Mismanaged debt is one of the biggest problems any person can have with their finances; it’s messy and can balloon out of control before you know it. As an extension you can only imagine how much exponentially worse the debt situation can get with your business budget. For the reason of debt management alone you have to demand the vigilant accuracy of your small-business budget. Here are a few other reasons that an accurate business budget is the only one that makes sense.
People’s Paychecks: Your employee’s lives depend on your being able to pay them on time and for the amounts they are owed. If you cannot keep your employees paid then not only are you going to have a more difficult time making money in the future (with no workers comes no future business) but you’re going to develop a bad reputation for one who doesn’t honor their commitments. Nobody; your investors, your customers, other employees, or anyone else; needs to be hearing negative things leaking out about how bad working for you is from anywhere; especially from the inside.
Paying Vendors: If you don’t keep accurate records and you aren’t able to maintain your cash flow then you won’t be able to pay vendors. This has a dual-effect. Not only will you not have products to stock your shelves with but you won’t have electricity to turn your lights on with and other basic electronic functions to keep your business going. If you make the ultimate misstep and begin to short your landlord and/or the tax man for the property tax on your businesses land, you might as well just kiss your business goodbye. Landlords don’t think twice before trying to uproot truant tenants and the all-seeing tax-eye blinks for no one.
Customer Credit: Another dodgy area for not keeping accurate budgets for your business comes when you begin loaning credit to customers. While other people’s debt may not seem any reflection of you, if you just begin lending credit to customers willy-nilly and you don’t carefully screen your credit applicants then there is the double-chance that you won’t get paid. That’s bad news for everyone; vendors, suppliers, landlord, tax-man. It will be because of your bad credit decisions though your business will be the ultimate one who suffers.
Slippery Slope: Another reason you want to keep as open and accurate representations for your business budget as possible is because once you begin fudging the numbers in any way it can become a slippery slope downward. You could think that you will just do a little bit of faking until the next month’s deposits post, but then there could be something else which will plug you even further behind and on and on it goes.
You don’t want to become an archetype of fiscal misbehavior; the term “Bernie Madoff” had very little meaning to folks 5 years ago then it does today. We all know in our heads that cheating anyone isn’t ever a good idea. Rather than trek that slippery slope you should be as open and honest with your investors and yourself as possible. There are always ways to turn things around if you’re honest. But people don’t blink twice when turning away from a proven liar. Get help with your debt before you become a cautionary tale.
Katherine Pilnick writes and blogs about personal financial well-being, debt consolidation, and issues that influence it for Debt.org, America’s Debt Help Organization.
Originally posted 2015-03-17 00:52:00.