Running your own business can be quite stressful, especially if it is your first time venturing into the world of trading and commerce. There are a lot of things that you will be responsible for: from advertising your company and products, to keeping your customers satisfied while making sure the financial side of the business goes smoothly. As such, it is important to always be vigilant and ready for any issues that may arise and to ensure that your business can survive in the long run.
One of the most common struggles that business owners and managers often face is debt management. Running a business will require a lot of money, and it is only normal for entrepreneurs to make small debts to secure the proper funding for necessary expenditures. However, if you do not make your decisions carefully, even small debts can add up to create a sizable financial challenge. In the worst-case scenario, the amounts owed can pile up and cause the business to go bankrupt.
In this article, we will help you avoid making mistakes that can lead your business to go down the wrong path. A cautious and meticulous approach to paying off small business debts will not only save your company but also keep you from ruining your own credit history.
Examine and Improve on Your Current Expenditures
The easiest way to pay off your debt is to make sure you have enough money to pay it with. In order to do that, you will need to take a look at your current expenditures to determine where your funds go and if you can cut off any unnecessary spendings. By stopping buying these things that you don’t really need to run the business, you end up freeing more cash to pay off your loans with.
Unnecessary spending can go from minor indulgences to larger business decisions. For instance, paying a few dollars every day to grab a coffee cup on your way to work can be counted as something you can cut off, or at the very least change. Instead of buying your coffee from a shop, you can invest in a coffee maker instead so you can grind your own beans at the office. Not only will this save you money in the long run, it will also benefit other coffee enthusiasts in your office because they, too, will be able to save money – that is, if you decide to share the coffee maker.
Business decisions include choosing the quality of certain products used in the office. If you don’t really use a lot of paperwork, cutting back on office supplies can save your company a few bucks. You can use the unprinted sides of already-used documents as scratch paper or for photocopying purposes. Do not be afraid to lessen expenses by taking out things the business can really do without. Remember that every dollar saved from unimportant spending can be used to pay off debts instead.
Try To Increase Your Revenue
It goes without saying, but it will be a lot easier to pay off debts if you are stacked. Cutting back on expenses is a good start, but sometimes it is not enough. You need to make more than what your business normally does to maintain itself in order to settle your loans.
There are many ways to generate additional profits for a business, depending on which product or industry it serves. For example, you can hold discounted sales in order to get additional revenue quickly. The common idea is that promotional sales do not earn the business a lot of money because the products are sold cheaper than usual, but the profits will tell you otherwise.
The trick is to look at the situation in the bigger picture: selling one or two products at its best dollar value on a daily basis might be good, but selling a huge number of the same product at a lower although still profitable price will definitely put your financial notes over the top. At the same time, sales are known to boost clientele by acquiring regular customers as well as get free advertising as the news travels by mouth.
Consolidate Debts and Set a Budget for Payments
We also spoke with Scott from JMA Credit Control Melbourne who advised that If your business has multiple debts, you can go for the option of hiring a professional debt collector for debt consolidation to make things simpler. When you consolidate debts, you will end up with one large loan to take care of all the smaller loans you originally had.
This is advisable for business owners who find difficulty dealing with multiple loan transactions every time the debts are due. This way, you will only need to focus on one debt payment which should make it easier for your finances. Ideal debt consolidation should result in a friendlier interest rate as well. Make sure that before agreeing to the terms of the large loan, the interest rate is lower than any of the smaller loans it will pay for.
Once you have completed consolidating, you should make sure that you don’t miss out on your payments by setting a strict budget for your debt. This should not be hard if you have already started cutting down on expenses and improving your cash flow as suggested earlier in this article. Making sure that your debts are paid off can be easy as long as you put in proper planning and prioritization.