Starting a new business often requires outside funding. Many new companies rely on loans or lines of credit to cover costs like payroll, supplies, or rent before revenue begins to flow. Debt can give your company the breathing room it needs to grow, but it can also become a burden if not managed carefully.
By tracking expenses, setting clear payment terms, keeping accurate records, and seeking professional guidance when needed, you can use debt as a tool rather than a setback.
1. Track Every Dollar You Spend
Cash shortages are one of the most common reasons new businesses fail. In fact, one report found that 38% of failed startups closed due to running out of cash. When every dollar counts, it’s important to know exactly where your money is going.
Start by reviewing your biggest fixed costs. Rent, utilities, and payroll may be essential, but there are often areas where you can trim spending. For example, a small café might cut costs by negotiating lower supply prices with vendors, while a tech startup could switch from expensive software licenses to free or open-source alternatives.
Don’t overlook smaller recurring expenses either. Subscriptions, unused services, and “convenience” purchases may seem minor, but over time they can drain valuable cash. Even saving a few hundred dollars a month can mean needing one less loan or credit line later.
Quick ways to track and control spending:
- Use accounting software or apps that categorize expenses automatically
- Review bank and credit card statements at least once a month
- Set budgets or spending limits for company cards
- Revisit vendor contracts annually to look for savings opportunities
By monitoring your spending closely, you protect your cash flow and may reduce the need to rely on additional loans or credit.
Use a recordkeeping system that works for you, and set it up before you get started, then use it consistently for the best outcomes.
2. Set Clear Payment Terms with Customers
Unpaid invoices can put serious strain on your company’s cash flow. Setting clear payment terms helps ensure you receive money on time and reduces the need to rely on loans or credit.
If your business provides a product or service that requires costly upfront work, consider asking for a deposit before starting. This protects your cash flow while still serving your customers.
It also helps to streamline invoicing. Digital invoicing tools can send reminders automatically or deliver invoices by text or email so clients know exactly what they owe and when. Offering multiple ways to pay—such as credit cards, bank transfers, or online payment apps—can also make it easier for customers to pay promptly.
3. Track Debt and Payments Carefully
Managing debt isn’t just about how much you borrow—it’s about staying organized with repayment. Losing track of bills or due dates can add late fees, strain cash flow, and make it harder to plan for growth.
A simple system can go a long way. Create a spreadsheet or use accounting software to log every bill, loan payment, and credit card charge as soon as it comes in. This gives you a clear picture of what you owe and when payments are due.
For example, a retail shop might use software to schedule rent, inventory payments, and credit card bills all in one dashboard. This not only prevents missed payments but also makes it easier to forecast how much money will be available for new opportunities.
4. Get Professional Support When Needed
Running a business often means wearing many hats, but managing finances doesn’t have to be one you wear alone. If bookkeeping or debt management isn’t your strength, getting outside support can make a big difference.
An accountant can help you set up reliable systems for tracking expenses, preparing records, and understanding how debt fits into your overall financial picture. But accountants aren’t the only option. Bookkeepers, local small business development centers, and even chambers of commerce often provide resources to help owners stay organized and informed.
For example, some community organizations offer free or low-cost workshops on budgeting, financial planning, or cash flow management. Even meeting with a mentor who has experience running a business can provide valuable perspective on balancing debt with growth.
Ways to find affordable support:
- Hire a part-time bookkeeper to keep records accurate
- Meet with an accountant during tax season to review financial systems
- Look into free or low-cost resources from Small Business Development Centers (SBDCs)
- Join local business groups or networks for peer advice and mentorship
Having the right support makes it easier to stay on top of your obligations, spot potential risks, and make informed choices about debt without feeling overwhelmed.
Final Thoughts
Business loans can give your company the boost it needs to get started, but they work best when managed carefully. By watching expenses, setting clear payment terms, keeping good records, and getting professional guidance when needed, you can use debt to support growth rather than slow it down.
Staying proactive about your finances may help your business stay flexible, protect cash flow, and be better prepared for new opportunities.
