The lack of money and poor credit management is one of the main reasons why small businesses fail. If your business has no money, trying to cover its basic expenses such as the payroll can cause bankruptcy. To ensure the well-being of your business, you should know all the options available to pay your debts.
From restructuring your debts through a 3rd party to eliminating excess costs, there are a number of ways to deal with business debt. Here are some tips that will help you to deal with your business debt and reduce it:
Rework Your Budget
Before you start attacking your debt, look at your current financial situation. If you are falling behind on your monthly payments, you need to revisit your financial plan to adjust for any unexpected cash flow changes.
Your business budget will help you identify fixed costs, sources of income, and variable expenses. Keeping a budget also helps you to set aside rent money and payments for your creditors/suppliers. You can visit online sites such as the Debt Academy site to learn how to manage your money.
Reduce Business Expenses
After you assess your business budget, you need to look at your operation costs. Find out if there are any expenses that you can axe and the services necessary for the operation of your business. For instance, are you currently paying for services that you use infrequently?
You also need to use accounting software to figure out the financial impact of cost-cutting in different areas of your business. If leasing office space, think about subletting the spaces that you are not using or downgrading to a smaller space. You might also be able to negotiate a lower price with certain vendors.
Your financial statements can be quite helpful in identifying the expenses that are contributing to your debt. The fastest way to increase your cash flow is by cutting out all the unnecessary costs.
Increase Customer Sales
Aside from cutting costs, you need to look at ways of increasing customer sales and boosting your revenues. You can do it by offering discounts on services and markdowns on merchandize, especially to your regular customers.
Additionally, you need to ramp up your account receivables by tracking late customer payments. For example, presenting your clients with discounts for upfront payment will help to improve your cash flow.
Communicate With Creditors And Lenders
If you find yourself lagging behind in payments, start prioritizing your debt payments to figure out which suppliers and creditors need to be paid first. Your cash flow statement will be quite helpful in pinpointing missed payments and delinquent accounts.
Once you figure out the amount of money you can afford to put towards unpaid debts, contact creditors and ask for agreeable terms of payment.
You should enquire your lenders about loan-consolidation programs, which can be useful in grouping several loans into one monthly payment. Do you qualify for a hardship plan? You might get lower interest rates and a payment extension.
However, the creditor needs to see a hardship letter detailing your current financial situation and providing proof that you need help in meeting your financial obligations.
Work With Debt-Restructuring Firms
A debt-restructuring firm can help you negotiate with your creditors to renew, change, or extend your current credit agreements. This process involves a written contract between the debt-restructuring firm and yourself. Automatic withdrawals are set up from your bank accounts to pay off your debts.
You can also raise money from platforms such as Plumfund in exchange for equity in your business.
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