Good financial habits to get you to a “yes”
While applications for small loans can be assessed purely by reviewing your bank statements, larger loans require deeper analysis of your financial position. If your financial records are in a mess or not up to date, it can be difficult to assess your loan application. As well as getting an idea of your financial discipline (shown by the conduct in your bank accounts), we need to understand the health of your business.
So, carving out just a little bit of time each day (seriously, even 15 minutes!) to get your financial ducks in a row can make it easier to get a yes from us. When your financial house is sparkling clean, we see you as less of a gamble, which means you're way more likely to have your loan application approved. Plus, good habits pay off, saving you and your business time and money in the long run.
Want to put forward a compelling argument for us to approve your application? Here are five finance-savvy habits, you can adopt daily or weekly, that will get you closer to a yes and keep your business humming along nicely.
Stop putting off your bank reconciliation. Accounting software makes it so easy to keep on top of your bank reconciliation. Your bank accounts are the source of truth – when the reconciliation is done! Make it a daily ritual, or at the very least, tackle it once a week. Reconciling regularly helps you catch any weird discrepancies early. That means quicker, easier fixes because you won't be scratching your head trying to remember what happened ages ago. It keeps your P&L and balance sheet up to date, and importantly, ensures they are accurate. Being able to pull off reports that give an accurate snapshot of your business right now gives you bonus points in your loan application.
Review the timing of your payments. Different suppliers will have different credit terms. If you can get any discounts for early payments, take advantage of those. If need be, chat to your suppliers and other creditors to see if you can time your payments to them to coincide with your customer payment cycles. This may prevent you from having to dip in and out of your overdraft, and shows good cashflow management.
Automate, automate, automate! Let technology do the heavy lifting for those boring, routine financial tasks, especially those that are recurring. Think invoicing, payroll, expense tracking—automating these not only saves you a ton of time but also slashes the chance of those pesky human errors. If you can’t automate, consider outsourcing those routine tasks.
Keep a close eye on who owes you money. Nobody enjoys chasing down debtors, but you absolutely must stay on top of those overdue invoices. If your budget allows, you could even offer a little treat for early payments such as an early payment discount. Being on top of your receivables seriously boosts your cash flow and shows lenders you're sharp when it comes to managing your income. If you’re asked to show your aged receivables, it’s best when all the numbers we see are on the left hand side of the page.
Pay your taxes when you file your returns. Don't be a procrastinator when it comes to taxes. Get into the groove of paying your GST and PAYE at the same time you submit your returns—Inland Revenue makes it easy to do this. This habit keeps you totally compliant and stops that debt from piling up. IRD arrears are a liability in your balance sheet which can erode your equity position. If you ever do fall behind, just give IRD a shout. They're usually happy to work out a payment arrangement.
Adopting these simple habits won't just make your loan application shine, they’ll also make your financial life so much smoother, saving you time and money. (Lower accounting fees anyone? Yes please!). By showing that you're on top of your finances and totally responsible, you'll be in a much stronger position to get awesome loan terms.
Remember, making money is one thing, but managing it wisely is the real secret to a thriving business and getting your hands on the funds you need to grow. So, get started on these habits today, and watch your business flourish! Then, when it's time to buy new equipment or finance that growth, we can help you get the money you need—quickly and efficiently, especially since you'll have put some of these suggestions into action!