Running a business is a rollercoaster. At times you can be flying high, generating bundles of sales, and seemingly do nothing wrong. Other times, you struggle to attract any attention for your products and services, hitting a lean patch that drops your finances into disarray.
If a company goes through the latter, it’s likely to leave them in debt. This is especially the case for a small or new business that doesn’t possess significant cash reserves in the bank.
Are you currently in this situation? While the future may seem bleak for your business, not all hope is lost. In your fight for survival, here’s a quick guide on getting out of debt.
Create a Debt Management Plan
First things first, you should take the time to create a debt management plan. By doing this, you have a list of your debts all in one place. Along with having a clear picture of what’s owed and to who, you know exactly what the situation is with your debt. It’s recommended you list your debts in order of which come with the highest interest rate, as you want to clear these first. One method is the debt snowball spreadsheet which prioritizes which debts to pay first.
While your regular monthly expenses might not have plunged you into debt, trimming these down can help in preventing you from entering the red again in the future. For most businesses, there are several ways to reduce costs.
One area to start in is negotiating with your current providers. From product to utility suppliers, see if you can lower your bills in some way. Instead of hiring in-house employees, you may also investigate the possibility of outsourcing work on a per-project basis.
After you have discovered ways to reduce your expenses, you should search for ways to boost your income – both on a short and long-term basis.
One way of doing this is to sell your products/services. This is obvious, yes, but a quick increase in sales can cover your debts on a short-term basis. There are also ways to elicit a sudden burst in transactions, such as offering a generous discount or committing to a dedicated advertising campaign.
Alternatively, you can receive assistance from a financial lender. Now, this doesn’t necessarily mean going with a personal loan or a credit card, although either of these can work in certain circumstances. If you still have amounts due from any customers, for instance, you can effectively sell these via invoice financing.
You’ve tried everything, but you cannot pay your debts in full or on time. As a result, your business has ended up insolvent. While this is far from ideal, it’s not the end of the world. Your first port of call should be contacting a licensed insolvency practitioner for expert advice and guidance.
Nobody wants to deal with insolvency. Yet, the faster this is dealt with, the more opportunities you have to keep your business afloat. You can then take the necessary steps to improve your situation, survive insolvency, and ultimately turn your company’s fortunes around.
Business Management: Getting Out of Debt – Summary
Taking the above guidance of reducing costs in certain business areas and finding a new cash injection will be vital steps to take after seeking help from experts to deal with your insolvency.
For more articles like this, check out the small business section of the site.