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Stop the Overdraft Cycle in Your Business

written by: M Lambert•edited by: Michele McDonough•updated: 5/12/2010

Once you overdraw your account it is very difficult to fix it. Small business can have tight budgets and when fees add up you just can't handle losing that money. Learn how you can stop this vicious cycle.

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    Stop Being Overdrawn

    Caught Up in the Overdraft Cycle? Your bank may allow you to over draw your account for a fee, or they may return the checks and charge you a fee. If this happens you will also have to pay fees to whomever you wrote the checks to. It is difficult to get out of this cycle because your account is overdrawn, and any money you deposit will cover that first. However you may need that money to pay to continue investing in your business. So how do you break the cycle?

    First, cash your paycheck or temporarily stop your direct deposit. This will give you the cash to pay the bills that you need to. If you have to mail a bill use a money order or a cashier’s check until you have caught up on all your fees, and you have enough money again.

    Second you need to prioritize and decide how much you have available to put into your checking account. You should make sure you can pay your rent or mortgage, eat and pay the utitlity bills. After that you put some into checking. You should eliminate eccess expenses as much as you can. Prioritize which investments you should make immediately in order to make more money, and which can wait.

    Third you need to go in and speak to a customer service representative at your bank. The bank will automatically close your account if it has been in the negative too long. However if you speak to them, and show them you plan, they will be more likely to work with you.

    Fourth stick to your plan and get caught up. If you can consider picking up a few extra hours at work, or selling something to come up with the money. You should also begin balancing your checkbook every day, and keep a running total of your account to prevent this from happening again.