A thought has just struck me • 2 October 2008 • The SnowBlog

A thought has just struck me


A typical person with debts

Hey, turns out I'm quite clever - not, as it would be possible to think from talking to me, paranoid, naive and pathologically unable to cope with the concept of debt. See, Snowbooks has no external debt. No overdraft, no loans. We do have a credit card but it is paid off every month and currently the balance is zero (and how else - paypal aside - do you buy goodsandorservices from the internet?). We also have a 10k overdraft arranged with a bank which has never been used - it's there just in case. We have a load of money owed to me and Rob from our initial director's loans (around 60k) but since we're not about to freak out and cancel our lines of credit to our own company, that shouldn't be a problem. This means we are in rather a nice position, which is good, since the Guardian reports: "Businesses are also being hit. The balance of lenders reporting a fall in credit availability to firms rose to 36% from 32%. And again, lenders expect to cut credit to firms further." See, if I was running the business according to accepted financial principles, cash should not be a factor when considering whether to undertake a project. If the NPV of a project after the cost of capital is forecast to be sufficiently positive, then cash should be sought from wherever's convenient. A minority of companies would 'save up' or wait until they had sufficient cash to do a project. Er, except me. Not for any clever reason; not because I have a sophisticated grasp of financial management. I just don't like the unpredictability of the publishing industry, which makes it hard to forecast sales and cash flow, and I certainly don't like the idea of having an overdraft pulled away from me at a moment's notice, or having to default on a secured loan because of a downturn in sales. No, my approach to financial management - summarised as 'only spend what you've got' - should stand us in good stead for a while. Phew. Thank heavens I'm silly and unsophisticated.


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