I’m sure most of us have been in the situation I’m about to describe. You’re low on money and it’s about time for all your bills to come due. You’ve got just enough to scrape by and get everything paid, but you’re leaving yourself just a little short for a while. You make an executive decision to let a bill or two slide into the next month so you’ve got a little more financial leeway. But then the same thing happens the next month. And the next. And then off you go down a very slippery slope into the land of juggling unpaid bills like a circus performer, as late fees, penalties and interest begin adding up. Eventually it feels like you’ll never get ahead again.
It’s a trap that can feel impossible to break but all too easy to slip into, and as bad as it can be from a personal perspective, it can be even worse for a business (and double that for those of us who are self-employed).
I’ve already spoken before about careful budgeting and how that can help to ensure your bases are covered, your bills are taken care of, and your remaining Personal Independent Earnings stay yours. I would like to expand on that a little bit with a few extra common sense points.
The trap I described at the beginning of this article is unbelievably common. As I said, for an individual it’s a bad spot to be in. For a business, it’s even worse. Make sure all of your bills are paid on time to avoid late fees, penalties, and worst of all, interest. Failure to do so will end up cutting into your profit margin, taking what could be a large Thanksgiving sized PIE, and turn it into one of the little personal sized ones sold at many bakeries. Or if things go really off the rails, a butter tart. Not a desirable outcome. Make sure your bills are paid promptly to avoid this, as those late fees, penalties and interest can add up very, very quickly.
Amongst all your bills may be bi-weekly or monthly payroll, should your business be of the type that requires you to employ other people. I spoke yesterday about keeping your customers happy to ensure that they keep coming back. This is equally as important for any employees you may have. The world is full of great money making opportunities, and if your work force isn’t kept happy and paid promptly, they might just go looking for one of them, leaving you in a rather large bind. Again, not an ideal outcome and something to be avoided.
And finally, prompt payment of all your financials helps to build credit. Eventually there will come a time where one or more of your business opportunities may require expansion. This is great news! Congratulations! However, while you’re doing pretty well for yourself (hopefully extremely well for yourself, if all goes according to plan), you may not be able to afford the necessary costs associated with expanding. If you can, that’s more great news, and you should be extremely proud of yourself. If you can’t though, you may have to take out a loan. Making sure all your ducks are in a row financially every month will build your credit rating, regardless of if you’re doing everything off of your own personal line of credit or as a registered business. A higher credit score means a higher chance a financial institution will give you the money you need to grow your business, increase your Personal Independent Earnings, and make even having to worry about the financial stability of yourself and your business endeavors a thing of the past.
Of course, it’s easy to say “pay everything on time.” How do you ensure you’re able to do it? Running an efficient operation – low overhead, low distribution or delivery costs, and so on – can help you keep the money you need for other expenses. Always be watching for ways to improve your efficiency. Of course, as effective as saving money can be, there’s only so much you can save – at some point, you’ll need to pay out money to handle the basics of business, and you don’t want to skimp when spending appropriately will give you access to something your business needs. That’s why it’s also smart to invest in a business that gives you a scalable income – the ability to earn more by working harder or expanding your existing base. Self-employment is one of the best ways to directly connect your work with your reward.
