Learning how to reduce business debt and keep healthy can help your company and business financing is the key. Debt is a scary thing for everyone, and this goes double for business debt.
Are you are a business owner fighting with unsustainable debt levels? Take advantage of this business financing 101 guide. Below are some tips on how to reduce or manage your business debt.
To reduce business debt you need to know what is causing the debt
If you want to reduce business debt, you need to understand what got you into the situation in the first place. You’ll need to look through your accounts to find out if it was a flawed expansion strategy, poor cost management, or another cause – and work with your financial advisor to figure out a solution.
Once you’ve cleared out the cause of the debt, you can effectively form a strategy that will reduce business debt. You must also make sure it stays that way once you have cleared it. Even if you’re going up the scale, the last thing you’ll want is for your debt to grow again.
The goal to reduce business debt should be a priority
If your company seems to be facing endless debt, don’t go setting other priorities because “you can handle that one later.” Instead, lowering your debt should be at the top of your priorities. Set clear limits as to how much you can afford to go in debt in the year to come.
Calculate your debt goals
If you have the goal of paying off your debt, make it clear about how much you want to pay. Also, you may want to identify the sources with the highest debt interest and pay those off first. Perhaps you have exhausted all of your organic options to reduce your business debt. If this is the case, you may want to consider business financing. This can help to provide you with an extra source of income to cover outgoings. Business financing can help you to navigate your focus towards paying off your debts, rather than worrying about day-to-day outgoings.
Avoid bad debts from customers
Make sure you follow-up on late payments from customers. For instance, presenting your clients with discounts for paying fees upfront can help improve your cash flow. Maybe get a deposit up-front and then a progress payment plan.
Reduce business expenses
Whenever you see an opportunity to reduce or completely eliminate costs, seize it. Take some time every month and look through your company’s financial records and think about what needs to be reduced.
Subscriptions and Memberships
Are you paying for subscriptions that you don’t really use? Are there professional memberships you can suspend for a short period until you get your business finances house in order? Speak with your accountant or use accounting software such as Xero or MYOB to forecast the financial impact of cutting costs in the various areas of your business.
Reduce business premises costs
If you lease an office, you might want to think about subletting unused space or even downgrade to a smaller work area. This will reduce your monthly outgoings significantly.
Negotiate with your suppliers
You could also try negotiating reduced prices and flat rates with certain suppliers such as software providers who often provide discounts for bills paid annually versus month-to-month.
Reduce business debt By consolidating your loans
Owning a company and getting business loans pretty much go hand in hand. So if you have more than one loan which you are trying to pay off, you may want to try consolidating your debts into one monthly payment at a lower interest rate. This will not only make it easier to manage your debt, but it may also reduce the interest. Even a difference that is as small as 1% can cut thousands of dollars from your business debt in the long run.
Boost sales and revenue
Another great way to reduce business debt is to look for ways to increase your sales quickly. By doing that, you can take the funds from your sales and direct those towards the debt fund.
Look into creative and innovative ways to increase customer sales that will boost your revenue. You may try offering mark-downs on merchandise and discounts on services, especially for loyal and repeat clients.
Increase productivity through a marketing campaign, bring out a new product, or invest in new technology; these will be short term payments for a long term gain.
Survival in the business world means that you need to act quickly before business debt starts eating you alive. Figure out what the problem is, create strategies to fix it and make sure that your company will be thriving in the future.
If you want to help reduce your business debt, get in touch with us today.
