Guard your credit diligently

Credit can help smooth out cash flow and accelerate large purchases.

But debt repayment can cause cash flow problems if you don’t manage your credit well.

Account for debt repayment properly. Make sure you include the entire payment for cash flow, but that you’re also separating interest from principal repayment in your financial reports. Interest is a deductible expense, but principal repayments are not.

Create a budget and stick with it. Plan for and control your spending. Budget based on your cash flow, not on your credit limit. I’ve seen good businesses struggle because the owners treated their credit limits like suggestions for how much to spend.

Avoid missing payments. Finance charges, interest, and a lower credit score can make running your business more stressful and expensive.

If you have to miss a payment, contact the credit issuer. If it’s your first time, you can negotiate an extended due date or a partial payment without harming your credit. But know that this can snowball. You don’t want to make a habit of asking for extensions.

So let me know…

Do you have a budget for your business?

If so, how well do you stick to it?

Have you ever missed a debt payment? If so, how did it go?

Hit REPLY and tell me about it!