Process: GL – Book it Dano!

Business people discussing the charts and graphs showing the results of their successful teamwork

Current portion of long term debt – book the entry now. Do you book it monthly, quarterly, yearly? It can have an impact on your balance sheet ratios as you switch from paying more principle on the loan than on interest.  The current portion will increase dramatically as you pay down the loan.  What will happen to your current ratio?  Of course the cash out is the same since the payment doesn’t change, but the composition of the payment might cause problems.  Review the debt schedule and make sure that any changes are made that might be part of your loan terms.  Do you have a variable interest rate or balloon payment coming up?  Make sure you stay on top of this.  While you are at it, you should also review the debt covenants to make sure you are in compliance and notify your lenders if you see a problem coming.  You are creating a rolling forecast to watch this? Right?  Please tell me you are doing this. If not there is no better time than NOW to do it.  Are you regularly tracking your debt and interest ratios?  If not, why not?  Easy to do and really should be part of your month end analysis.

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