Understanding And Avoiding Bad Debts For Your Business

The most important thing to consider as an entrepreneur is the difference between a good debt and a bad debt. Good debt is an investment that will grow in value or generate an income. It comes from forms of mortgage, loan, or credits.

Bad debt, is not leveraging your business instead it’s dragging it down.

Bad Debt Image
PHOTO CREDITS: Pixabay

Entrepreneurs need to overcome this three mistakes to become financially literate :

Stop these mistakes

Unstable cash flow. An entrepreneur often underestimates the unstable flow of cash in the counter and don’t envision the months of terrible cash flow. We suppose that we can easily pay back the credit card next month, but we don’t. And that begins the crisis you deal later.

Personal expenses. Many times, an entrepreneur depends on his business for his personal needs. Hard times pressures a businessman and often they quit their day jobs and work hard to build the businesses, but they don’t realize they’re just not ready to pay the monthly salary they need to live on.

Over-confidence. It is the nature of an entrepreneur to be confident, but not to the point of being over-extent. Live on low means invest in assets rather than keeping up with the jones.

Overcome a bad debt

The procedure for the debt is – Kiss Principle “Keep it Simple, Stupid.”

  1. Devise an easy plan.
  2. Be consistent in doing it.
  3. Linger the aroma of success.

First, eliminate unnecessary expenses to pay your debt first. You need to commit a very strict budget and stick with it as much as possible. Seriously, the amount of money you’re going to commit to eliminating this debt has to stretch you.

Protect yourself from bad debt

  • Hire only employees if very necessary do not hire employees only to expect growth in your company.
  • Keep a strict budget and avoid being extravagant.
  • Do not over-extend yourself even in good debt. Always be cautious.
  • Always have an emergency cash.Having ample cash reserves to deal with emergencies.

Success is never final, failure is fatal. In business, it is the courage that counts.