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How To Manage Your Company Debt

Nov 3, 2007
Small businesses are frequently perceived as a means of making easy money in a relaxed and tension free environment. In other words, it's a glorious road leading to the easy life. If only that were so... Misconceptions abound concerning businesses and the lifestyles of business owners. But casual observers are seldom aware of the effort that goes into starting and maintaining a business - perhaps even more so for a small or home business since the needs are split among a small number of people.

In reality, ownership of a legitimate business takes very hard work, long hours, and requires broad accountability. There is little that is casual about it, and the pressure of its responsibilities can be enormous. An owner must dedicate nearly the entirety of available time to its success, and ultimately is solely to blame if the business fails.

Entrepreneurial pursuits offer no fixed income or guarantees of success. People who work "normal" jobs are typically able to wake up at the same hour each day, head off to work, and arrive home around the same time. Business owners, on the other hand, must always be thinking about their company as if it were a needy child in the family, even during sleep hours. Some days, work may stretch from 9 am to midnight, and others from noon until 5:00 in the afternoon with meetings later in the evening. There is no standard pattern, thus making a life outside of the business very unpredictable.

Companies often incur large sums of debt from banks and other lending institutions. Such business loans are normally taken in the name of the company and kept legally separate from the owner's personal finances.

However, late repayment of business loans can inhibit a business from making a profit or even establishing new accounts with providers. Unfortunately, companies often take on enormous amounts of debt - much more than revenue can justify - and then face just as large a problem in paying it back.

Some of the most effective ways of addressing your company's debts are:

1. Keep detailed records of your employees on file in the finance department. It's important to have proper oversight of work hours, salaries, and benefit expenses where employees are concerned.

2. Maintain a weekly balance sheet to make it easier to pinpoint gaps between sales projections and reality; then you will more easily be capable of assessing the causes and issues associated with any deficiencies.

3. If you need money to purchase items for the business, draw it from business profits. Pyramid your earnings back into the company to pay for unexpected needs.

4. If at all possible, avoid borrowing altogether. Make it a business objective to become self-sustaining.

5. Make a detailed plan for paying off any debts each month that you do incur.

These are simple, yet useful, tips for building your company with a strong financial foundation and keeping debt under control. Implementing them will help you to maximize the benefits of your resources and better prepare your business to meet its inevitable growing financial demands.
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