With 2018 already here, more and more businesses are looking to take new approaches to increase or improve their finances for the year. Maybe your company went into the red last year or maybe you just didn’t make as much as you expected. Whatever the situation is, with the downturn of the economy last year many small businesses saw themselves ending up in the negative for the year. Every business will have their share of customers from time to time that refuse to pay their bills or simply just don’t have the means to pay.
With that in mind, how do you go about preventing ending up in debt? Below, you will learn some amazing tips and tricks that will help any small business owner avoid developing bad credit.
Setting Appropriate Credit Limits
Depending on the goods and services that you are offering, it is highly likely that you have to open a line of credit with most of your customers. This means that you provide them with the good and services up front and they pay monthly or weekly payments until the bill is paid off. This is not a problem and normally how most businesses operate. However, there are those customers that take on more than they can afford, which leaves the business holding the bill.
In order to avoid this make sure that you set lower credit limits for those customers that you aren’t familiar with. Until you know with 100% confidence that certain customers can take on a large amount of credit you should limit the amount of credit that is available to them.
Learning To Recognize When Things Are Heading South
As a business owner you probably already have tons of things running through your mind at a single moment. With that being said, you should always know or at least have some kind of ideal where your finances are. If you know that money is getting tight, never resort to credit cards in order to sustain your payroll or bills. Instead, you want to take the appropriate approach to learn to live within your budget. Maybe you can look for additional ways to either cut back or supplement your income.
Pay Bills On Time
Bad credit can ruin businesses, causing them to shutter their doors, if they are not very careful. This is why it is crucial to avoid bad credit at all cost. One of the best ways to ensure you maintain a high credit score is to pay your monthly bills on time. Make it a habit to pay bills as soon as the invoice arrives on your desk. If you fail to do this, your credit score will plummet quickly and you could be facing bankruptcy.
A single late payment can cause your credit score to drop several points. And, consecutive late payments can lead to even worse problems, such as repossession, foreclosure, collections and charge-offs. Also pay bills on time. If you fail to do so, you may need to read Better Credit Blog remove a charge off and learn how to repair your credit.
Avoid Taking On Too Much Debt
One of the biggest factors that influence a business’s credit score is level of debt. If you want to maintain a high credit score, you should start by avoiding taking on too much debt. Just the slightest mishap can lead to the inability for businesses to make timely payments. If the issue is not corrected in a timely manner, these businesses could end up facing permanent closure and layoffs.
Always Pay Bills In Full
There comes a time when most businesses will struggle financially. For instance, companies that offer seasonal services will make a much lower profit during their downtime. The only way to avoid financial struggles during this time is to spread out your money to ensure it lasts the entire year. Also, it is crucial to continue to pay your bills in full, because minimum payments can lead to debt entrapment and then bad credit.
Maintaining a flawless credit score is never easy for seasonal businesses, but with a strict budget and habit of making full payments, it is possible. With late payments come fees that can tally up to a large sum in a short period of time. It can be extremely difficult to catch back up, especially if you are dealing with hundreds of dollars in late payments.