What common credit mistakes firms should avoid
September 04, 2014

While proper cash flow management is essential for any organization to successfully operate, it's important for companies to keep an eye on their credit too. Without a good credit score, modest businesses could face even more challenges when seeking financial support from accounting firms.

However, there are many small mistakes companies, and even firms themselves, can make that have far-reaching and unexpected consequences that accounting software can help avoid. Leaders need to do everything they can to build up their scores and ensure they stays healthy if they ever wish to expand or acquire new assets. Even administrators at accounting firms, though they're essentially experts in economic matters, need to be aware that credit flubs can be irreparable to their business.

The dangers of bad credit
If organizations are careless with their credit, it could make it much harder to ever branch out to new storefronts or hire additional personnel. Not only could it damage the brand name and reputation of a firm, but at the end of the year, it could be the deciding factor between making a profit or incurring losses, according to Small Business Trends.

Not everything always goes as expected when running an accounting business or managing financial records and if leaders expect to be able to handle any problems that come their way, they need an open source of credit to fund any corrections needed to remedy an issue. It's impossible to accurately predict the cost unforeseen dilemmas will have, so it's often best for companies to keep as much credit open as possible to deal with whatever comes.

Common mistakes to avoid
To secure the right amount of credit, certain factors generally have to be met. Something as simple as not using personal finances for business purchases can go a long way when it comes to managing accounting resources, reported Small Business Trends. This can dilute the financial vision of a company and blur the lines of what assets belong to who when any problems arise.

Some firms may think it's best to open up as many credit cards as they can or maybe not use the ones they already have in an effort to drive up their credit score. If owners don't use their cards, companies may stop reporting their results to credit bureaus and could even close an account, stated U.S. News Money.

Opening up too many credit cards can lower the average age of an association's credit history.

Instead of predominantly using one card and building up a large balance on it, organizations should keep the amount owed low on more than one card. By keeping a lower debt-utilization ratio, accounting firms can prevent any negative repercussions of high balances at the end of every month.

Nexus: G-WEBCD6