As the economy continues to slip, many small business owners are having to re-learn how to run their businesses.

They are working harder for less money, taking on clients they never thought they would, and -- even more significantly -- working with some of their customers at a loss just to keep busy. 

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Judith Moore falls into the latter category. Moore runs Charleston, S.C.-based Charleston Cookie Company, which sells premium baked goods.

“It’s been challenging,” she said. “We’ve had enormous growth up until this year. Now it’s an exercise not in growth, but creativity.”

Moore cited one of her wholesale clients who has been there since the beginning. The client is no longer the regular source of income they once were, but Moore keeps them on in hopes business will turnaround someday.

“I’m not making as much money on them as I was," she said, "but because of the relation and association I want to have with them, I am certainly going to keep them around because they’ll be great when this economy turns around.” 

In fact, many other small business owners who declined to be identified for this story said they were trying to keep up the appearance of being busy while the economy was slowing down.

Many of these entrepreneurs said they have never experienced an economic downturn, and as accounts receivables sit higher than normal, some small business owners are being forced to dip into their savings while others are reducing head counts. And many small business owners are worried they’ll have cash flow problems in the next six months, according to recent survey data and industry expert observations.

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“We’re seeing a lot of problems right now,” said Alice Bredin, a small business adviser with American Express OPEN. “A lot of companies have a lot of money on their books – but somehow they can’t make payroll." 

Moore started her cookie company in 2003, when the economy was growing, and while she said business is still good, she's had to learn how to pinch every penny – much more than she was doing before. Her cost savings measures have been complicated by rising ingredient costs. Cocoa is up 50% from a year ago, and butter is up 7%, according to data from the Chicago Mercantile Exchange.

Even businesses that have been through this before are having to re-learn to adjust.

Sissy DeMaria is president of Kreps DeMaria Public Relations in Coral Gables, Fla. She’s been doing public relations for 20 years, making it through the economic downturn in 1990 and 2001.

DeMaria said she’s had to change her firm’s makeup multiple times in order to stay in business and remain successful. Where her firm was doing 80% of its business in 2004 and 2005 in real estate marketing, now the firm is doing about 20% of its business in real estate, she said.

“We had one law firm in 2005, we now have four,” she said. “It used to be we wouldn’t take a client for under $4,000 a month, we are now doing some work with clients who are $3,000 a month. You’re working harder for less money.”

One challenge DeMaria has had is collecting account receivables. “We can quickly get weighed down,” she said.

She’s also diversified her clients into more recession-proof industries, such as hospitals. 

“We’ve become more of a hybrid firm, doing both PR and now advertising as well,” DeMaria said.

Small businesses cite account receivable issues as one of the biggest problems they face. According to a March 2008 survey done by American Express OPEN, 24% of small businesses thought their account receivables were too high, up from 13% six months ago.

Bredin, who works in consultation with OPEN, said she believes the 24% number is going to rise.

“You need to know who to bill and how to bill,” she said. “If your client wants the invoice number in italics in hot pink lettering surrounded by balloons, do it. You cannot afford to let those get out of hand.”

Bredin said while it’s all right for small business owners to carry large clients who’s historically been profitable at a loss or break even for a temporary period of time, you don’t want to make a habit of it especially in this uncertain economy.

Along with account receivables, many small business owners are now dipping into their personal savings to keep things going. According to the same survey done by OPEN, 26% of small business owners have used personal or private funds as a primary way to make ends meet, up from 18% a year ago.

“You don’t want your ‘a while’ to go on and on and on,” she said. “You have payroll to meet. You don’t want to be known as the cheapest vendor.”

If a small business owner is unable to negotiate with their customers on higher prices, it might possible to negotiate with your suppliers, Bredin said.

Moore did just that. She said she locked in a price on butter eight months ago when dairy prices were lower and that has helped out.

“I know realize that because I am a bit bigger, I have a bit of leverage,” she said. “Not a lot, but it’s enough to get by.”