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Why Your Business Needs a Budget

Think of your budget as the financial equivalent of a roadmap. If you’re setting out on a cross-country trip, you wouldn’t just start driving without knowing where you’re headed, how long it might take, or where to refuel along the way. The same is true in business. Without a budget, you risk running out of resources, missing opportunities, or veering off course.

Budgeting isn’t about restriction. It’s about clarity and direction. A strong budget connects your financial resources to your growth strategy so you can set priorities, measure progress, and make confident decisions about the future of your company.

And just like any good roadmap, it starts with knowing your destination. In business terms, that means defining your goals and aligning your spending to support them.

Align Your Goals with Your Spending

Every strong budget starts with clear goals. What are you aiming to achieve this year? Growing revenue, improving margins, building cash reserves, or launching new products?

Once your goals are defined, your budget allows you to connect dollars to strategy. For example:

  • If revenue growth is your goal, do you need to invest in sales staff or customer acquisition?
  • If improving cash flow is your priority, should you renegotiate vendor terms or streamline expenses?
  • If product expansion is on your roadmap, what level of R&D investment is realistic?

A budget forces prioritization. With finite resources, you allocate funds where they’ll have the greatest impact.

Once your goals are clear and your spending priorities are set, the next step is translating that vision into numbers. That’s where your budget becomes a roadmap to profitability.

Create a Roadmap to Profitability

At its core, a budget shows how income and expenses translate into profit. By forecasting revenue by product or service line and detailing expenses by category, you can see whether your strategy adds up.

Supporting schedules, such as compensation by employee or sales by client, provide more insight into the numbers. Instead of one “big number,” you’ll know exactly where money is going and why.

The result is a clear financial roadmap that shows how your business will achieve its profitability goals.

But a roadmap only works if you check it along the way. After you’ve built your budget, the real value comes from measuring performance against it and adjusting when necessary.

Measure What Matters

A budget is more than a plan—it’s a benchmark. Comparing actual results to your budget each month (known as variance analysis) helps you spot risks and opportunities early.

If sales lag behind plan, you can adjust expenses or accelerate sales efforts before problems escalate. If marketing spend delivers higher-than-expected returns, you can double down on what’s working.

Budgets keep you proactive instead of reactive. You don’t just track performance, you manage it.

Tracking results is powerful, but the real payoff of budgeting is confidence. With clarity on your numbers and your progress, you can make important financial decisions without second-guessing.

Make Financial Decisions with Confidence

With a budget in place, financial decisions become clearer. You already know your priorities, planned investments, and expected results. That makes it easier to answer questions like:

  • Can we afford to hire that new executive?
  • Should we sign this long-term lease?
  • Is now the right time to expand into a new market?

When your budget keeps your team aligned and your decisions grounded in data, it becomes more than a spreadsheet. It becomes a tool for growth.

The Bottom Line

A budget gives growing businesses more than numbers on a spreadsheet. It provides direction, accountability, and confidence in navigating growth.

As Dale Carnegie said, “An hour of planning can save you ten hours of doing.” Taking the time to create a thoughtful budget now pays dividends throughout the year. 

If you don’t have the time or expertise to tackle this alone, Momentum CFO can help. We work with business leaders to build budgets that not only track expenses, but also support strategy, profitability, and long-term growth. Schedule a free consultation to learn how can help you plan for financial success in the year to come.

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Why should you hire a Fractional CFO? 

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: 

Expertise:

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.  

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8 Components of a Business Plan to Revisit as You Grow

Many business owners create a business plan in the early days, then rarely look at it again. But as your company grows, your original plan can quickly become outdated. New markets emerge, competition shifts, and your financial picture changes. Revisiting the components of a business plan regularly ensures your strategy, operations, and finances remain aligned with growth goals.

A business plan isn’t just for startups. It’s a tool that should evolve with your company. As the Chamber of Commerce notes, “a business plan is a living, breathing document that you’ll use to direct your enterprise. You should revise your business plan annually and refer to it often after you launch your business.”

Here are the eight components you should revisit.

1. Executive Summary

The executive summary is one of the most important components of a business plan because it captures where your company is today, and more importantly, where it’s headed. Update it to reflect new growth strategies, financial performance, and long-term objectives. A clear, current summary helps employees, investors, and lenders quickly grasp your vision.

2. Business Description and Mission

Mission statements often shift as companies mature. Ask yourself: does your mission still capture what your business does and why? Has your long-term vision evolved? Revisiting this section helps realign leadership and employees around shared goals.

3. Products and Services

The product and services section is another key business plan compoenent that deserves attention as your business grows. offerings that worked at launch may no longer be your strongest drivers of profit. For example, some products may face pricing pressure while others deliver higher margins. Reassess:

  • Which offerings generate the highest margins
  • Where pricing needs to be adjusted
  • What innovation or expansion opportunities exist

Pricing in particular deserves close attention. Many businesses unintentionally erode profit by sticking with outdated pricing models.

4. Market Research and Competitive Analysis

Customer needs and competitors change constantly. Therefore, review your market research to identify:

  • How your ideal customer profile may have evolved
  • Where demand is increasing or declining
  • How new competitors are positioning themselves

Staying on top of these shifts helps you refine strategy and avoid blind spots.

5. Marketing and Sales Strategy

Even the best product won’t succeed without customers. In this section, explain how you’ll build brand awareness and drive Your growth depends on how effectively you attract and convert customers. Revisit your sales and marketing plan to ensure it reflects:

  • The most effective channels for reaching customers today
  • A sales process that converts leads consistently
  • Realistic expectations for customer acquisition and retention

A well-tuned sales and marketing strategy ensures growth projections are achievable.

6. Organization and Management

As your business scales, leadership and staffing needs often outpace original plans. Review your organization chart:

  • Do you have the right leaders in place for the next stage of growth?
  • Where do gaps in skills or bandwidth exist?
  • Are decision-making processes efficient at your current size?

Scaling successfully requires the right structure and leadership.

7. Financials: The Most Important Component of a Business Plan

The financials are the most scrutinized component of a business plan, and for good reason In fact, the most successful companies go beyond historical reporting and focus on forward-looking tools such as:

  • Multi-year profit and loss forecasts
  • Cash flow projections
  • Balance sheet planning
  • Scenario modeling to test growth strategies

Reliable financials help you secure financing, evaluate opportunities, and reduce risk. As the U.S. Small Business Administration points out, your business plan “not only helps you set and track goals, but it also makes a case for why banks and prospective investors should offer you funding.”

8. Finishing Touches: Table of Contents and Appendix

Finally, keep your plan professional and complete. Also update supporting documents like market data, organizational charts, and financial models in the appendix. A polished, current plan gives credibility when shared with investors, lenders, or strategic partners.

The Bottom Line

A business plan isn’t a one-and-done document. It should evolve with your company. Revisiting the components of a business plan regularly helps you ensure your strategy, operations, and financials remain aligned with your growth goals.

Momentum CFO helps midsize businesses strengthen their financial planning, build models that support decision-making, and ensure profitability keeps pace with growth. Schedule a free consultation to bring new discipline and clarity to your business plan.

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Six Signs of Scary Financial Management for Small Businesses

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!

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Paycheck Protection Program Loan Forgiveness

What is the Paycheck Protection Program Flexibility Act?

Have a Paycheck Protection Program (PPP) loan? If so, you may be wondering how to qualify to have the loan forgiven. 

Well on June 5, 2020, the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law.  This means the PPPFA makes it easier for small business owners to obtain loan forgiveness by relaxing the original PPP rules. 

Need to know what changed? Let’s dive in!

PPP Forgiveness Time Period

The Paycheck Protection Program (PPP) is a federal financial assistance program that provides forgivable loans to small businesses. So as a small business owner, you receive funding equal to 2.5 times your average monthly payroll costs. 

Originally, business owners had only 8 weeks to use the loan funds and obtain forgiveness. However, the PPPFA extends the forgiveness period from 8 weeks to 24 weeks after loan origination. 

How Can PPP Funds Be Spent?

The primary goal of the Paycheck Protection Program is to help small business owners continue to pay employees.  For the loan to be forgiven, you were originally required to spend at least 75% of PPP funds on payroll-related expenses. However, many small business owners were unhappy with this requirement. 

Why? Most small businesses were running at a fraction of their original capacity.  They suffered from greatly reduced income. To protect what profit they did have, many businesses decided to reduce their expenses. In many cases, this meant laying off staff.

Therefore,  the PPPFA reduces the requirement for payroll-related spending from 75% to 60%. Furthermore, no more than 40% of the funds can be spent on rent, mortgage interest, and utilities.

Rehiring Deadline and Requirements

The PPPFA also extends the deadline for you to rehire laid-off workers by six months. You now have until December 31, 2020 to rehire your team. In addition, the PPPFA relaxed the requirements for rehiring workers. 

Are you still operating with less staff? Well you may be eligible for loan forgiveness if you demonstrate an inability to:

  1. Rehire similarly qualified employees as those that were laid off
  2. Return to previous levels of business activity
  3. Rehire someone the business employed on or before February 15, 2020

What to Track to Qualify for PPP Forgiveness

How do you apply for PPP Forgiveness? First, keep detailed records of how you used your PPP funds. Be sure to spend only on approved expenses.

Second, provide payroll and other financial information. Thankfully, many payroll processors have developed PPP payroll reports specifically for this purpose. Not working with a CFO? Schedule your free financial consultation now and learn how we can help!

Additional information you’ll need to share:

  • your number of employees
  • how much you spend on mortgage or rent
  • your utilities 

Did you receive an SBA EIDL loan? If so, you’ll be asked to report the loan and loan advance amounts you received. 

How to Apply for Paycheck Protection Program Forgiveness

Here’s the steps to take to apply for loan forgiveness:

  1. Complete the SBA’s revised 3508 application or the 3508EZ form. 
  2. Unsure of which one to use?  Review this checklist to see if you qualify for using the simpler EZ form. 
  3. Check with your lender for specific requirements for submitting your application.
  4. Submit your application.
  5. Need assistance gathering the required documentation? Your payroll processor, CPA, or CFO may be able to help. Operating without one? Momentum brings the benefits of Fortune 500 financial expertise without the expense of hiring a full-time CFO. Schedule your free financial consultation now.

Repayment of Unforgiven Funds

The PPPFA enables more small business owners to obtain full loan forgiveness. However, if based on your use of the funds, you still feel you will not receive full loan forgiveness, there’s good news. The PPPFA extended the repayment term for the loan from two years to five years.  

In addition, the annual interest rate for the loan was left unchanged at 1.0% annually. 

Need more information about the Paycheck Protection Program Flexibility Act? View the full text of the Act here. 

Still Have Paycheck Protection Program Questions?

Need more help with PPP loans and long-term financial planning? Well, we offer services for small to mid-size businesses to help them avoid the expense of hiring a full-time CFO! 

Save money and time by contacting us at 858.284.0314. Or, schedule your free financial consultation.

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5 Financial Tips for Reopening a Small Business

You may be wondering, “is it safe and financially feasible for reopening a small business?” Well, after an extended period of closures to reduce the spread of the coronavirus (COVID-19), businesses that survived the economic downturn are starting to reopen.  

In this article, we’ll review financial tips to help you with reopening a small business and stay open during these uncertain times.

1 | Avoid liability by complying with health and safety regulations

There are daily changes to city, county, and state requirements to help curb the spread of COVID-19. Live in California?  Here’s the latest from Governor Newsom.  

If your business has been closed for an extended period, you’re probably already running low on cash. Therefore, the last thing you need is to face costly fines or lawsuits for non-compliance.  In addition, non-compliance could put the lives of your employees and customers at risk. 

Research what is required to for reopening a small business such as yours.  Stay informed of the latest changes.

Do your employees need to wear masks?  Are you required to post signs about coronavirus?  Must you implement touch-free payment systems?  Change your business practices as required to keep yourself, your employees, and your customers safe and avoid unnecessary expenses. 

2 | Don’t lose sight of deferred expenses for your small business

Have you deferred payments to vendors and lenders?  Don’t lose sight of the fact that you may owe a large sum of money in the future.  Deferring payment allows you to more time to pay your bills. However, it doesn’t eliminate your obligation to pay them.  

Make a list of all the expenses you’ve deferred and include them in your cash forecast.  Don’t be caught by surprise by large lump-sum payments.  

Furthermore, are you worried that you won’t be able to pay your expenses by the deferred due date? If so, contact vendors and lenders now to make alternative payment arrangements.  As a small business during this COVID-19 crisis, they may be willing to make further accommodations. They would much rather see you reopen your small business and make a late payment. It’s much better than no payment at all. 

3 | Understand the Payment Protection Program loan forgiveness requirements

Did you receive a Payment Protection Program (PPP) loan to help you maintain pre-pandemic staffing levels? If so read our latest blog on new requirements for PPP loan forgiveness now to get the steps needed to have your loan forgiven.

Here’s the quick scoop: PPP loans are fully forgivable (you don’t have to repay) if you use the funds for approved purposes.  At least 60% of PPP funds must be spent on payroll-related costs within 24 weeks of receiving the loan, and no more than 40% of the funds may be used for rent, mortgage interest, and utilities.  

First, read our PPP loan forgiveness post first.  Second, contact your lender. You’ll be asked to provide evidence of how you used the funds. Therefore, make sure you are tracking your expenses accordingly.  Not using a payroll system or running your small business without a CFO?  Drop us a line and let’s get you set up for success.

4 | Update your cash projections before reopening a small business

Your account balances may be sufficient now. However, when reopening a small business, your expenses will begin to go up again. What will your accounts look like in six weeks?  

If you are uncertain of how to predict this, create a cash forecast that lists all weekly inflows and outflows of cash.  Still not sure how to proceed?  Send us a message and we can provide consultation as if we were your personal CFO!

A cash projection provides crucial information about when you may experience a shortfall.  Knowing when cash will run low helps you act now to change your future financial circumstances.   


5 | Start prepping your small business to weather the storm

COVID-19 is not going away anytime soon. Furthermore, the coronavirus has put a spotlight on the financial weaknesses of small businesses.  Almost all of us have seen one or more of our clients press pause. Or, worse yet, our favorite small businesses close completely during the pandemic. Some yet to reopen. 

Why? Due to local and state regulations. In addition, because there wasn’t enough cash to continue operating.  

Therefore, here are a few key steps you can take now before reopening your small business. Ensure you are better prepared for reopening post-COVID-19, and for future financial emergencies.

Financial Steps to Reopening a Small Business:

  • Build a cash cushion equal to three or more months of expenses.  Treat savings as a monthly expense that you must “pay” to a separate savings account.
  • Apply for a line of credit to draw from during emergencies.
  • Consider alternate ways of generating revenue, including digital sales.
  • Cut non-essential expenses. 
  • Identify alternate vendors to supply goods and services if your primary vendors can’t deliver.
  • Develop business continuity and disaster recovery plans.  Need help developing a specific financial plan for your small business?  Contact us at 858.284.0314 or schedule your free financial consultation. 

Final Thoughts on Reopening A Small Business

This is a stressful time for most small business owners. We are all navigating uncharted waters. Therefore, don’t hesitate to ask for financial help.

With thoughtful planning and careful financial management, you can rest easier knowing that you are better prepared to weather the current COVID-19 economic crisis.  

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Coping With the Coronavirus Cash Flow Crunch

If you’re like most small business owners, you are suffering from cash flow challenges due to the coronavirus pandemic.  With lots of money going out the door and much less coming in, what should you do to cope with the coronavirus cash flow crunch? 

In this article, we’ll discuss four critical steps to take to ensure your business survives this unprecedented time:

  1. Forecast cash flow
  2. Adapt your business practices to generate income
  3. Cut costs
  4. Apply for financial assistance programs

1 | Forecast Cash Flow

Cash deficits are the #1 reason businesses fail. COVID-19 is exacerbating the problem. How long will it take for your business to run out of cash if you have reduced or no income in the near future? You will surely feel stressed and anxious if you don’t have a good handle on how much money you need to sustain your operations. 

The solution is a cash flow forecast that predicts future inflows and outflows of cash.  By looking ahead, you’ll eliminate the much of the uncertainty about the cash you’ll have on hand next week or three months from now.  Not sure of how to set this up?  Reach out and we can help! 

Remember, do not manage cash simply by checking your bank account balance. A bank account balance is simply a snapshot in time that doesn’t provide insight into how much cash you’ll have in the future.   

Want to set up your own cash flow forecast? Great! Here’s how to create a basic cash flow forecast:

  • Start with your beginning bank account balance for the time period at hand, whether it’s the current week or month. 
  • List all your inflows of cash from sales, loans, or other sources. 
  • List all your outflows of cash such as payroll, rent, and credit card payments. 
  • Add your total cash inflows to and subtract your total cash outflows from your beginning bank balance. Then you will have a forecast of your ending account balance for the time period. 

Still feeling overwhelmed, don’t have a bookkeeper, let alone a CFO?  We offer services for both startups and small businesses. In addition, we already have experience helping businesses reopen and bringing them out of their cash flow crunch due to COVID-19. 

2 | Adapt Your Business Practices to Generate Income

Many states have ordered non-essential businesses to close. If your business was forced to close, and you are still suffering a loss of income, it’s time to get creative.  Brainstorm how you can continue to offer your products and services in a different way. For many, this many mean switching to e-commerce services or product sales. 

Do you typically meet clients in person? Determine if you can deliver your services online via video conference instead. Were you selling products at a storefront? Well, you might be able to promote digital gift cards or offer delivery services! 

Either way,  set up safe, socially-distanced options for your customers to continue to work with you. Stay top of mind. And, don’t overlook the power of social media to do this. Offer special promotions to keep clients engaged. 

Be sure to stay on top of your accounts receivable and follow up with customers who are late on payments. Bill customers as soon as you deliver your product or service. Consider using a factoring company (factor) to get an advance on the receivables your customers owe you before their payments are due to you. For more information on factors, see our article on cash flow. 

3 | Cut Costs to Increase Cash Flow

If you’re suffering from a severe cash-flow shortage, cost-cutting is essential. What should you do? First, reduce or eliminate all non-essential expenses.  Postpone major purchases. Sell excess inventory. Delay payments to vendors as much as possible. 

Rent and payroll are the two biggest operating expenses most businesses incur. Ask your landlord or mortgage lender if you can defer payments to a future date. Some lenders are offering rate reductions on existing debt. Payment deferments of up to six months are available on Small Business Administration 7(a) and 504 business loans and microloans.  Learn more about SBA loan deferments. 

Lastly, in this exceptionally low-interest rate environment, consider consolidating and refinancing any existing debt at a lower rate to save on interest expense. Contact your lender or finance professional for assistance. 

To learn more about how we’re helping businesses reopen post COVID-19, contact us at 858.284.0314 or schedule your free financial consultation.

4 | Apply for Financial Assistance

The Small Business Administration’s Economic Injury Disaster Loans (EIDLs) and the Paycheck Protection Program (PPP) forgivable loans are federal financial assistance programs available to small business owners. 

SBA Economic Injury Disaster Loans are available to businesses and non-profit organizations suffering losses from COVID-19. The funds from disaster loans can be used to pay your employees, vendors, and creditors.  Disaster loans provide up to $150,000 in assistance for business owners and have favorable terms including low-interest rates, and long payback periods.

The Paycheck Protection Program provides forgivable loans to small businesses to pay their employees during the pandemic. The loan amount is based on 2.5 times your average monthly payroll cost. The entire loan amount will be forgiven (you don’t have to repay it) if you use the proceeds to pay for payroll costs, rent, mortgage interest, and utility costs and you maintain staffing and compensation levels. 

Contact your local bank to find out if it is participating in the program.  Get all of the details about the Paycheck Protection Program.

In addition to exploring federal assistance programs,  research financial assistance programs that are specific to your industry and location. Special funds have been established for businesses in various industries. In some areas, local government agencies are also providing assistance. 

For example, the City of San Diego’s Small Business Relief Fund is available to local businesses affected by COVID-19. The fund provides grants and forgivable or low to zero interest rate loans to eligible small businesses. 

Final Thoughts on Increasing Your Cash Flow

This is a stressful time for most small business owners as we are all navigating uncharted waters. Don’t hesitate to drop us a message about how we might be able to work together to get you through this cash flow crunch.

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The Paycheck Protection Program

Editor’s note: This article was last updated on June 9, 2020. It reflects loan forgiveness changes outlined in the Payment Protection Program Flexibility Act.

If you’re like many small business owners, you may be struggling to retain employees during the COVID-19 pandemic. Fortunately, federal financial assistance programs can help. In this article, we’ll discuss the Paycheck Protection Program (PPP). 

What is the Paycheck Protection Program?

The Paycheck Protection Program provides forgivable loans to small businesses. You may be wondering, how big of a loan can you get? Up to 2.5 times your average monthly payroll costs.

Ready for the great news? The entire loan amount will be forgiven if you meet the forgiveness criteria. Forgiveness means you don’t have to repay the loan.

Who can apply for the Paycheck Protection Program?

In general, small businesses with fewer than 500 employees, non profits, and veterans organizations. Sole proprietors, independent contractors, and self-employed individuals may also apply. 

In certain circumstances, businesses with more than 500 employees are eligible. Learn more about the SBA’s size standards for small businesses. 

Unlike other types of business loans, no collateral or personal guarantee is required for PPP loans. 

How must PPP funds be used? 

The primary goal of the Paycheck Protection Program is to help small business owners continue to pay their employees. 

Business owners must spend 60% of PPP funds they receive on payroll-related expenses. They must do so within 24 weeks after receiving the loan. No more than 40% of the funds can be spent on rent, mortgage interest, and utilities. 

Your loan won’t be fully forgiven if you don’t use all of your PPP funds on approved expenses. There are also restrictions on decreasing headcount or wages that may limit your ability to achieve 100% loan forgiveness. 

How do I apply for a Paycheck Protection Program loan?

Don’t delay in applying for a PPP loan. Loans are available on a first-come, first-served basis. The CARES Act initially allocated $350 billion to the Paycheck Protection Program. Later, lawmakers approved an additional $310 billion of funding.

Most lenders began accepting applications for Paycheck Protection Program loans in early April 2020. Which organizations can accept PPP applications? SBA lenders, federally insured depository institutions, and other regulated lenders approved by the Treasury. Find an approved lender here. 

First, see if you can apply with the financial institution you bank with. Some lenders will only take applications from their current customers. They may also require borrowers to meet other criteria. This may include having an existing lending relationship with them. 

If you don’t qualify, you can still apply with another lender that has different borrowing requirements. 

What if my PPP loan isn’t forgiven?

If you’re required to repay your loan, repayment starts 6 months after receiving the funds. 

Payments are deferred for 6 months. But, 1% annual interest will begin accruing immediately. Full repayment is due 5 years after receiving the loan. There is no pre-payment penalty for repaying it sooner. 

About Momentum CFO

Momentum CFO is a boutique firm specializing in outsourced Chief Financial Officer services for small to mid-size businesses. We bring the benefits of Fortune 500 financial expertise to your business without the expense of hiring a full-time CFO. 

To learn more, contact us at 858.284.0314 or schedule your free financial consultation.