One of the biggest reasons that most small business do not get approved for business financing is because of their credit score. But disorganized financials are also another factor to blame. Lenders want to make sure that your business is viable and will be able to repay the debt. Organized and up to date finances are essential if you want to increase your chances of getting approved.
The following are simple ways you can organize your business finances.
Create an Easy Filing System
Not paying pills on time can lead to late fees and if you do not handle them right away, they will pile up fast leaving you to feel like you are disorganized, and everything is out of control. One way to fix this is by scheduling some time each week to sort this out. Create a simple filing system based on the invoice dates for consistency. You will need to create files for papers such as taxes, charitable contributions, and health insurance paperwork.
Do Not Mix Personal and Business Finances
If you do not have a business bank account, do not wait any longer to create one. Make sure to use your business account for business expenses only. If you need funds to pay personal expenses, pay yourself via payroll and/or owner’s draw then use your personal funds to pay personal expenses.
If you are combining your personal business in funds in business account, it can jeopardize the legal protection your business structure offers. It is going to be difficult to do your taxes if you do not separate them as well. And using personal accounts for your business can definitely make it more difficult to get financing as many lenders want to verify business revenues.
Plan for Expenses
Make sure that you set aside funds to pay your annual bills too. If you do not plan ahead for those expenses, you might run out of money. Forecasting your business’s financial needs and then planning for them is key. Many business owners outsource to finance freelancers to help with some of the more complicated planning. Software tools and websites can help too.
Setting up autopay is a great way to pay your bills, so you never forget. You will save money on late fees and interest charges. As a bonus, this strategy can help you build and protect your business credit score since business credit reports can include payments that are just a day late.
Consider using your credit card to make those payments and you can earn rewards. Just make it a point to pay on time to avoid interest charges.
Tailor Your Financial Reports
Financial reports play a crucial role in getting approved for funds. Some lenders might want to see your balance sheets, profit and loss statements, and other financial statements and analyze your revenue. Consider your creating your own report in your bookkeeping system to make it easier to analyze all the numbers.