Avoid the 7 mistakes business financing is a key component in business survival.
If you start making these business financing mistakes too often greatly reduce the possibilities for business success over the longer term.
The key is to understand the causes and significance of each for you to be able to make better decisions.
>>> Business Financing Mistakes (1) - No monthly account.
Regardless of the size of your business, inaccurate record keeping creates all sorts of issues related to cash flow, planning and business decisions.
Although everything has a cost, accounting services are very cheap compared to most other costs of a company will incur.
And once an accounting process was established, the cost usually goes down or becomes more profitable because there is no wasted effort in the registration of any business.
By itself, this error tends to lead all others in one way or another and should be avoided at all costs.
>>> Business Financing Mistakes (2) - No cash flow projections.
No significant accounting creates a lack of knowing where you've been. No projected cash flow creates a lack of knowing where to go.
Without keeping track, companies tend to move farther and farther from their goals and wait for a crisis that requires a change in monthly spending habits.
Even if you have a projected cash flow, which has to be realistic.
A certain level of conservatism must be present, or otherwise meaningless in a short time.
>>> Errors business financing (3) - Inadequate working capital
No amount of record keeping will help you if you do not have sufficient working capital to properly operate the business.
That's why it is important to accurately create a cash flow forecast, even before the launch, acquire or expand a business.
Too often, the working capital component is completely ignored with the main aim in the direction of investment in capital assets.
When this happens, the decline in cash flow generally feels faster than enough funds to properly manage through the normal sales cycle.
>>> Errors business financing (4) - Payments poor management.
Unless you have significant working capital, forecasting and bookkeeping, it is very likely going to have problems with cash management.
The result is the need to stretch and defer the payments are due.
This may be the very edge of the slippery slope.
I mean, if you do not find what is causing the problem of cash flow in the first place, extending the payments can only help to dig a deeper hole.
The main objectives of government remittances, accounts payable and credit card payments.
>>> Errors finance businesses (5) - Bad Credit Management
There can be no serious consequences of credit to defer payments, both for short periods of time and indefinite periods.
First payments in late credit cards are probably the most common ways in which businesses and individuals to destroy their credit.
Second, bad checks are also recorded through business credit reports and are another form of black point.
Third, if you put off too long for payment, the creditor may file a bug against further damaging your credit.
Fourth, when you apply for credit in the future, being behind government payments may result in automatic coverage for many lenders.
It gets worse.
Every time you apply for credit, credit applications are shown on your credit report.
This can cause two additional problems.
Early research, several can reduce overall credit rating or score.
Secondly, lenders tend to be less willing to lend to a company that has a multitude of questions about your credit report.
If you find yourself in situations where it is effective for a short period of time, be sure to discuss the situation proactively with your creditors and negotiate payment you can live with so much and does not jeopardize your credit .
>>> Errors business financing (6) - No return obtained
For new businesses, the most important thing you can do from a financial standpoint is to make profit as quickly as possible.
Most lenders need to see at least a year of financial benefits before considering borrowing funds based on the strength of the business.
Before short-term profitability has been demonstrated, corporate finance is based on the primary personal credit and equity.
For existing businesses, the historical results that show the cost of acquiring additional capital.
The measurement of this ability to pay is based on reported net income in the business for an accredited third party accountant.
In many cases, companies work with their accountants to reduce the business tax as much as possible, but also destroy or limit your ability to borrow in the process when the business net income is not sufficient for any additional service debt.
>>> Errors finance businesses (7) - There is a funding strategy
An appropriate funding strategy creates 1) the funding required to support present and future cash flows, 2) the amortization of the debt cash flow can service, and 3) contingency funds needed to deal with unplanned business needs or unique.
This sounds good in principle but often not well practiced.
Why?
Because funding is mostly an unforeseen event and after the fact.
Apparently, once everything is settled, then a company will attempt to locate funding.
There are many reasons for this, including: employers are more focused on marketing, people believe that funding is readily available when needed, the impact of postponing short-term financial problems are not as immediate as other things, and so on.
Whatever the reason, the lack of a viable financial strategy is in fact an error.
However, a significant financing strategy is not likely to exist if one or more of the other 6 errors are present.
This reinforces the idea that all the errors mentioned are interrelated and, when more than one is made, the negative effect may be aggravated.
Topic: 7 Critical Business Financing Mistakes (Read 1326 times)
