5 Accounting and Budgeting Tips for Paying off a Business Loan after You Start a New Business
Starting a new business means you’ll have to face many expenses. In most cases, the best option for handling these expenses is to take out a business loan. As your company begins to grow, you must be careful not to get distracted by other concerns and neglect the repayment of that loan.
Although repaying your business loan may seem overwhelming it is a goal that you can achieve. With the right strategies for budgeting and accounting, you can make paying off your loans a breeze. Here are five useful tips to help you begin repaying your business loans.
1) Make a Business Plan
Having a business plan is an important part of every successful business, and it can be especially useful for managing your company’s finances. A well-structured business plan should include:
- Marketing strategies
- Accounting predictions
- Start-up costs
- Loan repayment
Once you’ve created a plan, continue working through the individual pieces and tweak it until it functions exactly the way you need it to. Your business plan should develop with your company. Don’t be afraid to reexamine your plan regularly and make changes as-needed.
2) Reevaluate Your Budgets and Debt
As part of your business plan, it’s a good idea to take a close look at the state of your debt and the state of your budgets. You need to know how much money you’re bringing in, how much money you owe on your loans, and how much you can afford to put towards repaying your debt each month. As part of this process, you should:
- Identify and assess your total debt
- Understand your current cash flow situation
- Figure up your debt-to-income ratio
- Formulate a new budget and stick with it
Budgeting is always a challenge, but it’s one that you’ll need to tackle if you’re going to repay business loans and have a successful business. Keeping debt under control must involve responsible spending. And that means formulating a budget that works for you and sticking with it.
3) Reduce Expenses
One of the things you may have to do as part of your budgeting is work on reducing expenses. Even if you find that you have enough money to cover loan payments each month, taking steps to reduce your expenses can still be a big help. Depending on your individual business’ needs, you might consider:
- Downsizing your office space and letting some employees work remotely
- Negotiating early payment discounts with vendors
- Using less expensive options for marketing, business processing, etc.
- Selling off equipment you don’t use very often
- Creating an essentials-only spending plan
If you’re able to reduce expenses, you’ll have more money available for paying off a business loan. Depending on the terms of your loan, you might even be able to save more money by repaying it early. Just double-check your loan agreement before paying it off early. Some lenders might have a prepayment fee and/or carry the same amount of fees and interest whether or not you pay early.
4) Invest in Accounting Software
Once you have a good business plan and a budget that works for your company, you can support their usefulness with accounting software. Reliable accounting software can help you meet your goals and pay back debt more effectively. And if you choose a cloud-based software-as-a-service company like NextProcess, you’ll also save money by reducing business processing costs.
Running a business means keeping up with many accounting related practices, and a business loan simply increases that workload. When you’re dealing with routine accounts payable, unexpected expenditures, and your loan repayment there is often too much data for one company to manage without help.
This is where accounting software comes in. With the right software, you can simplify your budget and automate many functions for great results. Accounting software helps you manage your budgets, repay expenses and other debts on-time, and easily access all information related to your company’s current financial situation. Plus, it’s not just useful for helping paying off a business loan. It’ll also be a huge asset to your business once you’re out of debt as well.
5) Pay Your Bills on Time
When you are highly concerned with one particular bill (like your business loan repayment) it can be easy to forget about the other bills you have to pay. However, neglecting your other bills will only lead to more debt in the future. Instead of simply focusing all of your energy and funding on paying off your business loan, be sure to stay on top of each of your bills. You don’t want to end up with more debt and late payment fees because you neglected your other expenses.
This won’t be much of a problem with appropriate accounting software. Software, like the Accounts Payable Automation that we offer here at NextProcess, automatically keeps track of payment deadlines. Using this software makes your bill pay much simpler and ensures you’re making all your payments on time.
Your new business deserves to succeed, and repaying your business loan is a huge step towards that success. Contact NextProcess for more information on keeping your company’s finances in order. We’ll be happy to answer any questions you have and schedule a free demo so you can see first-hand how much our software can help your company manage finances and get out of debt.