Page 194 - Budgeting for Managers

Small Business Money Management
As a general rule, you want to plan to have enough money
to run your business with room to spare. Otherwise, you may
find yourself relying on credit card debt, which is very expensive
due to high interest rates. As a small business owner, you will
almost certainly have to cosign any loan to your business. 177
One of the worst things that can happen to a small business
owner is that the business fails and then the debt of the business
becomes personal debt. Even if you can return to the world of
regular paychecks quickly and with a high salary, it will take a
good deal of time to pay off those debts. As much as possible,
ensure your own personal financial security and don’t allow
your enthusiasm and love for your business to jeopardize your
personal life.
Managing Accounts Payable When Money Is Tight
In the routine operation of your business, there will be times
when it’s difficult to pay the bills. You should have a plan for
these situations before they arise. Here are some options. You
should make a prioritized list of your own similar to this one:

•Borrow money from a line of credit or get a loan.
•Make partial payment on bills from major suppliers. Don’t
just send the payment. Call their accounts receivable
department, explain the situation, and set up a payment
plan. Follow up the call in writing with a statement that
you can refer to. That way, if a vendor cuts off supply, you
can refer to the letter and maintain a good relationship.
•Make arrangements for extended payment terms, such as
paying in 60 or 90 days instead of 30.
•Work out arrangements with your staff for delaying paying
them.
Of course, you hope you never have to do the more difficult
tasks listed further down. But it’s better to think of them in
advance and even sound out your vendors and staff on what
they are willing to accept. This will make it easier if hard times
do come.