10 Daily Habits of Credit Savvy Business Owners
In order to enjoy success in any business, there are several ingredients that an entrepreneur needs to practice on his day to day running of the business. One of the key things that determine the success of any enterprise is finance management. Money makes the business go round as it does to the world and that's for sure. This means that any business owner who knows how to manage his business credit and cash flow has a 50 percent chance to reach entrepreneurial success.
Credit does play a crucial role especially during the start-up phase of any business. This is because any level of either your personal or business credit score will obviously dictate your purchasing power, the ease with which you get loans, the interest rate you get on loans and so forth.
Due to this, it's vital for any business owner to be credit savvy and look for ways on how to improve and maintain their personal as well as business credit ratings. There are some daily habits and character traits of credit savvy business owners that are developed in the course of running their businesses and here is a look at top 10 daily habits.
They Are Calculative
For you to succeed in any kind of business, you need to calculate every move that you make. By calculation, you will be able to project how the move may impact your business and therefore take precautions. In terms of credit, one needs to do a feasibility test on the different sources of credit that they are willing to accept.
When that is done, the second thing they do is an assessment of the credit's payment period, terms and interest rates.
This will actually enable you to stay well informed and prepared financially during the credit period. That is how credit savvy business owners do it. They just don't take risks, they take calculative risks and know what might come with a certain risk.
After you take credit from any given source, you should have a clear outline of how you will repay the loan prior to taking it so that it does not affect your credit rating negatively. If you took credit from a given source and it needs to be repaid monthly, do your math in terms of daily payments so that at the end of each day you have the cash reserved for repayment. This means you will never default in repaying your loan and thus your credit score will never be impacted negatively.
They Are Honest With Their Finances
For you to reach your business goals, you must never lie to yourself when it comes to finances. Remember, numbers don't lie and if you do lie, one time everything will catch up with you. You need to be very honest with how much you have first before thinking of getting external sources of finances. In your day to day running of your business, the book of accounts must reflect what type of transactions that the business had on that day. Try accounting for everything and try as hard as possible to limit the expenses that cannot bring in cash and most of these are personal expenses.
When it comes to credit score improvement and maintenance, you need to appreciate the fact that the money that is running your business at that time is not yours.
It is borrowed and needs to be refunded. This means that you need to put up measures on a daily basis so as to reduce cash outflow. This will make it easy for you to repay the loan. If you have an employee, it is also good to be honest with them and inform them why certain benefits they used to enjoy before won't be available anymore to avoid financial constraints.
They Plan Ahead
Eleanor Roosevelt said, "The future belongs to people who believe in the beauty of their dreams." This also applies to the business world. For you to enjoy success in any business, you must always plan ahead financially. You should be able to determine at what time will your business need a loan and how the loan will be obtained. Having such a plan will really help you in choosing the cheapest source of loans when the time comes otherwise you could end up getting cash from a source which may be the most expensive ever.
If you are just starting your business, first of all, you need to establish a good working relationship with vendors. This will actually help you to get items on credit, sell and then repay the vendors. This could be an easier way than going for a business loan from a traditional loan. This is what any credit savvy business owner does on a daily basis.
They Think of Alternatives
In life as well as in the business world, it is good to have alternatives and weigh which ones are the most appropriate. As a business owner, there are times when your business finances are strapped and this calls for external enforcement of finances. Thus, any business owner should always be prepared for such hard times and must always have alternatives to solve the problem. The most common mistake that many people make is not having alternatives prior the problem arising, they just fall for anything quick fix. This is dangerous and may hurt your business after some time.
When you are in your business environment daily, think of the cheapest ways you can use to get money without necessarily going for a loan from a traditional bank. You may lease your equipment, try to conserve cash within the business or look for alternative sources of business loans that are way cheaper. Be a thinker and think of solving certain finance issues in case they happen.
They Are Selective
Yes, in the business world, it is advisable for business owners to make the right decisions, otherwise, a slight mistake may cost you a lot financially. Before you make a decision, have several options at your disposal before choosing the best out of them. For instance, when you need credit, you need to have several choices for you to choose from. If you want a vendor, for example, you have to set some standards for the sake of your personal or business credit score.
Choose a vendor that you are sure that he or she reports all the payments that you make to the credit reference bureaus. If you make all your payments in time, reporting this to the relevant agencies will actually raise your credit score. This means that you have to set some standards that even your creditors will have to meet before you establish a working relationship with them.
They Are Not Money-Hungry
In order to save your credit rating, you have to run away from impromptu finances that come your way. Before you go for a business loan or business line of credit and have a pressing need that forces you to look for an external source, never grab every opportunity that purports to lend you money. Doing so could land you in financial trouble in the near future. Be very calculative with any finances that either go out or come into your business.
Having many loans that need to be repaid will make cash conservation in your business very difficult in the long term and this might even hinder the smooth operation of your enterprise. Thus, do not be hungry for money unless there is a feasible need for you to go for it. Balance your financial sheets on a daily basis and utilize what is there in the business to the maximum.
They Believe in Details
All credit savvy business individuals are always detail oriented. When it comes to the financial status of their business, they are aware of every detail pertaining to the book of accounts. All the records are clear and up to date. They are well informed about their personal and business credit ratings, the profit and loss account, the debtors as well as the creditors among many others. This makes it easy for them to plan ahead of time financially.
After doing business the whole day, successful business owners have to record, audit and review all the transactions that were done during the whole day. This really helps to know the real financial position of the business and enables the entrepreneur to come up with ways on how to either maintain or improve the financial position of the business in real time. In terms of credit ratings, credit savvy business owners do make credit inquiries every time and verify that their reports are accurate and up to date.
When It Comes to Finances, They Are Disciplined
One of the things that lead to business failure is lack of discipline when it comes to management of finances. Financial discipline is key and makes up to 75 percent of success in business. You need to have knowledge and self-control when it comes to money. As a focused business owner, you need to beware on how to conserve cash, follow your budget strictly, utilize any type of credit given to you responsibly and keep credit utilization ratio below 30 percent if possible. If you lack financial discipline, even if you have millions of dollars at your disposal, believe me, all of that money will be over in no time due to unnecessary spending.
On the day to day running of your business, you need to develop financial discipline. Record all the cash inflow and cash outflow of the business. This will help you to track how the business is doing and make the necessary adjustments in due course. By so doing, you will never land in any financial trouble with your creditors. This is because you will be conserving cash which will in the short term be used to repay your creditors on time and hence improve your credit ratings.
They Know What to Do and When
As the famous saying goes, you can never get lost if you do not know where you are going. Credit savvy business owners know what they want and are aware of what is supposed to be done and how to do it to reach their destination. They are aware of when to go for a business loan, when to repay any given debt as well as when to pay their bills so as to increase the credit ratings for their business. This is what makes the difference between success and failure of any business.
In order to raise your credit rating, one has to very keen not to miss any bill payments. This is what credit savvy business individuals do. They know when to apply for a loan, when to repay the loan and when to work with a particular vendor and so forth. This is a daily habit that every entrepreneur must develop in the course of running the business.
They Spot Credit Opportunities
For you to be credit savvy and be successful in business, you must posses a very unique character trait which most individuals don't have. You must be able to spot very unique opportunities that might help you in getting the finances that you need for your business. When it comes to credit opportunities, that are easy to repay, one needs to always stay on the look out for such rare chances that come their way.
As you run your business daily, be on the lookout for financing offers that are existing at such time and when there is a need to apply. However, don't apply for a business loan when there is no need. There has to be a need, otherwise, don't go for it since it may land you into trouble.
If you have always wanted to be a credit savvy business owner, this article gives you the green light on how to achieve this goal. The 10 ways when taken into practice will go a long way in helping you to improve and maintain both your personal as well as your business credit score.