Whether you’ve recently launched a new business or you’ve been trading for years, debt is an ever-present concern. Debt can be a high-level danger for businesses, and managing that debt requires some work. Debt is also very common, and if you’ve borrowed more than your business can make, then your debts can become a huge threat that could put an end to your entrepreneurial goals. If your business is currently dealing with high levels of debt and you’re not sure what to do about it, here are some tips for business debt management that you may not have considered.
Increase Your Revenue
Tackling debt, either as a private citizen or as a business, can often be very complicated. However, you do have an advantage in that you have an existing business that creates a revenue stream. The goal then should be to increase that revenue. You can do this in a wide range of ways. A useful tip is to look at your existing inventory and look for those products that have been sitting on shelves for too long. That’s cash that is sitting there doing nothing. Use it as a promotion, even if you end up taking a loss on that product. It will still free up cash that can be used to pay off what you owe. Diversify your products, improve your marketing, and make sure that you manage the profits that you make in a way that tackles your debts.
Chase What’s Owed To You
Many business models mean you have to wait before you get paid. If your business requires the delivery of a product or service, which you then send off an invoice for, it can take time for that invoice to be paid. That can leave you stuck with the promise of payment but no actual cash to pay off what you owe. Late payments are almost always problematic, but you can also look at them as an opportunity. If you have debt collectors harassing you, then chase up those customers that owe you money. Be professional and polite, and you could easily prompt someone to pay you even before they are due to do so.
Cutting Business Costs
This can be a tricky balance to get right. Cutting your business costs is a very useful way of making sure that you have more cash at your disposal, but it can also damage your business. From an employee that you can no longer afford to pay to marketing or product costs, it can be a risk to start going backward. It can be very hard to be ruthless, especially when it comes to the people that you hire. However, if you want your business to survive past what you owe, then a certain level of ruthlessness is going to be necessary. Depending on your type of business, there may be options for cutting costs that won’t result in mass firings. Restaurants can reduce their menus or change suppliers, for example. Look at smart ways to cut your costs and you could be running your business debt-free much more quickly. Depending on the sector that your business trades in, cost-cutting exercise can include any combination of the following:
- For office-based businesses, reducing your supplies expenses can save a lot more money than you might expect. Ideally, aim to go as paperless as possible.
- Automation is one of the most high-value business trends of recent years, and it can be incredibly useful when it comes to cutting costs. That’s because of the time that your employees spend on data-entry, report generation, or even skilled tasks like accounting can now be kept to a minimum. That frees up your team, who can be working on more proactive profit generation.
In most cases of debt, there will be some bills that you should pay off sooner than others. These will be the ones that are critical for keeping your business up and running, and they should always be your priority. You may find that some of the people or organizations that you owe money to can become intrusive or even aggressive. You should never feel pressured to pay off a debt by a debt collector, and there are protections in place that can help you prevent that from happening. If you are getting debt collectors acting aggressively or intrusively, then use a debt lawsuit attorney that has the experience and who specializes in protecting consumers and business owners against aggressive debt collectors.
Contact Who You Owe
One of the worst things that you can do with mounting business debt is to ignore it and hope that it goes away. It won’t, and delaying dealing with the problem will only tend to make things worse. Contact everybody that you owe money to and explain the situation. You may find that they will offer easier repayment options, especially if you have long periods of business success. Banks, for example, will never get their loan totals back if your business goes under, and they would much rather that you pay more slowly than not at all. Meet with your creditors and be honest and upfront. This can be hard because so much of running a business is about portraying success, and by admitting that you are struggling, you could lose out on potential investors. However, being upfront can also give you a lot more breathing room.
Selling Off Assets
This should be a last resort because it will tend to affect your business as you move forward from debt. In serious cases, selling off your assets might be your only option. Of course, like cutting costs, you could find that you simply can’t run your business without those assets. That is going to seriously limit your options for the future. However, when your back is to the wall, it’s always worth remembering that you have that final trigger to pull.
Business debt is very common, and many businesses go in and out of debt regularly without any cause for concern. The problem is that when those debts mount up, getting rid of them becomes much harder. Take your time to tackle those debts and find smart ways to pay what you owe, and your business could be in a much healthier position sooner than you expected.
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