It’s not uncommon for companies to find themselves in debt. What’s important is managing that debt correctly to ensure it doesn’t jeopardise the business. The key to managing business debt effectively is remaining organised and being proactive in identifying problems. These are our top tips for managing business debt so that it doesn’t become overwhelming:
Categorise Debts
Remaining organised and maintaining accurate bookkeeping is essential for keeping track of your business debts. Mapping out and maintaining detailed information on each of your debts is the first place to start. This should include the type of debt and method/schedule of payment, as well as additional information such as interest rates. This will give you a clear idea of where the debts have come from and how you can plan for the future in order to avoid further problems. It’s essential to identify the main causes of your debt so that you can resolve the issue whilst also future proofing your company.
Prioritise Payments
Once you’ve organised and outlined all of your current debts, you’ll be able to ascertain which business debt is most urgent and which is less urgent. The loans that you want to prioritise paying off are those with higher interest rates. This is because the higher the interest rate, the more you will end up paying if you delay repayment. You should also prioritise business debt that has a personal guarantee attached to it. This is important for preventing your personal savings and assets being jeopardised as a result of your business debt.
Discuss Potential Repayment Terms
Communication is key when it comes to managing business debt effectively. If you’re struggling to stay on top of your debts then it’s best to be proactive in communicating with your creditors. If you explain your situation to creditors and emphasise your intention to repay them in full, they are often open to renegotiating payment terms. It’s in the interests of creditors for you to pay them back, and so more often than not, and with the right communication, they’ll be willing to give you some leeway. Renegotiated terms such as lower interest rates or new payment dates could give you the breathing space that you need to get your business debt back in order.
Increase Revenue & Reduce Expenses
Another way to relieve the pressure of short term business debt is to increase your short-term revenue, whilst reducing spending where you can. This is of course easier said than done, however there are ways to make your business more financially stable. Assessing your inventory and overheads will give you a good idea of where you could cut excess costs. You can also negotiate with suppliers to see if they are willing to offer any discounts. Options for raising funds include liquidating assets and looking for new investors. It’s also important to assess your customer base, and see if there are any ways that you could increase demand.
Seek Professional Guidance
Remaining organised and being proactive in tackling problems head on should help to prevent companies from falling into serious trouble with their business debt. However, if you are the director of a company that is struggling financially and you are feeling overwhelmed by debt, it’s important to seek professional advice. A professional business rescue specialist will be able to advise you on the best options for moving your business forward so that you can get back on your feet again.
If you are concerned about the financial state of your company, please don’t hesitate to get in touch with our experienced team at Ballard Business Recovery for confidential advice.
