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Financially fit

Keeping your mind and body healthy is essential but keeping your business financially fit is equally important. How do you do it? That's the question. Firstly, you've got to put your business's credit health first.

Ask yourself, Is my business able to meet its monthly obligations? Can I repay my existing loans without breaking my monthly budget? Can I do it every month? Or do I cross my fingers and hope for a windfall on the 20th? Is my business able to take on more credit without causing any additional stress?

The thing is, maintaining your business's credit health isn't always easy, especially in today's tough economy. Everything seems to be getting more expensive and creditors are slow to pay. And that's why it's so easy to find your business slipping further and further into debt.

As an entrepreneur, you have two choices: let the debt overwhelm you or take action now. To make things a little easier for you, we've got a list of debt do's and don'ts.

DON'T

  • Don't ignore letters of demand from creditors.
  • Don't only pay the outstanding amount on the most pressing accounts with the intention of paying only a little to another creditor next month.
  • Don't borrow more money to pay existing debt.
  • Don't max out one credit card to pay another.
  • Don't fool yourself into thinking the situation will straighten itself out on its own.

DO

  • Get an objective appreciation of the true state of your business's debt situation. Start by obtaining your business's credit report you can buy your TransUnion Business Credit Report by logging on to www.mytransunion.co.za or calling 0861 482 482.
  • List all the active loans, credit and other account information from your credit report.
  • Write down your anticipated total monthly income (not the amount of income you hope to achieve).
  • List all your monthly expenses. Don't leave anything out and do not underestimate.
  • Calculate your monthly budget.
  • Try to reduce your monthly overheads so that you are able to save 10% of your income each month. For example:
    • Examine your budget honestly and critically so see where you can realistically reduce your expenses. Decide what are must-haves and nice-to-haves. Reduce expenditure on nice-to-haves.
    • Look for ways to reduce your must-have monthly expenses. Plan the route and schedule of deliveries to save on petrol; conserve water; switch off computers, air conditioners, and the urn at night; try to avoid unnecessary trips on tolled highways.
    • Use these savings to pay off your debts, and consider paying off the following first:
      • any debts with high interest rates
      • accounts above 35% of their credit limit
      • debts that are close to be being paid off
      • those with high annual fees
      • Create a payment calendar with the due dates of each debt and the payment amounts and stick to it.

GET AN EXPERT'S OPINION

Whether you need advice with your business's credit rating, want to apply for funding to expand your operations, or whether you just need some guidance in terms of your VAT income tax returns, 1st for Women also offers sound financial advice, included in policies at no extra cost, to all of our Business Insurance customers. Call 0860 83 84 85 or visit www.ffwbusiness.co.za today for any help you may need.

Finally, remember to set goals for your debts and, when the time comes, celebrate when you reach a major debt reduction milestone… just don't go overboard. If you follow these simple tips, and make a few short-term sacrifices, you'll boost your business's credit health in no time! 

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