Small Business Debt, Use it as a Tool but Manage it Carefully
Who do you know that can make money for their enterprise without first investing time, energy, and cash into providing their service or producing their product?
Since most businesses require some type of investment to get started and since few people just have thousands of dollars sitting around waiting to be invested, the money needed to finance a company often has to be borrowed.
Although business debt is often what we leverage in order to begin or expand our business it’s something we have to manage wisely if we want to stay in business. Many small enterprises are forced to close their doors when their debts outpace their income and their credit dries up.
A recent article on avoiding business debt offers some tips entrepreneurs can use to help keep their debt in check.
Collect Accounts Receivable
You have to spend money to make money. A line of credit allows you to spend the money to do the work before your customers pay you. One of the problems that small businesses face is that we’re so focused on landing the clients, completing the projects, and pleasing the customer that we don’t put enough emphasis on getting paid.
We assume that if we do all these other things right, the payments will come in. The article suggests using PayPal and other web-based invoicing applications to automate the billing and collection process.
Manage Tax Receipts
This one is kind of a no-brainer, not much technique required. The main point here is just to take the time to file business receipts and that it will pay off with nice deductions next tax season.
Prioritize Your Projects
How many times have you had a great idea late at night and rushed to implement it without considering the impact it had on your other current projects? Entrepreneurs are constantly coming up with new ideas but we don’t have the time or money to chase them all at once. If you can’t prioritize your projects you many end up losing focus and running out of cash before any of them are profitable.
Spend in Moderation
Pretend you’re back in college and living as frugally as you did then. Every cent counts, buy only what you need during the startup phase to help ensure the cash flow will cover your debt payments.
Pay Your Credit Card Bills
Accumulating late fees and interest charges is a speedy way to eat into your bottom line. If credit card expenses are mounting, consider transferring your balances to the Advanta Life of Balance card, it offers low rates on balance transfers for the life of the business card.
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