Managing business debt can help you steer clear of financial trouble!
Piling up a lot of debt could leave your business in financial difficulty or, worse, bankrupt. Here’s five ways that may help you manage debt and avoid a financial mess.
1. Understand your business situation
It’s important to keep track of debt and money owed to you by having a record of your creditors and debtors and amounts involved. If tracking your business finances requires more than a simple spreadsheet, you may want to consider a bookkeeping system to make monitoring more efficient.
2. Prioritise debt payments
Once you have a good understanding of where your business stands financially, prioritise your debts. Identify which debts you must repay now and which ones you can put off or put onto a payment plan. When prioritising, consider the urgency of the debt or the importance of the creditors to your business.
3. Negotiate with creditors
It may help to speak to creditors openly and honestly about your business situation. Ask if there are any hardship provisions or if you can have your due date extended. Talking to your creditors as early as possible can save you from paying more penalties and other charges. It may also be a good chance to negotiate for better terms and rates on your business loans.
4. Collect outstanding payments
You may want to collect payments from your own debtors to help improve business cash flow. If you have a long list of debtors, prioritise them by going after the biggest accounts first.
5. Protect what’s important
There are steps you can take to help protect your business from risks that can affect its ability to continue operating. Taking out a business insurance policy, for example, may help you by replacing lost income or maintaining cash flow.
A financial adviser may be able to help you determine if business insurance might work for you. I’m happy to chat further about any protection questions you may have.