If you have a business, the chances are good that during these unprecedented times, your business has taken on more debt than you might be comfortable with. If so, you aren’t alone. If you’re nervous about being in the red, here’s a quick look at a few tips to help you get rid of that debt.
Create a Plan to Pay It Off
There are a couple of main strategies when it comes to paying off your debt. You can compare the two and utilize a debt payoff calculator to determine which would be the best option for your business. One of them is the profit percentage. This is where you utilize a portion of your profits to pay down the debt. The other is with a set amount. This is where you set a specific amount to use to pay off the debt each month.
Make sure you add whatever amount you go with to your monthly budget.
Time to Budget
It may have been a while since the last time you took a close look at your budget. If so, there’s no better time than the present to look at it again and create an updated one that will reflect the finances of your business more accurately. Doing this gives you a clear picture of exactly what the business is bringing in and how that money is being used.
If you purchase supplies from vendors and use credit cards to do it, there are 2 ways to bring that down. First, the vendors themselves may be willing to give you a discount based on the amount you purchase from them. Secondly, you can take a look at the credit cards you use and attempt to get a better interest rate on them. Remember that it never hurts to ask – the worst they can do is say no.
There’s a multi-pronged approach to scaling back your spending that includes a few things. The first of these is sticking to the budget you updated. If you utilize an app like Wave, it takes the need to enter each transaction manually away and allows you to use one of your mobile devices to scan all of your receipts. This can be uber-helpful.
You also need to understand what your costs are. Once you’ve entered everything into your budget, you can then go through and categorize each of the expenses you have and compare them in order to determine where you may be spending more than what’s typical.
Then, the next logical step is to work on getting those rising costs down in order to remain on target with regard to the budget.
Finally, when it comes to getting rid of your debt, you should take a closer look at your variable and fixed expenses and attempt to find ways to improve those costs. You may be able to whittle them down by doing things like reducing any discretionary expenses for items like technology, office supplies, etc. You may also look into changing contractors and vendors to ones that are a bit more affordable. Additionally, why not eliminate those methods of marketing that yield low returns and rent out any office space that you might not be utilizing?
In the end, understand that it’s much easier to pay off any debt the business has when you are making more money. To that end, the ultimate tip for paying off that debt is to increase your profits. Whether you do that by diversifying your offerings, raising your prices, or some other way, is totally your call.
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