A few Business owners make very serious Financing Mistakes, by placing so much emphasis on the benefits of an IT project. Apart from the benefits that a proposed new system brings to the Business such as improved decision making though provision of additional management information, it also brings costs to the Business which requires funding.
I would like to share with you some of the worst Financing mistakes you must never make as a small business owner.
The Cash flow of your business is a very important part when analysing the cost of any proposed new system against the benefits and the availability of funds. The decision to either generate the funds in-house or to get some external financing will impact on the financial position of your business.
If you chose to borrow for instance, one of the worst mistakes you can make is to ask for more money than your business can afford to repay.
Getting money from a lending institution for a project is one thing and repaying the money is yet another thing. You need to make a very careful assessment of what your cash flow is and determine how much money your business can pay back based on your current cash flow and not on anticipated cash flow that you hope to achieve in future.
It is said that “profit is a reward of uncertainty bearing”. Hence Business is full of uncertainties. When something adversely affects your business such as prolonged poor sales, as the owner, make an important assessment and a critical analysis before committing the little resources to the project or before you decide to knock at your lender’s door.
Some business owners make further mistakes and improper decisions which cause them to get even deeper into debt because of assumptions that the situation will get better and then it never got better.
This article is not meant to discourage you from borrowing for IT expenditure but just to be cautious in identifying how much your business can afford to pay for an accounting system and put a contingent plan in place in case things do change.
About the Author:
Fixed Asset Consultant at Prosperity Agencies Limited with over 10 years practical experience in physical verification, bar-coding of assets and fixed asset software implementation +260 211 239859
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