Significant debt is a growing problem for businesses of all sizes, especially small business whoppers who can very quickly find themselves personally responsible for the weight of debt accused by their business. This can have dramatic effects on the future of the business itself as well as the livelihoods of staff and the business owners alike.
In this article we explore some of the ways that a business can avoid the perils of too much debt and to manage serious financial issues before they can amplify.
Audit and filter your outgoings
In the first instance it’s wise to take a deep look at the existing outgoings of your business to see where you might be able to eliminate and unnecessary costs and perhaps reduce outgoings in key areas. Much of the tech in a business, for example, may being going unused whilst retaining significant value and could be sold to free up cash.
Work with your accounts team to see if invoice chasing and debt collection can be upscaled and made more efficient to help improve cashflow. Do you really need the expensive comms system, or all that workspace currency not being used? Always be on the lookout for ways to save money and not spend where it isn’t necessary.
Is your budget outdated?
It’s possible that your company budget was written a while ago, perhaps before your current financial situation took a different turn. If your budget is outdated and not in touch with the balance sheet as it is today, it would benefit from an overhaul. Your fixed monthly costs may have fluctuated a lot since you last looked at the budget spreadsheet, rent, bills and other interest related costs can go up or down by significant margins and you need to know what that looks like against your sales projections today, not as it was several years ago. A realistic outlook is critical to avoiding serious business debt.
Seek professional help when appropriate
Your existing team might be sensational at their core jobs, but they may not have the legal expertise to make strategic decisions when your company is subject to a debt related lawsuit. You should always seek professional guidance with a debt lawsuit otherwise you risk serious financial impactions that go beyond the original debt. Always reach out to the experts when in doubt as they can advise, guide and offer professional services to ensure that any debt related legal issues resolve in your favor.
Always put debt repayments at the top of the list
All debts should be prioritized according to the size of the interest rates associated with them; the higher the interest rates, the soonest they should be paid off, if possible. This is equally true of business debt as it is with personal debt and you should always prioritize your company’s repayment structure accordingly. Typically, that will be company credit cards, but any high interest debt should be top of your list.
Taking the time to fully audit your existing financial situation along with a revised budget and any appropriate professional guidance will soon have your business out of debt and moving forward into financial success.