continue to discuss what matters most about cash flow. Acknowledge each other’s feelings. Whatever you folks discuss about goals and values, money should be part of it.

Both partners need to know your company’s financial situation at all times. You must be aware of your real-time financial condition. In this way, both of you will have a practical sense before making financial commitments.

Unless you have a lot of startup experience, it can be a little tricky to make down-to-earth financial projections for your new company. Pragmatic assumptions are important in such a forecast (see Startup Financial Planning: How to Get a Pragmatic Forecast).

3. Continue to identify priorities. That means having short-term and long-term goals. Discuss what you want to achieve and the best roads to get there.

For instance, agree on how you’ll manage the sweet spot — between your price-optimization and costs. Avoid the typical 11 pricing mistakes (see Strategies for Stronger Profits by Optimizing Prices).

4. Fine-tune your working budget. A financial plan will keep you focused on how to responsibly achieve your goals. It should cover timetables and how to save for investments in people and equipment.

Document everything. Keep a paper trail. Uncertainty can kill hope in business. Best practices in management mean having the right information to alleviate uncertainty in business. For that you need the right tools.

One important tool – know your break-even point (BEP). A BEP analysis should be an integral part of your financial planning (see Why and How to Determine Your Break-Even Point).

5. Have an agreement on your roles. How and who will manage your day-to-day finances?

It’s preferable to have multiple revenue streams. Agree on how the revenue will be saved or invested.

Anticipate problems and who will act. For example, what will you do if you get a call from your bank about possible suspicious activity with your accounts, and your banker wants to make sure you’re not a victim (see Small Business Tips to Protect Your Bank Accounts).

6. Each partner should consult each other in major decisions. You have a shared responsibility to see that the company prospers. This means shared responsibility in major expenditures, hiring or investments.

Even if one person has responsibility in managing money, both parties should have equal standing in how and when to spend it.

That also means both parties should be equally in involved if sales decrease and hurt profits. You should work together to turn the problem into an advantage (see 8 Strategies When Sales Drop and Costs Cut into Your Profits).

7. Be respectful when there’s a difference of opinion. Remember the reasons that drew you to the other person as a partner. Money disagreements can easily morph into heated arguments.

Money should be a tool for success, not a catalyst for arguments. If you share your mutual visions and communicate with transparency, you’ll more easily minimize stress and keep the focus on growth.

In chaotic times, it’s common for businesspeople to be fearful and reactionary when they must cut expenses. But entrepreneurs need to be unemotional so that they make decisions that will bolster their objectives.

They can take the emotion out of their decision-making — by eliminating stress factors – if their priorities are clearly defined with values (see Cutting Costs — 9 Best Practices to Avoid Making Reactionary Decisions).

From the Coach’s Corner, related content:

Think About 9 Key Questions Before You Form a Partnership — Sure, there are good reasons to partner in business. A business has more flexibility with more than one owner. Also, two or more partners can help accelerate a company’s growth. But it can also be a hindrance, especially when there isn’t unanimity on business issues.

Checklist to Increase Your Startup’s Cash Flow — It’s true that cash flow is the salient dynamic that leads to the failure or success of a business. Whether your new company’s performance is stagnant or you’re growing quickly, cash flow is paramount. There are at least 11 ways you can increase cash flow for your business to function properly.

Hunting for Profit? How to Become a Lion, King of the Jungle — The quest for profits is challenging if you’re lost in a jungle of uncertainty. But success is possible if you emulate a lion hunting for its prey.

12 Tips for Profits to Keep Your Business Dreams Alive — To keep your dream alive in this economy, you must find ways to adapt and do it quickly.

“Always aim at complete harmony of thought and word and deed. Always aim at purifying your thoughts and everything will be well.”

-Mahatma Gandhi


Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.