If the end user is a consumer, the company may decide to seek customers through on line marketing as well as direct sales. A creative on line marketing campaign is both time consuming and costly.
The expense is shown on a profit and loss statement as an operating expense.
- Currency Exchange Rates – This cost has to be considered in a transactional basis.
Non Monetary - Hidden Costs
due to quality control issues and shipping issues.
Management’s Time spent overseeing importation issues,
finding the best manufacturer, developing a good working relationship with that resource, and supervising the importation process and costs.
Indirect Borrowing costs -
There is an additional indirect cost of borrowed funds; the time needed to shop for the appropriate line of credit and the management of the borrowed funds.
Proper accounting procedures must be established to avoid a financial crisis.
When financial management of borrowed funds is not properly supervised, the company may be forced to seek additional short term funds from credit card companies. (Credit card debt should be avoided if a company wants to maintain its profit margins and its acceptable credit rating.)
Expensive short term borrowing impacts profitability.
A competent CFO evaluates the company’s capital needs, on a short term and long term basis, and tries to match the loan with these needs and also consider funding needs to meet a planned growth strategy.
About the author
Marjorie Weber has been educating entrepreneurs and guiding them in their search for capital for the past 16 years: combining business training programs with one-on-one mentoring. Marj is currently a financial advisor for Florida SBDC at FIU. She was Chair of SCORE Miami Dade from 2010 to 2014. She also serves as an advisor to the Goldman Sachs 10,000 Small Business Program and the SBA Emerging Leaders Program and provides training for Veterans seeking an entrepreneurial path upon retirement from the service. She has been facilitating workshops under the auspices of Miami Bayside Foundation for the past 3 years. She commenced her career as a real estate investment banker in New York and Miami.She uses these long term relationships to assist her clients in accessing capital. She knows both the process and the people and has assisted in providing financing for hundreds of businesses in Miami Dade.