What Finance Traps are Holding Your Business Back?

taxesFinance traps are anything that stops the flow of money in the right direction for extended periods of time. The proper flow of funds in a business should go from sales (income), to overhead (including savings and investments), to employees (payroll), then to profit. Any graduate of an MBA online degree will also tell you that finding profit can be the hardest part about starting up a new business. When the flow is diverted to other expenses, such as payments with interest, finance charges, and late fees, they tie up funds that should be flowing into the pocket book to improve the bottom line, not into someone else’s pocket. Are any of these things holding your business back?

Payments with Interest

Interest is how places like banks, loan companies, and car dealerships make money. They offer money to cover things that are needed right now, and charge a percentage extra for being lax about when it has to be paid back. The longer it takes, the more they make.
When financing items, shop around for the best interest rate and financing terms you can get. Avoid this trap by making larger payments over shorter periods of time, and take advantage of same as cash deals rather than traditional financing or loan type situations.


Finance Charges and Fees

Every type of business finds various avenues to build income streams. Finance companies do it by adding fees and charging for additional services. Someone has to keep track of when payments are made and process the payments when they are made.
These things are difficult to avoid when financing so trying to avoid financing at all is the best bet. When necessary though, read the fine print and determine what the fees are ahead of time, review your statements and dispute any charges that are not expected ahead of time, immediately.

Late Fees

We all miss a payment or have to make a payment after its due date from time to time. A due date falling on a date out of sync with income dates happens quite frequently. Financial providers know this and use it to their advantage.
It isn’t easy to avoid these fees without maintaining on time payments. Occasionally, if it is known in advance a payment will be late, calling the provider to extend the due date can avoid a late fee being assessed.

The best way to avoid falling into a finance trap is to avoid financing all together. When that is not possible, know your options, read your contracts, and catch things that might be holding up funds that should be going to your bottom line.

Brooke Chaplan is a freelance writer and blogger. She lives and works out of her home in Los Lunas, New Mexico. She loves the outdoors and spends most her time hiking, biking and gardening. For more information contact Brooke via Twitter @BrookeChaplan

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2 Comments

  1. Always true that to get profit from a new business is very much hard specially for these sort of traps. So it’s very much important to avoid these traps when someone will start a new business and it would be good for the business to continue avoiding these sort of traps. Thanks

  2. This post is really insightful. It’s important to understand where, exactly, your money is going in order to figure out the best way to help your business and its finances to advance. Nicely said! Thanks for sharing!

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