Small businesses should proceed cautiously

There is no doubt about it – these are difficult times for small businesses in Maricopa and throughout the Valley. Business owners are looking for ways to increase profit and cut expenses at the same time. And small business owners should cut back where possible – but ought to proceed with caution when considering where to cut, according to local experts.

Pay attention to your bottom line

In more profitable times it was easier not to scrutinize balance sheets, but that is no longer a luxury small business owners have, according to Robyn Barrett of Valley-based Factors Southwest, who works closely with small and medium businesses in Maricopa and throughout the Valley that are dealing with cash flow and funding issues. Factoring is a form of lending based off a business’s accounts receivables.

“I would advise business owners to really watch your bottom line and watch your expenses and know what you are spending on,” Barrett advised.

Where possible, Barrett said, business owners should consider going out to bid on services they need such as water delivery, telephone services and Internet services.

“Get competitive bids for things you can,” Barrett said. “You can control those expenses more than getting new business clients.”

John Milne, managing member of Sterling Grant & Associates, who works with businesses throughout the Valley, agrees.

“This isn’t the time to be lavish on the expense side; this is the time to hunker down and be cognitive of every dollar we are spending, from the fuel we use to the water we drink and everything in between in, an office like mine and yours,” he said.

“Be sure you are looking at your P&Ls on a monthly basis to be sure nothing gets out of control,” Milne said.

Control your bill paying to reduce fees

Milne also advises fellow business owners to be cognizant of their own bills and stay on top of payment schedules.

“Pay bills on time so that late fees don’t increase the cost of an already specific line item,” Milne said, noting that sort of knowledge and discipline on your own expenses can result in saving money in the long term.

Use your time wisely

Now that business may be a little bit slower than in years past, it presents an opportunity to review your current business plan and consider any changes to improve efficiency or to define your next future expansion.

There is also an opportunity to stay more in touch with your clients and even check to be sure they are receiving bills in a timely manner from you.

“Don’t be afraid to call on day 15 or day 20 of a billing cycle to confirm that accounts payable has your invoice,” Barrett advised. “Seventy percent of late fees are because the invoice didn’t make it to the right place or was lost in the mail.”

The call does not simply have to be about collecting money; it should be approached as a friendly check-in.

“It is a courtesy call to the client,” Barrett said. “Look at it as a positive and reconnect with your client, at least once a month. Ask them if you are servicing their account properly, and see if they have any feedback and comments at that time.”

That simple call to confirm receivables can save money in re-issuing invoices and late payments to your business in the future.

Right size your fixed expenses

Milne, who provides insurance to a variety of business types, said it is important to be sure safety nets are in place, but there are also opportunities to cut those fixed costs business owners might not have considered.

“Business owners can think about lowering insurance limits. If there is no contractual reason for high limits to be purchased, maybe lower limits can be considered where needed,” Milne said.

The rule of thumb?

“Re-evaluate the amounts of insurance purchased to make sure they are in line with business assets because that is what insurance protects, the business assets,” Milne said.
But don’t be too heavy-handed, Milne cautioned.

“Certain things should not be overlooked because they could theoretically be catastrophic,” Milne said. “Even a small interruption in business can be catastrophic when the insurance isn’t there.”

Make a back-up plan

If your bank or lender happens to call and renege on lending terms or decrease your business’s credit limit, do not be caught unaware.

“I get calls every day from banks that say they are kicking clients out,” said Robyn Barrett of Factors Southwest. “Usually if that happens, the bank says that you have 30 days to figure it out. It is devastating to your business.”

For short-term fixes, Barrett recommends looking to family and friends. For some, factoring might be a good option for a more long term fix.

Regardless of business owners’ current situation, it is vital to take a step back and see the forest for the trees, particularly when looking to cut expenses in the short term.

“Saving money is very important,” said John Milne. “But saving your business is more important.”

For more information on Factors Southwest, visit www.factors-southwest.com. For more information on Sterling Grant & Associates, visit www.sterling-grant.com/. For additional online resources and information about small business in Arizona, visit the Arizona Small Business Association at www.asba.com and click on Resources.

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