Higher interest rates can significantly impact the finances of your small or mid-size business. If you’ve been paying attention to the news, you’ve heard that the Fed has been raising the federal funds rate.

What’s the federal funds rate? It’s the interest rate at which banks lend money to each other overnight. When the Federal Reserve increases the federal funds rate, it has a significant impact on the cost of borrowing for individuals, businesses, and the government. In this blog post, we’ll explore how an increase in the federal funds rate hurts and helps small and mid-size businesses.

The Good: How Higher Interest Rates Help Small Businesses

What’s good about higher interest rates? Interest rate increases benefit small and mid-size business owners by increasing interest rates on savings, strengthening the dollar, and reducing inflation.

Higher interest rates on savings: After the Fed raises the federal funds rate, banks often pay more interest on savings accounts to stay competitive with other banks and attract deposits. If you maintain a healthy account balance, you could earn thousands of dollars per year on your savings. Are you tired of your large, national bank paying you next to nothing on your savings? Momentum CFO recommends checking Bankrate.com to find out which banks are offering the highest interest rates.

Stronger dollar: An increase in the federal funds rate can strengthen the dollar’s value relative to other currencies, which can benefit small and mid-size businesses that import goods or rely on foreign suppliers. Stronger currency means you can buy more with $1 today than you could when it was weaker.

Reduced inflation: A higher federal funds rate can reduce inflation, which leads to a more stable business environment. Taming inflation is the primary reason the Fed has raised rates in recent months.

The Bad: How Higher Interest Rates Hurt Small Businesses

There are several ways higher interest rates hurt small businesses. Rising interest rates impact you by increasing your borrowing costs, reducing access to credit, reducing profit margins, and reducing consumer demand.

Higher cost of borrowing: Small and mid-size businesses may face higher borrowing costs when the federal funds rate increases. Small businesses that have variable-rate sources of financing will undoubtedly face higher monthly payments. Higher monthly payments deplete cash, which could result in a cash deficit. If you rely on a line of credit, consult your CFO for assistance. A fractional CFO carefully monitors changes in interest rates and will partner with you to manage the financial impact of increased interest expense.

Reduced access to credit: As interest rates rise, banks may become more selective about which small and mid-size business they approve for a loan or line of credit. This can make it more difficult for you to finance operations or invest in growth opportunities. If your small businesses has less than stellar credit, it will be even more difficult to qualify for financing. The bank may also offer you less favorable terms, such as lower credit limits.

Reduced profit margins: Your profit margins may shrink as the interest expense on debt increases. In some cases, you may need to raise prices to compensate for the increased costs, which can make your business less competitive in the marketplace.

Reduced consumer demand: When the federal funds rate increases, consumers may have less disposable income to spend on goods and services. This can reduce demand for your products and services.

The Bottom Line

In conclusion, higher interest rates have both good and bad impacts on small and mid-size businesses’ finances. While higher interest rates on savings, a stronger dollar, and reduced inflation can be beneficial, businesses may also face higher borrowing costs, and reduced access to credit, lower profit margins, and lower demand. Small business owners must carefully monitor their finances and adjust their strategies accordingly.

Are interest rates negatively impacting your small business? Momentum CFO can help. Schedule a free consultation to learn how we can help you navigate increasing interest rates.

Do the words “budget planning” make you groan? For many people, it’s on par with being stuck on a cross-country flight next to a screaming baby. Or calling [insert company you dislike most here]’s customer service line. 

It doesn’t have to be that way. Budget planning is not all about limitations. In fact, budget planning can be freeing! As John Maxwell said, “A budget is telling your money where to go instead of wondering where it went.” 

You control your budget. Your budget does not control you.

Budget planning is undoubtedly a key component of your small business’s financial success. Therefore in this article, we’ll discuss the importance and benefits of small business budget planning.

1 | Clear Goals and Strategies to Plan Your Budget

Planning a budget for your business provides you with an opportunity to plan strategically for the year ahead. The first step in budget planning is identifying your financial goals. What do you want to achieve? 

Here are a few common small business financial goals, with links to get you started on some of these right now:

Goals should be SMART: Specific, Measurable, Achievable, Realistic, and Timely. An example of a SMART goal is: “Grow net operating profit by 10%, to $250,000 by the end of the year”

Next, consider how exactly you’re going to achieve your goals. For example, if you want to increase revenue, what specifically do you need to do to make it happen? 

  • Do you need to hire more salespeople?  (Use our new hire cost calculator!)
  • Spend more on research and development to launch a new product? 
  • Engage a marketing agency to increase brand awareness?

As you work through this process, don’t lose sight of any constraints on your resources. Most businesses do not have unlimited cash to spend. Therefore, you should allocate resources to the initiatives that are most impactful to your business. Prioritize your spending to get the most bang for your buck! GET HELP WITH YOUR BUDGET

2 | A Path to Greater Profit

Effective budget planning details anticipated income and expenses by month. It charts your path to greater profit. How?

Well, your budget should include detailed information about revenue by product and service. It should break down spending by account categories, such as professional services, software, and employee compensation. Need a budget template to get started?  Download Momentum CFO’s budget template for free!

In addition, it’s a good idea to document supporting details for those account categories as needed. Your budget may include additional schedules that show compensation costs by employee, or the components of spending specific marketing initiatives. 

That way, when you refer to your budget, you’re not just looking at one big number, trying to remember how you came up with it. Instead, you’ll be able to review the details of your spending.

Net profit (your “bottom line”) essentially equals revenue minus the cost of goods sold and all other expenses. After you’ve completed your budget planning, you’ll have a custom-made plan to achieve your profit goals. 

3 | A Way to Measure Financial Performance

Another benefit of budget planning is that it gives you a way to measure your small business’s financial performance. Businesses become and stay profitable with careful financial management. Therefore, analyzing variances between your actual financial results and your budget (a process known as “variance analysis”) keeps you on track to achieve your financial goals.

Review variances between the two sets of numbers each month so you can identify where you may be getting off track from your budget. For example, if you find that sales are $50,000 lower than you expected in the first quarter, you’ll need to cut expenses by the same amount to achieve the profit goal you set. Don’t put off this important task. If you procrastinate, by the time you’ve identified a problem, it may be too late to solve it.

Don’t have the time or inclination to do complete variance analysis yourself? As part of our CFO Services, Momentum CFO can analyze your financial results each month. We will deliver them to you in easy-to-understand financial dashboards. All of your critical financial information will be at your fingertips! 

In addition, we can provide you with analysis and customized financial recommendations that don’t take a degree in finance to understand.  

4 | Confidence About Financial Decisions

Budget planning gives you greater confidence about making financial decisions. Here’s why:

  • You have already set your goals and developed strategies to achieve them
  • You’ve determined how much you’re going to spend 
  • You know what you’re going to spend it on 

By planning out your budget for the year, it takes a lot of the guesswork out of how to manage your business’s finances. That makes it much easier to decide whether you should sign that contract, make a big purchase, or hire a new employee! 

Ideally, you should share your budget plan with your leadership team. You and your staff should be on the same page, working towards the same goals. Stick to your plan as much as possible and you’ll be on your way to a great year!

Budget Planning: The Bottom Line

As Dale Carnegie said, “An hour of planning can save you ten hours of doing.”  Take the time now to plan for the next year. By doing so, it will help you set the strategic financial direction of your business and provide a path to greater profitability. Budget planning provides a way to measure financial performance, course correct as needed, and feel confident about your financial decisions.  

Need help? You don’t have to tackle budgeting on your own.  Download our budget template to get started today! Then, let Momentum CFO do the heavy lifting for you.  Schedule a free consultation to learn how we can help you plan for financial success in the year to come!

Business owners who are operating mid-sized businesses without a CFO might feel that they don’t need this crucial role. Or, in many cases the idea of bringing in a C-Suite stakeholder who would require either a hefty salary or equity is unappealing.  At Momentum CFO we’d like to take a moment to outline some of the benefits of choosing to work with an outsourced CFO.  

We know that growing a company is a complex balance of many factors: Many entrepreneurial CEO/ Founders shoulder multiple roles of not only CEO but also COO and CFO.  As companies grow, however, bringing in a fractional CFO with years of experience can make the difference in how quickly and efficiently your business can scale. 

For businesses that are in growth mode, a solid financial strategy is essential to prepare for the next phase of business growth while continuing to be profitable in the present. A fractional CFO is part of the C-Suite decision-making team and can help guide your business to profitability and long-term stability. 

Some of the aspects of finance and accounting that a fractional CFO provides are: 


An outsourced CFO will be highly skilled with years of professional experience. Their expertise will bring an invaluable new perspective to your business. They can review company performance and provide a detailed analysis and plan to address any existing financial issues. 

Strategic planning: 

Outsourced CFOs can analyze your business’s financial picture and provide high-level strategic guidance that will optimize revenue growth.

Exit strategy: 

If your business is planning for an exit, an outsourced CFO can help you package your business’s finances attractively and prepare all the necessary documents to get the best possible sale price.

Transparency in reporting: 

Many business owners don’t have the clarity they need to grow their business because they either don’t receive or can’t interpret their financial reports on a regular basis. Fractional CFOs help interpret the company’s information and work with their management team to create a strategy that succeeds. 

Meaningful insight: 

Are you using the insights you receive from your financial reports to affect the day-to-day decisions you make as a business owner? Momentum CFO believes that all reports should be timely, accurate, and provide meaningful information on which to base decisions. Some business owners receive extensive reporting, and their financial understanding is deep enough to know what the reports say about profitability, productivity, and cash flow. However, even with this level of understanding, often the CEO does not change strategies based on the numbers in their reports. 

A fractional CFO will look at the reporting and not only interpret the data into practical insights, but also suggest strategic changes that the business can implement to improve operations and increase profitability.

Benefits of working with a fractional CFO include: 

Reduction of overhead costs. Costs associated with hiring full-time high-level employees can be high. With outsourcing, companies only pay for the actual services being rendered. Business owners are able to eliminate costly benefits packages, payroll costs, paid time off, retirement, vacation, sick days, and workers’ compensation. When you hire a fractional CFO, you can save up to 40% of the monthly costs associated with hiring a highly skilled employee.

Having the best numbers in play. When you choose to outsource, you can access a higher caliber of employees with more years of experience than you would otherwise be able to afford. When it comes to outsourced accounting, having accurate numbers not only gives you insight into where your company stands in the present but allows you to forecast where your organization is headed.

Save time so you can focus on running your business. When you bring on a fractional CFO, you get leadership focused on a specific deliverable.  This frees up time for your business’ stakeholders to manage other pressing issues around business operations. By delegating responsibilities, you are able to direct your focus toward the growth of your business.

Detecting and preventing fraud. Hiring an outside team of accounting professionals can help to detect discrepancies in your books. Outside CFOs and Controllers can also implement the proper protective procedures to protect your business from potential threats in the future. This can help save your business thousands of dollars. The majority of fraud in accounting comes from lax controls in middle management. 

From the visionary role of the CEO to the operational granularity of the COO to the technical insights of a CTO to the strategic financial acumen of a CFO, the C-suite is important to growth-oriented mid-sized companies. Momentum CFO’s clients have seen, hands-on, the difference that CFO insights make in a company’s ability to pivot, manage growth and prepare for exit. A fractional CFO is the ideal stepping stone for many mid-sized businesses who need the insights a CFO can provide but are not ready to commit to a full-time C-Suite stakeholder.  

Tips for Improving Cash Flow

Cash flow is one of the biggest sources of stress for business owners. While cash management is essential to a healthy business, it is only one of the aspects business owners need to address to have a healthy and profitable business. From getting a loan to collecting aging accounts receivable, there are many ways to improve cash flow.  Here are a few that any business can incorporate, even when they’re flush with cash. Need to hire? Add inventory? Move? Cash is king. Healthy cash flow will put you in the driver’s seat to make strategic moves, and be a stronger negotiator. Best of all, more cash reduces stress.

Let’s examine some easy-to-implement strategies for improving cash flow:

Stay on top of what you are owed

  • Can you invoice sooner to better match the timing of work performed?
  • What about the invoice cadence?  Consider invoicing semimonthly versus monthly.
  • Make it hurt for them to pay you late.  It hurts you, be clear about penalties for late payments.
  • On large projects, ask for a deposit for materials.
  • Require payment in full before you release the final product.
  • Be precise with billing.  If you’re not keeping track, you may be missing out on the money you are owed.
  • Set up ACH, and take the thought out of bill pay by having your customers on an autopay option (incentivize this!)

Put off paying others until the last minute

  • Who needs to be paid first and why? Be sure you’re paying the accounts with penalties first and putting off more lenient ones until your cash flow recovers.
  • Ask for an early pay discount wherever you can.
  • Use online bill pay to pay at the 11th hour.

Use debt to your advantage

  • Refinance old debt.
  • Look at alternative lending options.  Consider factoring, or accounts receivable loans.
  • Pay as many vendors on a credit card as possible. Bonus: You’ll get an extra month to pay and points for flights!

Look at expenses and prices

  • It may be time to increase pricing.  Have your costs gone up? When was the last time you increased prices? 
  • Ask vendors what you can do for a discount. Recurring payments? ACH? a longer contract? You’ve gotta give to get.
  • Partner with others in your industry. Volume purchases or referring companies can get you favorable discounts.

Get the whole company on board

  • From the assistant to the CFO, get the whole team on board with a rolling 12-month cash flow forecast. Many small businesses fail due to a lack of planning and control over cash resources.  Having a more detailed 13-week cash flow plan can give you a heads up before you’re really strapped for cash. 
  • Segment suppliers, customers, and inventory. Don’t try to tackle your cash flow as a whole. Do you have too much cash tied up in products that sell seasonally?
  • Enlist the help of an experienced CFO to set you up for success so you can have more time to focus on running your business. Enlisting an outside expert will generate much more cash than it will cost.
  • Ask everyone for ideas on where you can cut back.  You may be spending on software that everyone hates or a retreat no one wants to go on.  Ask and listen.

Every business owner wants their business to be profitable. 

Productivity and profitability go hand in hand in the business world. There are many factors that lead to a profitable business, including employee productivity. Naturally, profitability will increase when your employees are more productive. Let’s explore controllable factors that influence productivity and positively impact profitability.

Defining Productivity and Profitability 

Productivity is defined as the relationship between output and input needed to create a product. Profitability is determined by how much money is left over after a product or service is sold and all expenses have been paid.

·                Productivity is the best way to measure efficiency. A productive team maximizes their output with less effort. Productivity is often confused with effort. While they are related, they are not the same. 

·                Profitability is a measurement of income compared to expenses. As it relates to productivity, profitability can be measured in part by observing the ratio between what you are paying your employees in relation to the amount of work they generate. 

Profitability and productivity work in a symbiotic relationship. As you work to run a successful business, these two factors are essential to your success. 

Practical steps to increase productivity can include:

·        Training Programs: As a business owner, you must ensure your employees are equipped to perform their job to the best of their ability. Begin with training programs and initiatives to improve operations within your business. Often this means leadership training for middle management.  Great managers are the key to profitability. 

·        Practice, Practice, Practice: Once your employees have been adequately trained they should practice their new skills. The more your employees practice these skills, the more second-nature they will become. Then, your employees will perform their tasks faster and more efficiently. Think about ways to encourage the habits you want to foster. 

·        Encourage constructive feedback: Implementing training programs and leading a team can be challenging. The best way to improve your programs and leadership is to allow your employees to provide feedback. What’s working? What’s not? Where can you improve? Ensure the feedback system gives your employees a sense of safety and that it comes without repercussions. Being heard and being loved are almost indistinguishable for most of us.  So give a little love and let your employees be heard. 

·        Implement follow-up activities: Training and education will not be effectively retained if you do not give your employees the opportunity to continue to use their new skills. As you continue educating your workforce, offer opportunities for them to train newer managers, invite their expertise into the company-wide conversation and remember to reward, reward reward.  

Once you have implemented proper productivity training programs for your employees, you can begin to focus on profitability. How can your employees advance your business’ profitability goals? When your employees feel as though they’re contributing to the greater success of the organization they will work harder to see profits increase. 

Profitability is what keeps your business running. When you inspire your workforce to be more productive, you will likely see an increase in profit margins.

Is your company motivated to create a better annual budget?

Perhaps, in years past budgets have been made (or set) and then reality has crept in proving projections wrong, or the annual budget was based only on historical data and not on well-planned forecasting.  Whatever the case, the promise of a practical, useable annual budget lures many mid-sized business owners into re-examining the process of creating and using an annual budget. 

For corporations and nonprofits alike, annual budgets are crucial to planning income sources and allocating funds for predictable expenses. Planning for those assets, liabilities, and equity as well as cash flow, debt management, or discretionary purposes is necessary for a company to continue to operate. 

When creating a forward-looking budget, the danger is in the desire to make it perfect. Instead of trying to make the budget perfect, let it be a scaffold that the quarterly forecasting will fill in. It is important for companies to set specific cash flow and operational targets. Once those are set, they act as the benchmark for quarterly re-evaluations and forecasting based on actual results. Without quarterly assessments of areas in which the budget and actual expenses are not in sync, there is no room to course-correct in real-time. 

Between the labor-intensive task of creating an effective budget and then updating it with real-time data, many businesses fall back on guesswork and conjecture. The day-to-day running of the business doesn’t allow for the necessary time and level of detail to get accurate, timely, effective numbers. 

Bringing in a fractional CFO can provide the insights necessary to implement an actionable annual budget that gets used by leadership and your internal accounting department.

According to Deloitte’s Global Outsourcing Survey, 59% of companies that outsource do so because of the cost-cutting benefits. While there are many other advantages to outsourcing, one of the most compelling is the ability to reduce costs associated with hiring C-suite team members.

When your company has access to the insights an accurate annual budget provides with the help of a fractional CFO you will be able to more accurately predict and plan for stages of growth.


If you are heading for a merger, acquisition or exit, it’s important to have your finances in order.

Today we are talking about the 8 components of creating a business plan. Starting a business is both exciting and challenging. You can design your own career, be your own boss, and pursue your passion. But, according to the Small Business Administration, only two-thirds of businesses survive at least two years. About half survive at least five years.

Want to know the secret to start off on the right foot?  It’s a killer business plan. You need to define your strategy and tactics for establishing a business with a strong financial foundation.

Are you feeling unsure or overwhelmed about how to get started? Don’t worry. Momentum CFO can help. Let’s start by learning the 8 essential components of a killer business plan. 

1 | Executive Summary

The Executive Summary is the first section of your business plan. It’s a concise and compelling summary of all the other  sections of your plan. It’s the first content section of your business plan, but it should be the last thing you write. Make it short and sweet. Give the reader the big picture of what your business is all about.

2 | Business Description and Mission

Second, describe your business and its mission. Why are you starting the business? When will you launch it? What is your mission? Your vision? Describe your business goals. Make sure your goals are SMART: specific, measurable, achievable, realistic, and time bound.

Provide this information, along with facts about where your business is located, how it’s organized as a legal entity, and your contact information.

3 | Products and Services

Third, the Products and Services section is where you describe the products and/or services you’ll sell. What is their purpose? Why are they unique? How will you price them? 

New business owners often initially set their prices by “gut feel”.  They don’t do the research and analysis required to ensure that their pricing is profitable. Pricing analysis is complex. But, it’s also crucial to the success of your business. Engage an experienced CFO to develop a profitable pricing framework.

4 | Market Research and Competitive Analysis

Fourth, use the Market Research section to describe a problem or need exists in your industry and how your business addresses it. What are the key attributes of your ideal customer? Be specific. The more specific you are, the easier it will be to design a targeted marketing and sales strategy.

Analyze your main competitors. How long have they been in business? What is their market share? What advantages do they have over your business and vice versa?

5 | Marketing and Sales Strategy

Fifth, the Marketing and Sales Strategy section details your plan for acquiring new customers. New business owners are often overly optimistic about how many customers they can bring on in their first year. That’s why is vital to develop a comprehensive sales and marketing strategy.

In this section, describe your overall marketing strategy. Explain the specific tactics you’ll use to drive brand awareness and sales.  How will you reach your target customers? What advertising and promotion channels will you use? Will you develop an awesome website? Ensure it’s optimized for search? Run social media marketing campaigns? Use print or online ads? 

Think about this carefully. You need enough customers to have a viable business.

6 | Organization and Management

The Organization and Management section is up next. Provide information about yourself and your leadership team here. Lenders and investors want to be assured that leadership is competent.

Describe your education and experience. What are your notable achievements? Are you a member of relevant professional organizations? What makes you suited to run this business? Highlight your accomplishments. Next, do the same for other key leaders in your organization.

7 | Financials

The Financials section is an extremely important part of your business plan. How will you fund your business? 

Some business owners “bootstrap”, putting their own money into the business. Others seek funds from friends and family. Business owners with larger capital requirements may seek angel or private equity investment. Still others will apply for small business or personal loans.

Are you seeking capital from outside sources? Know that lenders and investors will scrutinize the Financials section. It helps them decide whether to lend to you or invest in your business. Include schedules such as a profit and loss projection and a cash flow projection.

There are several important parts of the Financials section. Don’t have a financial background? Engage a CFO to help. It’s important to get this section right. You can’t run a profitable business without a detailed financial plan.

8 | Finishing Touches: Table of Contents and Appendix

The final subject in our 8 components of a business plan: include a Table of Contents at the beginning of your business plan. Add an Appendix section at the end. Next, include important supporting documents. These may include your financial projections, business licenses, the resumes of you and your leadership team, etc.

Final Thoughts

In conclusion, starting a new business is exciting! It takes careful planning to do it well. Momentum CFO’s startup planning and implementation services put you on the path to achieving long-term success. 

Our Smart Start Strategy service includes a tailor-made road map for successfully starting your business. It covers:

  • Smart Start checklist of crucial startup tasks
  • One-on-one financial strategy sessions 
  • A comprehensive written business plan 
  • Financial projections for your first year in business
  • Recommendations for financing your business

Ready to get started? Book a free consultation today!BOOK YOUR CONSULTATION

Be sure to check out our other resources for small business: http://updates.momentumcfo.com/cfo-resources/embed/#?secret=DrIUkEHE8W

A Much Loved Holiday Tradition Continues In San Diego.

How the Need for Arts Education and Solid Non-Profit Financial Management is Carrying the San Diego Civic Youth Ballet Through the Pandemic

The coronavirus pandemic has presented major challenges for non-profit organizations in San Diego this holiday season.  Like most non-profits, the San Diego Civic Youth Ballet generates a bulk of its operating expenses from in-person events.  

However, due to current COVID-19 regulations, these critical fundraising events are not possible.  But through our ongoing partnership, we have given the ballet financial strength to weather this economic storm. As a result, they’ll be able to host their annual performance of The Nutcracker for all to view this holiday season!

Non-Profit Financial Management: Why December is so Important

Why is December such an important month for nonprofits? Well, 31% of annual giving occurs in December. And 12% of all giving happens in the last 3 days of the year.  However, this year there has been a lack of traditional fundraising events in place, which could prove disastrous for some organizations. 

As a member of the ballet’s Board of Directors, I worked with Molly Terbovich-Ridenhour to secure over half a million dollars in PPP and Economic Injury Disaster loans for the ballet. These funds will enable us to continue to provide high-quality, affordable ballet education while they develop new strategies to restore income to pre-pandemic levels. 

Scenario planning and forecasting are incredibly important steps in non-profit financial management during uncertain economic times. During the annual budgeting process for the ballet, we created best, likely, and worst-case financial scenarios. This ensures the ballet is prepared for various levels of income loss.READ MORE ABOUT OUR BOARD OF DIRECTOR’S WORK

A lot has changed since the San Diego Civic Youth Ballet opened its doors in Balboa Park at the end of World War II. But during turbulent times, the strength, beauty, and grace of ballet, as well as the vital importance of arts education, has never wavered.  

“I began dancing with the San Diego Civic Youth Ballet in 1964 when I was six years old and loved it immediately,” said Sara Goldman, SDCYB alum, “I was a tall, lanky kid who was teased unmercifully, however, when I started dancing, I felt free.  It brings me great joy to know there are many generations to come who will discover their own love of art through the ballet just like I did.”

Identifying New Revenue Streams

One of the ways I am working with the ballet’s staff and board to keep revenue flowing is through upholding the ballet’s holiday tradition, a performance of The Nutcracker. SDCYB’s dancers have been rehearsing for weeks via Zoom in preparation for this year’s virtual ‘Nutcracker Project 2020!’ 

While not open to a public audience, the 30-minute performance of The Nutcracker will feature the following:

  • The iconic Tchaikovsky score
  • Performed by two separate casts
  • Professionally filmed and available for viewing online from the safety of your home!

Tickets to the Nutcracker Project 2020 are on sale now for $5. The performance will be available for viewing between December 19th to January 1st.  

For the first time in the San Diego Civic Youth Ballet’s 75-year history, their version of this classic ballet and cherished story will be available for all to enjoy this Christmas!

Why the Focus on Non-Profit Financial Management

I often find silver linings in difficult financial situations. And as someone who has been in ballet class since the age of 4, it feels good to give back to something I’m passionate about. 

I am currently open to other Board of Directors positions for both non-profit and for-profit organizations. Here are a few ways I can help: 

  • increase your profit
  • improve your cash flow
  • help you make better financial decisions

If you’re interested in any of Momentum’s CFO’s services get in touch and let’s make a difference together.

Financial management for small businesses can seem like a daunting, scary endeavor. However, if you hide from it, your finances will haunt you for years to come. 

Therefore, today we’ll explore 6 signs of scary finances that small business owners might face. With Halloween just around the corner, we want to turn your financial planning into a sweet treat!

1 | No Cash Reserves

Nothing scares small business owners more than concerns about running out of cash. Will you have enough cash to pay your employees and bills during a frightening financial time? The hardest lesson many small business owners learned during the COVID-19 pandemic is the importance of having cash reserves for an emergency.

To build a strong financial management plan for your small business, you must incorporate saving enough to cover at least three months’ worth of operating expenses. Keep in mind, it may take time to build your reserves. Therefore, set aside a little each month. You can also explore a line of credit as an alternate source of funds. Do not procrastinate. The best time to apply for a line of credit is when you don’t need it.

2 | Insufficient Insurance Coverage for Your Small Business

It’s scary to think about the financial risks you are taking by starting your own business or scaling up a small business. Therefore, insurance policies are meant to protect what you’re working so hard to build. They hedge the risk of financial loss.

In addition, common business insurance policies include general liability, professional liability, property insurance, and workers’ compensation.

Make a practice of reviewing your insurance policies each year. If your business has changed significantly, your coverage might not be sufficient anymore. Need help reviewing your finances and determining what type of insurance policy is best? Let Momentum CFO help you review your policy options to ensure that you don’t experience financial hardship in the event of a loss.  Let’s chat!

3 | Highly-Aged Accounts Receivable

Are your customers tricking you by not paying your invoices on time? If you offer your customers payment terms of 30 days, 45 days, or even longer, keep an eye on whether they’re paying you by the due date. 

Are a large percentage of your accounts receivable over 60 days past due? If so, follow up with those customers ASAP. The longer an invoice goes unpaid, the lower your chances of collecting. Plus, late customer payments put you in the scary situation of potentially not having enough cash to pay for your own expenses. 

4 | Signing Loan Agreements without Reading the Fine Print

Ready to sign that loan agreement for your small business?  Be sure to read it thoroughly to avoid frightening financial surprises. Are there hidden fees somewhere in the fine print? Penalties for early payoff? What is the APR on the loan?

In addition, the lender may present you with what seems like an affordable monthly payment. But, be sure to do the math. Do you have sufficient cash flow to afford that payment for an extended period of time?

We get it. These documents can be tricky. Need help?  Engage Momentum CFO to review your loan document, and create a cash forecast that accounts for all your expenses, including debt payments.

5 | Too Much Debt

Excessive debt can make you feel buried alive.  How do you know if you have too much debt? Ask your CFO to calculate your debt to equity ratio. Debt to equity ratios indicates how leveraged your business is.

What is a good debt to equity ratio? They vary widely by industry. Industries such as manufacturing are more capital-intensive than others. However, a good rule of thumb is a debt to equity ratio of between 1 and 1.5. Ratios over 2 signal that you may have trouble repaying your debts if the business were to decline. Don’t have a CFO in place yet to help?  Check out our services to see if they are a good fit for your small business!

6 | No Internal Financial Controls

Internal financial controls are designed to prevent fraud and ensure the accuracy of financial processes. A key element of financial controls is the segregation of duties. Segregation of duties involves giving multiple people responsibility for the separate parts of a financial task. 

Let’s use check-writing as an example. There should be at least two people involved. One person should write the check and another person should sign it. If only one person is responsible for this task, he or she could, in theory, write checks to whomever they choose. The inappropriate check payment might go unnoticed, or you might not catch it until it’s already been cashed. At that point, there’s not much you can do about it.

Therefore, ensure that part of your financial management includes setting financial controls to prevent scary financial situations

The Bottom Line on Financial Management for Small Businesses

Small business owners sometimes face scary financial situations. The sweet news is that they don’t need to frighten you. 

Let Momentum CFO conduct a financial health check and create a solid financial management plan for your small business.We’ll identify tricky financial situations that may be hiding in plain sight. Then, we’ll show you how to tweak them to keep your business cash positive with a solid financial strategy. 

Book your free consultation today and let’s work together to ensure your finances aren’t frightening. 

Thanks for reading and have a Happy Halloween!