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Top Small Business Finance Trends in 2012

Here is What is Happening in Small Business Finance in 2012


If you are the owner of a small business, or an entrepreneur starting a business, you don't want to be left behind. You want to be aware of the trends we see in small business finance in 2012. The business world moves fast and as a small business owner, you have to keep up or your business will not survive. After the Great Recession, we find that the business world has changed and what we have to do to keep up and prosper has changed with it. What should you focus on in 2012? Here are a few suggestions in the form of trends happening right now.

1. The Rise of Cloud Computing for Small Business Finance in 2012

More and more small businesses will rely on the power of cloud computing in 2012 and beyond. The simplest definition of cloud computing is that it is computing as a service rather a product. The "cloud" actually represents the Internet. Laptop and desktop computers, along with smartphones and iPads, are simply tools to use to access the cloud. A simple example of a cloud computing application is the Google documents suite, such as Google spreadsheets.

In 2012, small businesses will speed up their use of low cost, powerful cloud-based data and analytical tools. The use of cloud computing allows business to organize and analyze data from their market research, their website, social media campaigns, and their website.

2. Increasing Use of Mobile Payments by Small Business in 2012 and Beyond

Small businesses will see the increasing use of mobile payments in 2012 and if they want to keep up, they need to join the trend. If a craft business is selling its wares at a festival, for example, setting up a point-of-sale terminal is difficult. Using a mobile phone and a mobile phone app is the solution. Mobile payments can be processed through tablet computers as well.

One example is Intuit's GoPayments. Use a card reader, sent to you by Intuit, with your mobile device, and sync up with QuickBooks and you've got it. If the Girl Scouts can use it, you can! Another example is Square, offered by T-Mobile. It's a simple app, with a card reader. The only downside is that it is not yet universally offered.

In 2012 and beyond, businesses will not always remain stationary. Mobile payments are the answer.

3. Consider the Cost-Effectiveness of Using the Daily Deal Model Such as Groupon

Everyone, including your customers, wants a deal. That's why they flock to services like Groupon and LivingSocial. The question is does the daily deal model, like these, work for brick-and-mortar businesses who are already operating on razor-slim profit margins? Can they really afford the lost revenue from such promotions even though they will almost certainly gain customers from it?

You will find businesses that say they will never run such promotions again as they can't afford them. You will also find businesses that throw themselves into running such promotions. In order to determine if, from a purely financial standpoint, these promotions are good for an individual business, you have to do a fairly simple cost/benefit analysis. One or two such promotions won't hurt a business, but if you do them on a large scale without such an analysis, you could be playing with fire.

4. Consider Investing in Technology to Allow Mobile Delivery of Your Website

Everything is going mobile and businesses cannot ignore it. In order to prepare for the onslaught of mobile users expected by 2013, web businesses should be preparing by investing in technology that will make their websites look good on a mobile screen. Business websites, whether for B2B or B2C transactions, must look good and function well for mobile transactions as soon as possible.

By 2013, one billion mobile internet devices will be in use worldwide and will spend $16 trillion. You want your website to be optimized for mobile devices so you can be part of this explosion.

Your business website is eventually going to have to be optimized for mobile technology. You might as well get ahead of the curve and start drawing in your mobile business.

5. Sources of Financing for Small Business are Changing in 2012

As any small businessperson knows, the Great Recession changed everything regarding sources of business financing. A big part of the reason is that big Wall Street banks helped cause the Great Recession. Once we started into recovery, those banks were leery of lending. They cited reasons such as a high rate of home foreclosures, low credit ratings on the part of businesses, tightening of business credit standards due to all of the above, and the fact that they weren't rolling in money. They weren't rolling in money because they squandered it on home loans they knew would never be paid and on credit default swaps in their investment portfolios that were little more than gambling.

The commercial bank landscape will take a long time, if ever, to get back to where it can lend freely to small businesses. So businesses find themselves seeking money. At present, three sources look most promising -- small commercial banks, microfinancing, and crowdsourcing. Other sources, such as merchant cash advances and factoring accounts receivable are also possible.

Small, local commercial banks are far more likely to give a local business a loan than a large bank divorced from the local community. Credit unions and mutual savings banks are also worth a try.

6. Stay on Top of all Sources of Business and Financial Risk

If there is one thing the global financial crisis beginning in 2008 and continuing into the current European debt crisis has taught us is to be prepared for all possible types of risks in business. Every business should perform regular risk assessments. Many types of risk affect companies such as interest rate risk, credit risk, and foreign exchange risk.

It is important for companies to keep ahead of risk by having adequate cash on hand and planning ahead for debt repayment. The best risk strategy in our current environment is that of risk avoidance rather than reaction to risk.

7. Start to Extend More Customer Credit While Remaining Cautious

Since the Great Recession began around 2008, you probably have not extended much trade credit to your customers or you have been extremely cautious when you did so. It may be time to change your mind-set. The only way to increase your sales is to expand your customer base and one way to do that is to increase your use of trade credit. Time to increase your use of accounts receivables but cautiously.

Trade credit is used for B2B transactions but also B2C transactions. You may be a business that offers store credit to your customers rather than making them use Visa or one of the other major credit or debit cards. Before offering store credit, either consider your existing credit policy or in light of the new economy we are facing, develop a new one. One of the tools you should always use when offering trade credit is the accounts receivable aging schedule on an on-going basis.

8. Stay on top of Market Trends but be Aware of Your own Situation First

The Wall Street Crash of 2008 and resulting recession caught many businesses off-guard. We don't ever want that to happen again. In the future, small businesspeople probably know that it is of critical importance that they be aware of trends in the economy such as unemployment statistics, the housing and labor markets, consumer prices, and other important economic indicators. It is only then that they can position their businesses for economic changes.

More important, however, is to be intimately aware of your own company's situation, first and foremost. Only if you are familiar with your customer base and your financial position can you move nimbly and quickly to respond to changing market conditions.

9. The Growth of B2B Electronic Invoicing

A business finance trend in 2011, continuing into 2012, is the growth of electronic invoicing between businesses. Online accounting programs like FreshBooks can facilitate electronic invoicing.

Some countries, including Finland and Mexico, are mandating or strongly encouraging the use of electronic invoicing and its use grew by 20% in 2011. It is thought that an increase in electronic invoicing will increase cash flow. Although checks are still certainly used as payments, their use is dropping across the globe. Investing in the technology to invoice other businesses electronically will serve businesses well as we move forward into the future.

10. Businesses Will be More Nimble to Keep Customers During a Tense Year

This is a presidential election year. That means that it will be a tense year and possibly a year of ups and downs for businesses as negative campaigning raises economic questions and questions about the direction of the U.S. in the future. It's important the businesses stay flexible and nimble in order to be able to change directions based on a possible new administration or a new direction for the economy.

Businesses also have to be prepared to cut profits to avoid losing customers. Remember "the customer is always right" slogan. In 2012, that is more important than ever as you try to rebuild the customer base you may have lost in the last few years.

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