How to avoid falling into overdraft in business

Finance

01/03/2023

JOHN MATHEW

It is not uncommon for entrepreneurs, especially beginners who are still fighting for their place in the market and working to achieve continuous inflows, to encounter a lack of liquid funds needed to cover primarily fixed operating costs (salaries, overhead costs, etc.). In banks where they have opened business accounts, entrepreneurs can contract an allowed overdraft, the so-called “minus,” which they use to compensate for the lack of funds in order to fully cover the incurred costs. Since a negative account balance is quite a burden for every entrepreneur, even though it doesn’t seem so at the beginning when symbolic amounts are used, it is necessary to be careful, and the most important thing is to create a plan that will completely eliminate the use of overdraft. 1. Continuous monitoring of inflows and outflows – Creating a monitoring model in Excel Continuous monitoring of inflows and outflows can significantly affect the sustainability of business in the future. It is important for an entrepreneur to have timely and accurate information so that they can make correct business decisions. Information is available if detailed monitoring is carried out in the company; in this situation, the company’s director has an insight into the state and movement of transactions, which is one of the important steps for making correct decisions. Situations in which decisions are made without prior detailed analysis can lead to business problems and unnecessary borrowing. Creating a model in Excel for entrepreneurs is an excellent tool with which the movement of funds can be clearly monitored, and the current situation can be checked at any time.

In addition to having a clear insight into the situation at any time (if records are kept regularly), the entrepreneur can take timely measures to secure additional funds, whether it is cutting costs, securing additional income by contracting new jobs, or regular collection of receivables. It is also important to detail the inflows that the entrepreneur realizes from each individual customer, so that they know how to recognize key customers, but also to terminate business cooperation with those who are a burden to the business. In the case of outflows, it is necessary to monitor and analyze each individual supplier in such a way as to define appropriate payment and delivery deadlines, monitor the quality of the service (goods, works), and changes in prices. 2. Creating a plan of inflows and outflows for a certain time period and comparing the plan with the actual situation Plans are made for a certain period of time; in practice, quarterly, semi-annual, and annual liquidity plans are mostly created. When planning future business, it is important that the plan was created after a certain time during which inflows and outflows were monitored, and an impression of their amount was gained. If it is a beginner entrepreneur, the inflow plan can be based on concluded business cooperation agreements, according to which they can roughly define monthly inflows, while fixed costs are generally known. A plan is always a plan, and of course it can be changed during the period, but it gains its true value only after comparison with the actual situation. Deviations, especially negative ones, are important for analyzing the cause of that negative deviation. They warn us about the existence of a certain problem, which we can describe in the following situation. The entrepreneur’s inflows in the semi-annual period are 20% lower than planned. Although income was generated, the receivable was not collected. It was determined that in the semi-annual period, the customer fell into financial difficulties and has problems with payment, which was reflected in the business of the observed company. The mentioned situation leads us to the next important step that also affects the company’s liquidity. 3. Recognizing problems and defining policies with customers and/or suppliers Deviations of the actual from the planned cash flow projection and problem recognition lead to the need to redefine the terms with customers and suppliers. The same can be changed depending on the length of business cooperation. The terms relate to payment deadlines, approval of discounts on services/goods/works, etc. In order for entrepreneurs to properly define the policy with customers, it is necessary to first establish thorough monitoring of each individual customer, and from the monitoring, provide answers to questions that may be focused on: defining discounts, warning whether a reliable customer is up-to-date with payments, whether their income is decreasing, what is the quality of the service, whether they introduce new services. On the other hand, in the case of suppliers, it is also necessary to monitor business, and certainly negotiate the possibility of servicing, securing the object of purchase, and return deadlines. 4. Business seasonality If the activity performed by the entrepreneur is characterized by seasonality, it is necessary to take into account the planning of liquid operations in months with reduced inflow. Monitoring liquidity, at least at the monthly level, can ensure liquid operations throughout the year and prevent potential problems with current liquidity that can be prolonged to a longer period. Monitoring liquidity and projections for the coming months of operation will ensure liquidity in the months when a reduction in the volume of work is evident. Given the type of activity, company owners are sometimes “condemned” to only a few customers/suppliers. If an individual customer also encounters liquidity problems, the resulting situation is reflected in the company, so in such situations it is good to create a certain reserve that will help bridge the problematic period. Account overdraft is an expensive source of financing and should therefore be avoided. This can be achieved with clearly adopted measures and a plan that will ensure business liquidity. Analysis of historical operations, monitoring of current and planning of future operations are measures that every entrepreneur must implement, and monitoring models are an excellent tool that helps directors see how their decisions affect the company’s cash flow and prevent entry into overdrafts on transaction accounts. Article published on: Women in Adria

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Concessions

4 Sep , 2025

Economic Feasibility Study

An Economic Feasibility Study is a document that must be prepared if you are bidding for a concession for a specific public good or service, and it typically constitutes a mandatory part of the tender documentation. For the allocation of a concession on the maritime domain, an Economic Feasibility Study is a mandatory attachment to the bid.

It is common for the tender documentation to prescribe the specific content of the study; thus, it can range from simple and concise to extensive and concrete. Naturally, this depends on the type of public services/goods in question and the estimated value of the concession.

The Economic Feasibility Study demonstrates the viability and profitability of the economic use of the public good or service. This requires creating a projection of operating revenues and expenses regarding the subject of the concession for the entire duration of the concession period. Within the study, the amount of the fixed and variable parts of the concession fee for the economic use of the good or service is determined. The amount of the concession fee, alongside the amount of investment into the concession subject, are the most frequent criteria by which received bids are evaluated and ultimately ranked.

Beyond the goal of winning the tender, it is crucial to ensure that the stated concession fee can be covered by operating revenues (along with other operating expenses necessary for performing the activity), and that the investment into the concession good has its own economic viability—whether direct or indirect.

Additional criteria that may be evaluated, and which form an essential segment of the Economic Feasibility Study, include the number of planned new jobs, as well as the bidder’s experience in performing the activity for which the concession is sought.

In our experience, more complex Economic Feasibility Studies are primarily required for the purpose of obtaining concessions on the maritime domain, specifically for ports, beaches, marinas, anchorages, hospitality facilities, etc.

Simpler examples of Economic Feasibility Studies are required for goods or services that can be provided on the maritime domain, such as: maritime and passenger agencies in ports, fuel supply for vessels, and similar activities.

For these more complex studies, it is highly recommended that they be prepared by an expert with the necessary experience and knowledge. The study must cover the entrepreneur’s historical performance, location analysis, technical-technological analysis, procurement and sales market analysis, and an economic-financial analysis that includes a projection of operating revenues and expenses, as well as an assessment of the return on investment.

Zobnica d.o.o. is focused on project preparation for obtaining financing from various sources, ranging from EU funds to commercial bank loans, as well as consulting on the preparation of various types of studies for concession applications. We have been successfully operating in the consulting market for 10 years, with clients coming from various industries and sectors. For institutional clients (Port Authorities, counties, and Local Self-Government Units), we have prepared feasibility studies for granting concessions, and for entrepreneurs, we have prepared economic feasibility studies for applying to concession tenders, giving us a comprehensive view of the process from both sides.

We understand that concession renewal for clients who have already invested significant funds into the concession subject is a very sensitive topic, and that obtaining a new concession is a vital and delicate matter for them; we approach it with the appropriate level of care.

The study preparation process should begin on time, even before the official publication of the concession tender, as alignment with tender conditions can be adjusted in a later phase.

If you require an Economic Feasibility Study and wish to have an informational conversation with us or receive a quote, please fill out the form at the following link, and we will get back to you as soon as possible.

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EU Funds

4 Mar , 2024

A Guide for Farmers

Whether you’ve just started or have been planning to apply for a non-reimbursable EU grant for some time, I believe you have various questions and dilemmas and are looking for answers.

This manual is the ideal starting point for your search for answers, and it was created after numerous conversations and meetings with farmers who have never applied for or implemented projects co-financed by EU funds.

The manual stems from the need to familiarize users with the fundamental prerequisites/concepts related to agricultural holdings viewed from the aspect of applying for non-reimbursable EU tenders.

The good news that I must emphasize right here is that with the purchase of this manual, you also receive half an hour of telephone consultations during which I will give you answers to your questions related to the content of the manual, as well as free advertising of your products and services on our portal Ethno Dalmacija. Our cooperation doesn’t have to end here; on the contrary, we dare to say that this is just the beginning, and you can see what else we can do for you and how we can help you on our website, where you can choose something for yourself. The price of the guide in PDF format is 70.00 Euros, which you can pay using this payment slip and confirm to us by email: info@zobnica.hr. Once we receive the payment, we will send you the guide by email and arrange a time for telephone consultations!

Take a look at the guide Download Pay and send an email to info@zobnica.hrDownload