Financial Fiascos: The Top Business Money Mistakes

summary

In this conversation, Jonathan Fodera and Keith Gause discuss the top mistakes business owners make, focusing on credit management, financial organization, and the importance of choosing the right financing programs. They emphasize the need for business credit, proper bookkeeping, and effective client management strategies to ensure sustainable growth and success.

takeaways

• Many business owners use personal credit for business expenses, harming their credit scores.
• Building business credit should start as soon as the business is established.
• Five fundability factors are crucial for business credit: phone number, address, bank account, email, and website.
• Operating solely based on bank account balance can lead to financial mismanagement.
• A budget is essential to understand spending and correlate it with financial statements.
• Using lines of credit for short-term needs is vital to maintain cash flow.
• Invoice factoring is a better solution for cash flow issues than relying on lines of credit.
• Client management systems are essential for tracking sales and maintaining relationships.
• Investing in client management tools is crucial for business sustainability.
• Financial decisions should be based on accurate financial data, not assumptions.

🎙️🚨 PODCAST GIVEAWAY 🚨🎙️

Apple Podcast: https://podcasts.apple.com/us/podcast/the-integrated-entrepreneur/id1721945867

Spotify: https://open.spotify.com/show/44djZ5wR9cyqTAKJs8DyEX

Subscribe to the podcast and email poof of subscription to jviccora@integratedbusinessfinancing.com.

🎁🏆  PRIZES  🏆🎁

🥇 Capital Tools Program ($1,999.00).

🥈 Business Strategy Session ($1,000.00).

🥉 Merch (Tees, Hats etc.).

🏅 Join us on the show.

Podcast Info: https://feeds.buzzsprout.com/2285267.rss

Apple Podcast: https://podcasts.apple.com/us/podcast/the-integrated-entrepreneur/id1721945867

Spotify: https://open.spotify.com/show/44djZ5wR9cyqTAKJs8DyEX

Also Check out:

Foundation Business Workshop: https://info.integratedbusinessfi.com/foundation

Join Jonathan in the Capital Tools Program: https://www.thecapitaltoolsprogram.com/home

Jonathan's Facebook: https://www.facebook.com/John.fodera.3

Jonathan's LinkedIn: https://www.linkedin.com/in/jonathan-fodera-391a98a1/

Jonathan’s Instagram: https://www.instagram.com/jonathan.fodera

Integrated Business Financing Website: https://www.integratedbusinessfinancing.com

Transcript

0:00

Hey, what's going on everybody? Today we're going over the top three biggest mistakes that business owners make And what we wanna do is we wanna uncover these and show you how to avoid them, so I'm gonna say the first one and Keith can back this up because Keith does it, he works with entrepreneurs at all levels, right? helping them grow their business very similar to what I do, except I just provide the financing. He does the consulting, the connection, making sure the systems and processes and marketing is all on point. And so he sees the same exact thing just through a different lens. And the first thing I constantly see, is a lot of business owners using their personal credit to build the business. And what I mean by that is they're using personal cards or cards that report to them and not only under the business. what this does, And I'll tell you how you can find out if you're one of these people as soon as we're done. First, what it's doing is it's actually lowering your credit score, okay? Because you're using a lot of your revolving credit. And then what happens is a lot of people when they get stuck, and they can't pay it off in full every month, well, now you have a problem because you're paying interest on top of interest that's compounding on your credit cards. And you're sitting there with a very low credit score. And I have seen operators, that should have a 750 plus credit score in the mid to low 600s because of their heavy utilization, And that's what's causing this is because you're using the wrong tools to grow and finance your business. It's dragging down your credit. And then once you're tapped or once you're high, on those revolvers and your credits are low, something happens. That's when you guys are looking for financing, And that's why people are coming back to you guys with awful programs, awful solutions, Where if you separate your business and personal credit a little bit, Put a lot of your, necessary expenditures on trade lines from your vendors. that report to your business. Well, now your business credits getting built. You don't have all this high revolving personal debt and you have a great credit score. So it's easy to apply for a line of credit. It's easy to apply for an SBA loan and you have all the actual solutions you need, in front of you. But most people don't understand this. Most people just go out, get a couple cards that are in the business name. And here's how you could tell one. If you're someone that uses a lot of credit and your credit's in the low to mid, even high 600s, this is impacting you. All right? If it's even below that, it's definitely impacting you. If you're in the high sevens, you should be okay. Mid sevens, you should be okay. Even low sevens. But just understand, if you're in the low sevens and you're doing this, it will eventually bleed over. So you need to take the right steps to build your business credit. I'd say probably 70 to 80 % of the people that I see have some situation that is set up like this. And it is destroying your credit, it's hurting your business, and it's limiting the options that you have. Here's what you should do instead. You should build your business credit. the best time to build your business credit is when you start your business. The next best time is today. go to DNB. claim your score and start optimizing your profile. And if you need help doing that, you can either reach out to me or go on our YouTube channel. And I have five or six videos detailing how to start building your business credit. Do this stuff right away and then everybody that you buy materials from, that you buy inventory from, that you buy any materials or anything like that. Ask them to report to your business credit and get 30 day terms or 60 day terms. what this is going to do is it's going to allow you to actually put that under your business, stop hitting your cards on a monthly basis and start building your business credit. So now you have a good personal credit score and a great business credit score. This is something that I am dead serious on guys and almost all of you make this mistake. What are the first two to three steps that they should do? Because we all hear about it, get a Don and Brad Street number, get a better business bureau number. Let's talk about those, let's talk about where it's worth someone spending their time to be impactful for a credit. a product. So the first thing you need to do is make sure you have the five fundability factors covered. And this is really simple. Really easy, and I would do this before you claim your profile. One, you need a business phone number. It can't be a Google voice number. It needs to be registered to the business. You need a business address. It can't be a PO box. And if you're home-based, there's no problem putting your home as the business address. You need a business address. Next, you need a business bank account. Every single one of you guys should have a business bank account. I'm telling you to go with a major or a local bank. Do not go to any business bank that you can open up that you can't walk into a branch. All right. There is a big push for these fintech companies to get into banking. And that will mess up your business really quickly. It will limit the financing options that you can get. and they don't have somebody that you can speak with in person in a branch. So don't do that. Open a regular business bank account, call it a day. Next, you need a business email. cannot be Keith helps businesses at Gmail. It has to be Keith at black label.com or whatever your website is, It needs to be a continuous business email. And in the last part of this, even if it's a one page website you make on Wix or something easy, you just need a business website that has your business phone number, your business address, and a business email to contact. Once you have those five fundability factors squared away, go to dnb.com. claim everything, put those five fields in there, And then start applying for business credit. You do not need to pay DNB to do this. In fact, if you need someone to build your business credit for you, I can connect you with who we use internally because they're great. And they can build it for you a lot cheaper than you would pay DNB to do it. And then you want to start applying at all of these different places that will extend business credit. A great one is Uline. And when you fill out the application, you put your DNB number and you put your business tax ID number. Do not put your social anywhere. As long as you don't have your social there, they may kick it back and say, hey, your social is not on here. But tell them, hey, I'm only applying for business credit. They'll probably give you a minimum of, let's say, $500. But that's a start. And then ask them. Make sure they report to DNB. Uline does. You can go Staples, Best Buy, Home Depot, Lowe's. Those are all easy ones to open up. And the idea is you want as much revolving credit under your business as possible. The more accounts you open and use and pay back, the better. All that real quick since you touched on that, Because before it used to be, if you had open credit cards that you didn't use, it was a negative stick. Then so people started shutting those cards down. Now it's utilization. It doesn't matter if you got 50 cards open and you're not really using them. It's all utilization factors recently, right? So let's talk about this. How should someone utilize, let's just say Home Depot, right? Or Best Buy. Call Best Buy because everyone can use that for their business. How should someone use this credit? What's the perfect way today? what's the best method for them? Use your credit, have it reported, quickest impact to their credit score. Pay it off use it pay it off use it pay it off. Yep, that's I'm getting at. So the best thing for everyone to do from a utilization factor, right? We have people talk about all the time. Well, how should I pay the card off? What should I put on the card? So when I talk about operational expenses, fixed operational expenses, meaning expenses that a business is gonna need that they really can't go without. So cell phone, internet, cable, those types of things, right? Bar notes, anything you can find on them that you're gonna pay every month without fail in the business, I typically tell people go get an American Express business card, throw all those expenses on it every month, and then make one payment at the end of the month. Here's the thing, pay the whole card off every single month. Do not leave one single penny over because then they will hit you with interest on that card. Correct. Yep. avoid interest while using credit cards is to pay it off in full every month without fail. The second component is now you don't have an issue with utilization. doesn't matter how much you run those up. They're traditionally don't have a cap on them, right? The Merit Express is pretty decent at giving businesses kind of a ball field to play on until they realize that you've hit a limit to where you can't support it and then they will cut your ass off in heartbeat. So. The quickest way that I've found from utilization to actual reporting is American Express because they're one of the biggest players of business credit cards. And it's typically around the 90th day when I start to see that the reporting starts to kick in and business credit starts to climb. So if you have anything different you want to add from your side, but that's what we're seeing a lot of. of. Here's another thing I would tell everybody here, and this will help boost anybody's credit. I want you guys to understand there's two things on any of your credit card bills. You see a statement date and you see a due date. The due date is when it's due. The statement date is actually when it reports, and the statement date is usually three to five, maybe seven days before the due date. So what that means is whatever is on the card on the statement date is what's actually getting reported to the credit bureaus. So if you're one of those people I spoke about having issues with credit card debt, but you're paying it and you see a low score, here's what I want you to do. Change your auto pay to make sure you pay the full statement balance. on the statement date or a day before the statement date. And if you can do that, and you do that for two or three months, you should see an increase because it's going to report less utilization. And if you do that across all your cards, you may be able to boost your credit significantly. You might be able to boost it 50, 70 points by doing that. Try to implement that as well. And then if you see your credits start going up, You know you are one of the people that was absolutely impacted by how you finance the growth of your company. And then that should be a clear indicator that it's time to make some adjustments. I don't mind anyone using credit cards for your business. I put so much on my credit cards for the business, but I pay them off every month. So my utilization's down and I pay it by the statement date and I know my credit score is gonna be 750, 770, 800, whatever it is, it's as good as you can get. So if you do that, that will be a massive win for you. Try that, get back to us. So that's the first mistake I see. The second mistake is people not having their books together or not understanding what goes where and how to use it. This is like you fighting a war and you're out in open field and you're taking fire from every which way. And you have no idea where to shoot because you don't know where your enemies are. it's like flying a plane blind through a fucking thunderstorm. and I don't understand. why so many business owners have this issue. Keith, what's your easy fix for this? fix is for everyone that currently operates off the balance of their bank account and not at the balance of their P &L needs to quit operating business for at least 24 hours in order to get their books in order. One of biggest things we see is, do I have enough money in the bank? And if I do, I'm going to go buy the thing that I'm looking at, right? But what we're not looking at is accounts payable, accounts receivable, and money's coming in. Who we owe money to. top line revenue is not in fact the same as net profit, Top line revenue means not my money. Net profit means my money. And we can't operate off of what some jackass says they did in top line revenue. know the proverbial hey how much did you make last year we did 50 million bitch please show me that net profit of 50 million because I probably don't know you if that's your net profit you you are on a different playing field than me and you're not spending time with people like me that aside in order for someone anyone who operates a business they must know in order for them to make decisions that are appropriate, they have to know balance sheet and P &L. I had a client this morning reach out to me and he's like, hey man, after all, know, holy shit, I was looking at my profits and I thought it was 50 grand a month and it's really 10 grand a month. I wasn't accounting for my loan payments. Loan payments aren't on the P &L, those are on the balance sheet. So if you're looking at your P &L and it's showing you 50 grand net profit every month and you're thinking, holy shit, I'm buying a house and I can go get this car and I can go do that thing. And the next thing you know, you're broke, it's shit because you weren't paying attention to money out. Right? So the biggest thing first is do you even have a budget? Budget's got to go first so you understand what you're spending money on and where, and then you can correlate that to your P &L and balance sheet. Okay, most people that have this problem, it's because they don't have a system like QuickBooks or any QuickBooks competitor. I'm not here to tout QuickBooks, okay? It's just probably the easiest one I know to use. But having QuickBooks and then getting a bookkeeper, If you are doing more than $30,000 a month, $20,000 a month, you should have a bookkeeper. It doesn't cost a lot of money. I can tell you, I don't know if I'd probably spend like three, $400 a month on my bookkeeper. we charge anywhere between $200 and $1,000 a month depending on the number of transactions. So you need a bookkeeper and you need them to work in one of those systems. Why? Because then when you need financials, you could just call the bookkeeper. Hey, are you up to date? Yes. All right, cool. You go and click a button and you have everything at your fingertips. Right. And now it's giving you the information you need. to point your business in the right direction. Okay, because without that, you're flying blind and no one wants that. Yeah. can tell you that. mean, first-handedly have seen dramatic differences in people when they make the decisions based off what's on the PNL in the moment. Right. Cause you can pull it at any time and go to any date and time and any time point. It's specific. Right. And be able to say, do I need to hire? Do I need to terminate? Do I need to buy new shit? Do I need to put more money in marketing? Like this is going to uncover all the data sets for you to not emotionally decide how you're going to spend money. the last one, is using the wrong program to reach your goals. And when I say the wrong program, I'm talking about the wrong financing program. And usually, it revolves around a line of credit. And here's my point to you. Lines of credit are great. Every single business needs a line of credit and should have a line of credit. And if you don't, I'm happy to help you. The problem I see. is that people use lines of credit for everything and that's not their intended use. Okay, they should be short term only. Things that you buy daily, think inventory, think adding people to your team, marketing, supplies, the stupid miscellaneous stuff that you do repetitively. And the whole point of a line of credit is use it and once the money comes in, pay it off right away so you keep your costs down. I see people letting stuff ride on lines of credit. And even my line of credit at Chase, it's prime plus. It's a great, great line of credit. I'm paying 12 % interest only. When I have stuff on there for a long time, that 12 % eats into my profit margins. I don't want that there. Secondly, I see people buy equipment in a 12-month line of credit or an 18-month line of credit. Lines of credit usually roll six to 36 months, guys. any good equipment that you're going to purchase for your business, why would you pay for it in a short time frame when you can actually go out three, four, five, sometimes six years to finance that equipment? OK, you want to finance things over their expected use life. So if equipment is going to last seven, eight, nine years, you should be at least financing it over five years. Otherwise, you're hurting your cash flow. The other thing that you're doing when you do this is you're not building comparable debt and you're not building your business credit because if you finance equipment the right way, it's going to build comparable debt. You're going to get more tax write-offs and it's going to build your business credit The other thing I see people use lines of credit for is, and this is the worst offender because this offender, this will actually get your business destroyed, is using, if you're B2B or B2G, and you have terms, you're net 30 or net 60 with all your clients. And then you start using a line of credit to float new clients, because you're constantly waiting to get paid. That is not fixing anything. You're putting a bandaid on a bullet hole, all right, because guess what happens? Now you're servicing clients, but now you're also paying back a line of credit. And I don't care if it's a weekly line of credit or a monthly payment line of credit. It doesn't make a difference. You still have a payment in there. And you still are waiting for all your clients to pay in 30 or 60 days. So the mechanics of what's causing the cash flow issue is still there. And all you did was add a payment to it, which is going to make the problem worse. All right. So if you're in this position, The right program to pick is invoice factoring because it's going to allow you to get paid right away instead of waiting 30, 60, 90 days from your clients. It's not going to hurt your profit margins that bad because the average factoring deal is like 2 % per 30 days. That's nothing. And it's fixing the problem of you waiting. So now you can grow and scale and you don't have to use a line of credit to borrow. You don't have to put it on your credit cards. The business cash flows, and you have way less worries. These are just three of the top mistakes that we see, and we've given you the solutions. Keith, what other things do you see? Give us a bonus here. Financial or outside of the realm of finance? doesn't have to be finance. could be anything that we constantly see entrepreneurs make the mistake doing. with their client base and keeping up with where a client is inside of the sales cycle. whether, know, CRMs are obviously, I mean, everyone knows about Go High Level, right? It's the taboo thing to talk about. You need somewhere where you can organize your client base. Know where they are in the pipeline, know where they are in your sales and know how to follow up. None of the other shit matters if you can't figure out how to keep your clients. Money will run out, marketing runs out, banks will say no. So I parallel those two things with one another because as we're developing education and tactics around finance, we also gotta make sure that you're keeping up with people that give you the money to keep up with, So that's just, that's what I see and it's a major one because while it's... it's... Not fun to spend money on that out of the gate and you know, we certainly can understand that it's one of the more vital pieces Because again, you can spend all the money on marketing, but if you don't know where to catch the people you got nothing So there's your bonus business. I love it. Here's what I'm going to do, guys. I will actually send you guys, or I'll include a copy of Capital Tools, like a way for you guys to get into Capital Tools. If you're a business owner that is looking to find what's available, what programs you can use, when, and how to grow your business financially, responsibly. All right. Go to Capital Tools. It'll teach you everything that you need. We'll have the link here. It's stupid cheap. And yeah, I appreciate you guys for listening. I know you guys learned a lot on this one. So please share this with two or three people, and we'll catch you on the next one.