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Financial Planning And Small Business: Sound Financial Tips For Small Businesses

Updated on April 10, 2011


In tough financial times, it's sometimes small businesses who are hurt the most.

Without the benefit of huge tax breaks or the backup of investors, it can be very stressful trying to make ends meet.

Here are some great tips and tricks to get your business through the tough times.

Even if you're not experiencing a downtrend at the moment, it's important to keep these principles in mind.

In running a small business, it's always best to prepare for the worst case scenario.


Be realistic. Have a clear perspective of your business and how its overall health is. In some businesses, you may not have tangible assets but if you do, such as equipment that isn't being used and you could improve your cash flow by selling it off, by all means do so. Selling off part of something is better than losing everything.

Know people. Make sure you have a working relationship and even a constant in-touch relationship with a banker or a financial adviser. He or she may be able to see potential revenue boosts that you haven't thought about or show you where to trim costs to survive in poor economic times.

public domain photo
public domain photo

Budget is the name of the game. Whether it's in your personal life or your business life, it's essential that you know where every dollar is going in terms of liabilities and where every dollar is coming from in terms of assets.

It also pays to make sure that you tighten the proverbial belt and during tough times, resist the urge for expansion or buying anything that is not absolutely necessary. It's better to have too much when it comes to assets than not enough in case of catastrophic business loss.

Check your debt. Check out your debt and how it's being paid. If you are paying any loans on the short term, you can save on monthly payments by converting the loan to a longer term arrangement. You will be paying for longer but you'll save on the monthly bills at a time when perhaps you need the extra cash.

The Small Business Administration (SBA) has a guaranteed loan program and you may be able to bolster your business with your debt again spread over a longer period of time. Depending upon the kind of business, you may qualify for a Business and Industry Guaranteed Loan. These are offered by the Department of Agriculture Rural Development Agency.

You can also obtain financial or technical assistance loans for small businesses in many states. A good banker should be able to provide you with these and other good resources that might be available for your business if it's struggling to stay afloat.

Business insurance policies. In hard financial times, it pays to reevaluate your insurance policies, whether they're private or business related......such as fire insurance or hazard insurance.

Are you paying for insurance on items that are outdated and that really don't need to be insured any longer? Are you paying low deductibles? Increasing your deductible on any insurance policy will decrease your monthly payment. Examining inventories to see if you actually need certain things covered is recommended periodically but especially in times of financial hardship. Always insure the most important aspects of your business but rethink the not-so-important and weigh everything against the cost of replacement should it become necessary.

Life insurance policies. Check your policies to see if you can borrow against your life insurance policy to come up with needed capital. Some allow you to borrow against the cash surrender value at low rates or you can deduct the premium costs from the cash surrender value. Or investigate policies at a lower rate. Can you convert from whole life to a term life insurance policy? By all means, keep your insurance though because it is something you don't want to be without!

Accounts receivable. Make sure that your accounts receivable are being paid on time and regularly. This one fact will keep your business surviving more than any other factor. Figure out ways to encourage or entice your customers to pay on time and regularly. Consider attaching a penalty fee to your invoices for bills due not paid by a certain number of days and then make sure you assign the fee. Most customers today don't want to incur late fees and will probably start paying their bills on time.

Debt collection persuasion. If you find that you do have customers who are lagging behind in paying and causing your business cash flow problems, simply begin the policy of a personal phone call to the accounting department or person who pays the invoices. Keep it friendly and professional but persistent. Just let the person paying the bills know that you are trying to check on the status of your invoice and when it might be paid. Sometimes a little persistence pays off and contacting customers personally makes them realize that they need to pay you! Or offer incentives for paying bills on time.

Think outside the box. Are there other ways that you can grow your business without spending more than you can afford? Are there ways to advertise that cost relatively little in terms of outlay but produce results, such as phone calls to potential customers or emails?

Drumming up new business. Tap into referral sources if you have customers who are highly pleased with your work and let them know that you'd appreciate more customers or a referral from them. Also ask to use good customers as a reference because nothing says more than praise by word of mouth.

Financial Tips for Small Businesses

In summary, it bears repeating. 

Here are some great tips to look at in terms of getting your small business through turbulent financial waters.

  • Budget.  A budget is vital whether it is on a personal level or part of a business plan.  If you don't know what is coming in and what is going out, you will find yourself in peril every time.  Get in the habit of knowing your expenses and being able to project your income.
  • Don't be afraid to ask for help.  Whether you have an accountant or a financial adviser such as a banker, don't wait until you have a problem to ask how to better your business financially.  Checking it periodically with someone who knows finance is a great way to see down trends
  • Money, money, money.  Everything you spend money on is either going to result in an asset or will result in a liability.  Evaluate every expenditure.  How will it improve the business or increase cash flow?  If it won't, then probably best not to make the purchase or use the expenditure to deplete your reserves.
  • Evaluate the health of your business.  Especially in a down turned economy, it is vital to examine your business and see if you are staying afloat, if you are successful, or if you are failing.  Considering the tax implications of all these scenarios is also key and evaluating whether you can hold on until the economy picks up is also important.  However, knowing if your business has reached the end of its life because of new technology or new and innovative ideas is something that happens.  Then you have to decide if it is "time to say goodbye".
  • Debt balance.  Most businesses have debt.  Evaluate the debt that you owe---long term versus short term.  Can you increase cash flow by turning short term debt into long term debt but then more importantly, is it worth it?  However, caution needs to be exercised in securing your business with your home or similar scenarios as failure of your business could be devastating.
  • Insurance.  It is widely known that increasing deductibles equals lower premiums.  Also looking at what you need to actually cover with insurance is vital.  Go over the items you insure in fine detail and eliminate things that are outdated and do not need insuring, thus lowering premiums.  Or ask about different plans that best suit your needs.
  • Guaranteed loan programs.  Check out loans or ask your banker about SBA (Small Business Association) loan programs.   This is a way to restructure your business for the least amount of money.

In a tough economy, these are all ways that you can stay afloat. 

The most important thing in sustaining any kind of income, whether personal or business is to budget, save and have realistic goals. 

Hopefully that way your business can survive the financial waves and come out on the other side into smooth waters.


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