FINANCING YOUR BUSINESS MADE EASY

Nick Roberts

You probably saw the recent headlines that more than 75% of SME's were using credit cards to stay afloat and that credit cards were now the most widely used form of business finance. Whether this is good or bad depends on circumstances as it can be a clever way of getting an extra 55 days free credit or a very expensive short-term fix.

So what are the things to avoid when using credit cards in your business?

• Don't use them to finance Provisional Tax as Tax Pooling is a much better and cheaper way (contact me for details) with a much longer credit period.
  
• Get a specific business credit card rather than using your personal cards as intermingling business and private is messy.
  
• Make sure you record all the expenditure properly in your books as many business owners get in a mess with credit card expenditure. I'll be happy to advise you here, client or not.
  
• Don't draw cash which just incurs extra fees and interest.
  
• You don't need me to point out why credit on credit cards is so readily available so don't be tempted just to pay the minimum payment.
  
• Plan in advance so you don't get caught out by black holes in your cash flow by preparing a simple budget and cashflow forecast. If you can't predict your sales work out your break-even point and use this in your projections as a starting point.
  
• Don't use credit card finance in substitution of pre-arranged longer term traditional business finance which is going to be far cheaper.

Getting your business finances in order is key to your survival. If your accountant is not interested in helping you or you're too frightened to speak to them because of cost get yourself one who cares you can afford!

If you have any tax or business queries of any kind telephone 0800 ASK NICK, e-mail nick@abac.co.nz or use "Contact Us" on www.abac.co.nz. The information in this article is of a general nature and should not be relied upon as a substitute for specific advice.