Top Ways To Manage Your Business Finances Effectively

 Every new business begins with personal seed money, but it becomes crucial to keep business finances separate from personal finances. The well-managed balance-sheet of a company eliminates any hindrances that could occur with a balance-sheet full of loopholes.

 Maintaining business finances separate from personal finances is important because managing a business involves many dynamic changes and decisions. Some days the business is flourishing and blooming, but other days you may have to make many difficult decisions and borrow credit even when you haven't planned for it. These situations would naturally have an impact on your credit score.

 If you maintain your business credit profile separate from your personal credit profile, it becomes  easier to keep your profiles safe from the ups and downs of either. The success of your business depends on how efficiently you manage your finances.

 Here are a few pointers that will help you manage business finances effectively:

● Don't underestimate the importance of financial projections. You won't know where you're going until you create targets for your business. Having projections in place will help you determine how much effort you will need to contribute in the financial year to grow your turnover. This will also let you have your tax plan in place. You would not want to pay extra when a few investments here and there could help you save up and grow your business at the same time.

● Stay up-to-date on invoicing and managing expenses. It is best to maintain the habit of book-keeping at regular intervals. Whether it is a weekly or monthly plan, ensure that you record all invoices in one place for easy tracking and quick reference, if needed. Stay on top of things and send invoices as soon as you provide your goods and services. Don't forget to do regular follow-ups on the sent invoices to see if they are on track. Similarly, clear invoices as soon as you receive them.

● Keep a separate business bank account. If you mix your business money with your finances, you are merely inviting losses and tax chaos that will mostly be difficult to explain to the authorities. When you keep your business money separate from your personal finances, it becomes easy to gauge your business profits and ensure that your taxes are taken care of.

● Keep track of the personal loans you picked for your business. Every business begins with personal credit, and once your business starts making money, you can repay it quickly. Apart from a director's loan, avoid taking any other personal loans directed towards your business.

● Don't ignore the power of a business credit card. The account of a business owner is never stagnant, somedays it would be full of cash, and on other days, your account might not have enough liquid money, but your expected payments could increase your spending limits. A business credit card will help you ensure uninterrupted business growth with a backup to carry out transaction-specific to your business.

● Pay yourself first. This doesn't mean that you gather all the profits into your pocket because that won't be the appropriate award. The best thing is to assign 10% of the earnings to yourself and redirect the rest to your business. This will keep your business running and not leave you without any earnings. It also provides you a safety shield for your business expenses and keeps your personal costs secure.

● Don't hold off expansion if you feel you are ready. Every expense you make towards your business will contribute to its growth and expansion. If all the factors are in your favor for development, then you should take the step to invest your surplus earnings in the business itself.

● Evaluate your partners with CRIF's business information report. Every time you make a business partnership for products, supplies, etc., it is essential to know all about your partner's credit history. It includes how well your potential partner can handle tricky business situations, credit lines, legal issues, etc. CRIF leverages its presence in numerous countries to extend businesses' support in analyzing their partners in-depth before establishing a business relationship.

 All of these steps will help you manage your business finances and develop your creditworthiness that will reflect on your CRIF Business Credit Score.

5 Ways To Break Bad Credit

Not all credit scores are excellent and everyone’s score is not perfect all the time. There is always a scope for some errors that can lead to a few bumps in the road. Your credit score is a quantifier for how responsibly you have maintained your credit and repaid them. Now, if you have made a few mistakes like missing loan EMIs or credit card dues, then rebuilding your CRIF credit score should be the first thing on your mind.

 Before you devise a whole plan on how to increase your score, you might first want to address bad credit habits that you could have developed. It’s time to replace them with good credit habits and build a healthy credit score.

 Related Reads:  7 QUICK TIPS TO INCREASE YOUR CREDIT SCORE

 Here’s a list of habits that could be considered bad for your credit health:

● Forgetting the importance of keeping a regular check on your credit score

● Opting for minimum payment options or not paying EMIs and dues altogether

● Taking your credit card statement lightly and not going through it thoroughly

● Over-utilizing your credit cards

● Closing credit card accounts without evaluating their impact on your credit report

 If you have made any of these mistakes, your credit score will see its impact but don’t worry. You can always change these habits and get your credit score back on track by developing good habits and filling your credit history with positive information such as the ones listed below:

 ● Monitor your credit continuously

If a bank checks your credit score, your score will see a drop since it counts as a hard inquiry but not when you check your score. Don’t forget to keep a close eye on your credit score, especially before planning a significant expense.

Keeping a close eye on your credit score will help you iron out the creases that could affect your credit applications. Right from a minute glitch in your KYC details to multiple hard inquiries you have not authorized, ensure that your credit report is clean and rightfully informed.

Checking your credit score regularly will help you track how positively or negatively different factors affect it. This analysis will help you identify the steps to address the potential issues and fix them in time.

● Learn how to read your credit card bill

Get into the habit of going through your bills thoroughly. If you are using your credit card, it becomes your duty to take a close look at the expenses, especially if you are an active credit card user.

Any credit card is susceptible to fraudulent attacks and not checking your statement every month could make you miss such unauthorized activities. If and when you find any such transactions, you should immediately file a dispute to fix it and ensure that it doesn’t impact your credit score.

● Keep your credit utilization low

Your credit utilization is the second most crucial factor in determining your credit score. It tells you how much credit you are using out of your entire available credit limit.

If you utilize over 40% of your available credit limit, you could appear as a credit hungry individual to the banks and financial institutions. To ensure that your credit utilization is in check, keep your credit card expenses to a minimum and take only the required loan amount.

● Avoid closing your credit card account

If you are not a frequent credit card user and are planning to close an account, it might make sense but having old accounts on your credit report adds length to your credit history, which is good for your credit score. In addition to that, it adds to your available credit limit that increases your spending limit and keeps your credit utilization ratio in check.

However, if you plan to keep an inactive credit card open, banks often tend to close them if they are not used for a specific period. So use your card for a couple of purchases now and then to keep it active and contribute to your credit history.

● Build a positive payment history

Your payment history is the basis on which your entire credit report stands, so even one missed payment can bring your credit score down. To add to that, these negative entries stay on your credit report for an extended period. However, if you have missed just one payment, it is not too late to correct your mistake! It usually takes 30 days for a bank to report a missed payment to the credit bureaus. So you can always pay and avoid a negative entry on your report.

Once you start working, your expenses increase, and it is bound to affect your repayments but what’s important is to keep your dues at a minimum and stay regular with your payments.

It is always best to set reminders for your repayments or enable auto pay options for these to avoid any missed payments.

If you stay vigilant and closely monitor your credit report, you can always stay one step ahead in determining what is going right and wrong in it. All you have to do is inculcate these good credit habits and get rid of any bad credit habits that could affect your CRIF Credit Score.