Essential tips for finance

1. If you have trouble determining where your money goes, particularly cash, then keep a spending journal. Document every expenditure for at least a two-week period. This will help you in coming up with a budget as well.

2. Don’t borrow from your 401(k) or retirement plans. This money, after all, is for your retirement. Plus, the tax implications and early withdrawal penalties are so hefty that you really are giving up a lot for a short-term cash infusion. You should have a separate savings account for your current needs.

3. Pay in cash when and as often as you can. It’s amazing how good that feels.

4. Shop around for the best credit card deals and banking programs. By shaving off a few percentage points on your credit card or avoiding bank fees, you can save hundreds of dollars a year.

5. Avoid peer pressure. Your friend might be able to afford five new pairs of leather boots, but that doesn’t mean you can. Who even knows if your friend can and who cares. Take care of yourself first and don’t try to keep up with the Joneses. There will always be people better off and worse off than you are.

If limits might be threatened “think the unthinkable” regarding the sale of assets

Anything that you are not using which has value can be sold and you can expect higher prices early in the recession than when there are many bankruptcy and liquidation sales.

Also look at assets where you are only using a fraction of the capacity. You may be able to generate cash and save costs by selling the asset and outsourcing the service.

If there is a conflict between profitability and cash-flow take the cash-flow option

This may be difficult to do but remember the business stops to trade when it runs out of cash and can’t meet the next payroll or satisfy creditors demands for payments of essential supplies.

The only time to excuse yourself on this is if you have big cash reserves (lucky you) or if you have done your cash flow forecasts and you take a look at the incremental changes for this project and it shows that the cash flow requirements can be comfortably covered.

How quickly will you get your cash back from the profit? Investing in extra working capital for a few months is one thing, investing in fixed assets with a payback of three to four years is entirely different.

If you are cash rich draw up a list of ways you could use surplus cash for the longer term benefit of the business

I like this idea and I have no doubt that the recession will bring problems and opportunities.

Clearly there are different definitions of cash rich and you need to have your long term financial forecasts in place otherwise you risk taking action under point ten which with hindsight shows you acted against point 3, prioritise cash flow over opportunities for profit.