Tracking loans and liabilities

Carrying debtWhether it’s your business or personal life, nobody is jumping for joy to pay the bills. But when it comes to your business, making sure that your liabilities are squared away is absolutely necessary for survival.

A common and extremely important liability is any loan that you’ve taken out for your business. And if you’re like most small businesses out there, you’ve got one.

We all know that there are two parts of a loan payment – the principal and the interest. When you pay the principal you’re repaying the actual amount of the loan, and the interest goes to the bank. But when it comes to your books, it’s a bit more complicated than that.

When you pay the principal of a loan, that cannot be written off. It simply decreases the overall balance of the amount that you owe. That payment simply moves over to the other side of the balance sheet. However, your interest payment can go on the P&L, because it is a business expense and can be deducted.

It’s important that you have a handle on how much your payments are, and how long you’ll be making them. It sounds like a no-brainer, but too many business owners don’t keep a close eye on their loan payments for the future. You can use one of many amortization calculators available online to make sure that your payments are in order.

Keeping an eye on the bills should go beyond just your business loans. To make sure that you aren’t missing payments, you should be keeping a good chart of accounts and know how much money is going where, every single month.

If keeping an eye on your liabilities is something that you think you might need help with, call (405) 210-0585 and get assistance with your bookkeeping and financial management.

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