8 Tips to Financial Stability for Small Businesses

This is a guest post by my business partner George.  Each owner of Pure Adapt will be writing a post while I’m on vacation.

Financing a small business can be very stressful when you are working with limited capital. Not having a solid cash flow can make or a break a company, so properly handling your finances is something no business owner should overlook. Below will outline some ways Pure Adapt has managed sustain positive cash flow and to continue self funding our growth without looking for outside investors.

1. Invest in QuickBooks or some other accounting software
Keeping track of your finances is important to assess how good or bad your business is doing. By entering everything into QuickBooks, you can easily pull up numbers about your profitability, what your balance sheet looks like, cash flow statements, credit card balances, bank accounts and much more. You can also use QuickBooks to track inventory, store customer information, manage your payroll, track your vendor orders and much much more. Once you take the time to learn how powerful QuickBooks is, you’ll wonder how you ever lived without it.

2. Make sure your bank account is accessible via the Internet
While this is pretty standard, it shouldn’t be overlooked. You want to pick a bank to work with who offers on-line banking. This allows you to pull up your account balance at any time, instantly transfer funds between accounts, get electronic statements, as well as easily setup auto payments and alerts. We use Citizen’s Bank for our banking needs. There are plenty of branches in the Northeast, they are open 7 days a week, and their Monday through Friday hours are an unbeatable 10am – 7pm for our local branch. Quick side note, it helps to make a conscious effort to introduce yourself and your business to the branch manager or the person in charge of small business accounts.

3. Apply for overdraft protection for your business checking account
Bank fees are outrageous now a days and can add up quickly. A simple way to avoid any overdraft fees is to apply for overdraft protection on your account. Yes, you’ll still pay a little bit if you happen to spend beyond your account balance, but the fees are minimal compared to over draft fees. I’ve seen over draft fees as high as $50 per transaction. Say one of your clients checks bounced and you made 10 transactions that took your account $2,000 over your current balance. With over draft fees this could potentially be $500 in fees! If you have over draft protection, even at a high 20% interest rate, it would amount to less than $35 if you left the balance ($2,000) for an entire month. It’s worth the piece of mind that you have the ability to cut a check or make a purchase prior to depositing funds or and not get crushed with fees.

4. Apply for a business line of credit through your bank
This may not be something you qualify for right away, but it’s certainly worth looking into. Most business line of credits go off of a percentage of your revenue and the stability of your business. You typically need to prove your business has been operating for 3 years by providing previous tax returns. The business line of credit acts as instant access to cash to pay off credit cards, have a cushion for payroll, take advantage of a deal from a vendor or for any other reason. Ideally, you want to get your business checking account (with overdraft protection) and your business line of credit through the same bank. With Citizen’s bank we can transfer funds between our business line of credit and our business checking account in real time 24 hours a day. This pool of cash has been an amazing asset to take advantage of credit card promotions, which I’ll get into next.

5. Apply for an American Express Plum Card
I love this charge (not credit) card for 2 main reasons. It instantly gives you a 2% discount on your entire balance when paid for within 10 days of the closing date. If your business is experiencing positive cash flow and you can pay off your purchases in full, this card is a must have. We saved thousands of dollars already with this card by making our inventory purchases from our vendors, then paying the balance in full. If you are close to paying the balance in full but don’t quite have enough, this is where the business line of credit comes in handy. The 2% savings for us, typically is worth much more than the few dollars in interest from using our bank line of credit.

Another great reason why e-commerce businesses should look into the Plum card is their rewards with FedEx and other vendors, such as Yahoo! We ship all of our packages via FedEx, and by putting your FedEx charges on the Plum (or any other Amex small business rewards card) you instantly save 5%, which is on top of your already negotiated discount rate with FedEx.

If you can’t pay the balance within the 10 days of the closing date, you have 20 more days to pay 10% of the balance and it’s deferred for 2 months completely interest free! Talk about flexibility from a charge card. I can’t stress how big this card is for our business and it comes highly recommended.

6. Don’t always throw away those credit card promotions
While most of us get bombarded with credit card offers, some of them can really come in handy. The ones that I really like are the ones that are a promotional APR for the life of the balance. Why wouldn’t you want to move as much debt as possible to a credit card with a fixed 2.9% APR for the life of the balance? It’s practically a free loan and no one is going to lend you money anywhere close to that rate. I recommend paying these balances off the slowest since you are locking in low rates for the entire life of the balance.

0% APR offers are good to take advantage of if you plan on paying it off before the promotional period ends. If this is the case, I find it helps to start a spreadsheet mapping out all of your planned payments so that you don’t get hit with higher interest fees once the promotional period expires.

If you have good credit where you can get approved for various cards, you can play the game of floating your debt between credit cards. You can pay one off with another, usually taking advantage of a balance transfer promo the credit card is offering. We managed to keep our credit card fees for all of 2008 to under 4% by playing this game.

7. Create a PayPal account and tie it into your business checking account
PayPal has many benefits to business owners and gives you one more way to send and receive money. PayPal offers an interest on your balance, so if you have a non-interest bearing business checking account, you can opt to keep some money in PayPal to make a return on your money. PayPal also offers random promotions on purchases made with PayPal so it’s something nice to setup for you and your business. It’s free and only takes a few minutes to get up and running.

8. Find an accountant that you feel comfortable with and who understands your business
When we first started Pure Adapt, we received some poor information from our first accountant that cost us thousands of dollars, as well as lots of time and frustration. Part of this reason was because they were trying to do what they could to make the most money, but primarily because they didn’t fully understand our unique business. We now found an accountant who truly understands our business, has experience with e-commerce companies and has already showed us ways to save thousands of dollars. Finding an accountant you can trust and feel completely comfortable with is worth its weight in gold, even if it means going through a few of them.

7 comments on 8 Tips to Financial Stability for Small Businesses

  1. Dave says:

    Great post, good to see you write here. Had a couple related questions myself:

    1) When you are tracking everything in Quickbooks, I assume you also have accounts in there setup for PayPal, Checking, Google Checkout, etc. My question is that I find myself having trouble managing and reconciling those accounts (PayPal and Google Checkout) with the fees that they charge/reimburse. I was wondering how you guys set it up, or a recommended way to go about managing my business’s money in QB from this perspective.

    2) How did you end up finding your second accountant that you liked? I’d hate to waste time/potential money “testing” accountants until I find one I like.

  2. George says:


    Thanks for the feedback. I’ve had to tackle the exact scenario you are describing. We do all of our e-commerce processing using PayPal so that’s an easy one. When you log into PayPal, click on “All Account Activity”. On the left side, you’ll see a box that says History, click on “Download My History”. Personally, I do the custom date ranges, 1 day prior to the day I’m downloading the history. So for example, today is 1/13/09, I’d set the dates up to 1/12/09 since that day has been completed in full. It can get confusing downloading mid day, then remembering to go back and get the rest of the orders for that day next time around. Where it says “File Types for Download:” click on the Quickbooks .iif file. This can easily be imported into QB’s which I’ll describe in a second. The next page shows three fields you have to complete…

    Name of PayPal Account:

    Name of other Expenses Account:

    Name of other Income Account:

    Fill those in EXACTLY how they are setup in QB’s. For example, our PayPal Account in QB’s is just called Paypal since I had some problems originally getting it to export. The other Expenses Account we have setup as a sub-account under cost of goods sold and looks like this 51004 · Merchant Fees, our other Income Account is where we track our revenue from product sales so that account is 41000 · Product Sales. Like I said, just make sure you make them the exact accounts you have setup in Quickbooks, otherwise it’ll auto create those accounts and you’ll have to move them or delete them and start over, which is a PITA. To be honest, it took me a few times to get right. I’d suggest importing just 1 day and get it working correctly before importing a lot of transactions. The next step is the click Download Log and the report is generated. Ok, to import. Go into Quickbooks and go File -> Utilities -> Import -> IIF Files… then select the IIF file that you downloaded from PayPal. Bingo, all of the PayPal transactions, including fees are put into the proper accounts in Quickbooks. The one glitch I find is it doesn’t handle refunded transactions, so even if someone pays you $100, and you partially refund them say even $1, it will not import the $100 transaction or the $1 refund, you have to go back and do those manually. Also, if you have various PayPal transactions that aren’t product sales, you’ll have to go back and edit them into the proper accounts instead of your revenue account.

    I would guess Google Checkout offers a similar way to export, I just have no experience using their system.

    I got our setup to the point where I can reconcile a couple hundred transactions in under 20 minutes, sometimes like 2 minutes if there are no refunds or changes to be made.

    We stumbled upon our second accountant through a referral from an e-commerce company I worked for out of college. They had great luck with him and came highly recommended. I sat down and met him and felt he was a perfect match right from the get go and things just happened to work out. If you are going to look around, I’d ask the accountants if they have any experience handling a business like yours. Chances are slim, since you are in a unique situation like us. Also, I’d avoid going to a big firm, where your work is just going to get passed down to low paid interns or junior accountants. The guy we work with is part owner of his firm and his work shows it.

    Hope this helps answer your questions. I’ve been checking out some of your sites and I may have to shoot you an e-mail sometime to ask you a few questions.

    Thanks for the comment Dave, best of luck with all of your ventures.



  3. Tim says:

    Great post George!

    I think so many become blinded by the excitement of starting a business they forget the house keeping that needs to be done to keep everything working properly. This aspect of the business is far from sexy and cool, but is absolutely crucial for growth and long term success. No two companies will have the exact same plan or goals, but the guidelines you’ve listed here are a great place to start. As you grow you will discover what works for you and what doesn’t, then make corrections and try again.


  4. Dave says:

    Thanks for the detailed response George, it’s really appreciated.

    I’ll shoot you an e-mail with some of my thoughts. I’d post publicly, but I’ll be getting into my order processing methodology, and I don’t really want to steer the comments away.

  5. George says:

    Tim, thanks for the comment. Your absolutely right, the finance side of things is anything but sexy and cool, but is a necessity to have in order, as it is the backbone of any business. I still find myself refining and tweaking the way we handle our finances. There’s no right or wrong way of handling money, I guess the key is to find out what helps maximize cash flow while paying the absolute least back on the money borrowed.

    Dave, got your e-mail and will be replying to it either tonight or tomorrow morning. I have a few ideas for you.

    Thanks again for the comments.

  6. This is so much! Do you do this all yourself or hire help?

  7. George says:

    I personally handle all of the finance for Pure Adapt as of right now. We have such an efficient system that it takes up about 20 – 30 minutes a day to stay on top of everything. Being as organized as possible is the best thing you can do. I utilize a spreadsheet with nearly everything I’d need to know at a glance and in combination with Quickbooks I can pull up virtually any number needed in a minute or two. Not letting the books / accounting get behind is the biggest thing and always reconcile (and backup) each time you use Quickbooks.

    I can certainly see where it’ll turn into a full time job for someone at some point, but I enjoy the challenge of handling it myself because it’s tough to trust a non-owner with all of your businesses numbers. With the way we operate and how fast we’re expanding, it wouldn’t take more than a couple mistakes to put us in big trouble financially.

    If you have any specific questions on anything, please do not hesitate to contact me.

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