Steps to Determine the Required Monies to Keep Your Business Afloat

Written By Steps To Faculty Published April 30th, 2010

You have taken the first step to start a business or you may be at the helm of a major organization and are planning for the next fiscal year. Like many other business owners and organization financial managers, you are charged with the daunting task of determining how much business credit is needed to keep the company afloat for the next year given the profits earned to date. This is no easy task. Let’s look at what to do.

Step 1 Review your FICO score

But, nearly all business credit is given to business owners with a FICO score of at least 680 points. As you may already know the FICO score reflects your business or your credit-worthiness based upon factors such as payment history, liens, judgments, and account balances.

Step 2 Look at your financial statements

After reviewing a FICO score, take some time and look at your financial statements or your operating accounting cash flow control form to determine your actual expenses and realized net revenues and net profits.

Step 3 Determine your real expenses

Review your weekly, monthly, and even annual payroll and salary expense reports. Also go over your mortgage or rent payments, inventories and inventory level, and supply expenses. For your inventory levels, be specific. Do not just glance at the monthly or weekly levels of inventory. Also consider how much you spend to store the goods and the periodic demand for the goods. In some cases, you may find that demand for your goods are higher in certain time frames than others and thus may need more funds to cover these spikes in consumer demand. Also, be sure to take into your deliberations that extra staffers may be needed at busier times of the year than at others when examining inventory.

Step 4 Know your cash flow

Finally, understand your cash flow. What overhead items require cash payments and which accounts are paid by credit? Cash on delivery (COD) are required to pay for truck deliveries and some supplies while rent and salaries are paid by check from a bank account. In other instances, new equipment can be purchased using a business credit card. Business owners often fail to assess their real need for cash versus credit payment items on their financial statements.

Remember, money is needed to keep business afloat.


Roger Due

Investing in Your Destiny® & Coaching Program - Wealth Building Summit Dallas, Texas

My name is Roger Due and I am from Albuquerque, New Mexico and I am the owner of the Monsano software company. This has been an absolutely fantastic conference. This is the best I have ever been to.