Business liabilities are simply financial and accounting factors that must be mastered for every business to succeed. Business liabilities are financial obligations; amounts that a business owes for the purchase of assets. Some liabilities are necessary for a business to succeed.
Different Types of Business Liabilities
Business liabilities appear on the balance sheet. They are of two types: long-term and short-term. Long-term liabilities are those obligations that may extend for more than a year including mortgages payable, notes payable, deferred tax liabilities, bonds payable, and capital leases. Short-term liabilities, also called current liabilities, are those obligations that should be paid off within a year’s time including:
• Sales taxes payable. Taxes collected from customers from a sale and held until they are paid to a state’s revenue department.
• Payroll taxes payable. Taxes withheld from employee compensation and held to be paid to the IRS and state tax agencies.
• Short-term loan payments that are due.
• Accounts payable. Payments due on items purchased, such as inventory or equipment.
• Interest payable.
• Wages and salaries payable.
In contrast to business liabilities, business expenses are payments for something that has no residual value such as phone service, heating and electrical bills, supplies, or cleaning services. These items have no leverage.
Ways to Improve Liquidity
One of the keys to successful business operations is to have healthy cash flow and to have liquid funds to pay bills as they come due. Ways to improve liquidity include:
• Managing business liabilities by gaining extensions on the timing of accounts payable.
• Accelerating accounts receivables.
• Accessing overhead costs to develop ways that they can be reduced.
• Eliminating unproductive assets.
• Reviewing ways to improve profitability through pricing and cost adjustments.
Successful Financial Business Habits
In addition to good management of business liabilities, a successful business will carefully review financial statements and analyze financial ratios. It will know its financing options and have adequate cash on hand.
Seek Expert Funding Assistance
Contact POM Capital & Finding Services to help achieve your business goals. Experienced professionals with great solutions tailored to your startup’s financial needs.