Posts Tagged ‘purpose of line of credit’

Accounts Payable is Not Long-Term Debt

This will be a very short article. It is a follow up to Current or Long-Term Debt that discussed the appropriate use of various kinds of debt.

Accounts Payable

A comment made in a forum about accounts payable is what prompted this brief update on debt and how it is used. The commenter noted that a company was reclassifying some of its accounts payable to a note payable. When I heard this all kinds of bells and whistles went off. This is usually an indication of Read the rest of this entry »

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Excessive Debt

If you have not already heard, the city of Detroit, Michigan is planning to default on a large portion of its debt and probably reduce pension payouts. So what is the lesson for your business?

Borrow Carefully

There are times when a business really does need to borrow to continue growing. However, there are also times when a business may borrow for the wrong reasons. In the case of Detroit and many other municipalities, commitments were likely made that far exceeded reasonable expectations of tax collections. One reason this could have happened was to avoid the Read the rest of this entry »

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Current or Long-Term Debt

There are many ways for a company to get into financial difficulties. One that is very common is misuse of debt. In a past blog, the risk of allowing accounts receivable to become overdue was discussed (see 3 Reasons Past Due Receivables May be Worthless). Also, in the blog posting 80/20 Rule for Receivables Management a way to help manage receivables was discussed. Another leading cause of financial distress is the mismanagement of inventory. See 3 Low Cost Sources of Cash – Part 1 for an example of the impact of this.

The problems of excess receivables and inventory are relatively easy to understand. But, the misuse of debt is a little more hidden.

What Kind of Credit Problem?

When people think of credit problems they are normally thinking in terms of Read the rest of this entry »

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How to Get the Bank off Your Back

I can remember on more than one occasion observing where a client’s bank just wasn’t buying what the client was saying anymore.  Perhaps you have had a similar struggle with your bank.  There are some things you can do to Read the rest of this entry »

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