Debt can pile up quickly. Even small debts can pile up quicker than you realise, and this can quickly increase until your debt reaches an amount that may seem impossible to pay off.
This is a common problem for small business owners but thankfully there are tried-and-tested strategies you can use to help you get out of debt.
Almost 50% of small business owners have to deal with debt and this comes as no surprise. Running a business, small or big, has its challenges. Here are some tips you can follow for a smooth sailing business.
Increase Cash Flow
How’s your cash flow doing nowadays? Is it enough to compensate for expenses and other payables, or are you constantly paying out of pocket and filing for a loan?
A simple strategy to help get rid of debt quickly is to increase your cash flow. Sounds simple enough, and it is! Sit down and study how past transactions have been doing. Do you have accounts that don’t pay on time, or haven’t paid at all? Have you sent invoices to clients? Keeping on top of these things are small yet important steps are essential when you want to improve your cash flow.
Do more with the time you have by increasing your productivity. Take a look at the machines you use — do they need upgrading? A recent model will be a wise investment if it can produce more products at a fraction of the time.
It’s not just about the machinery and tools — take a good look at yourself and your team too. Are there processes that could be more efficient? Are you working smarter, not harder? Attend training sessions that can improve your skills. For example, if your business requires you to deal with clients face to face, there are seminars that can help improve your customer service.
Little steps to improving processes and sharpening you and your team’s skills can go a long way. These improvements will be evident in how you run your business and it will surely help you gain more clients in the future.
Increase sales by improving your marketing strategies. Use those that have been tried and tested to be consistently bringing in new clients. Avoid strategies that are too outlandish or difficult to maintain; you wouldn’t want to be a one-hit wonder. The goal is to entice clients to go and STAY with you. Marketing is an often overlooked area of many businesses – why not have a look at what your competitors are doing – perhaps you could do it better?
Shop for suppliers or negotiate
Payment terms with your supplier can often be lengthened if you have been a good customer to them. Some vendors offer up to net -60 days payment terms — this means you have up to 60 days to settle your invoice even after you have received supplies, leaving you with ample time to make profits.
Check your inventory
Stocks that are lying around can be costly. If you don’t have a proper inventory management system in place, you run the risk of overordering, leaving you with supplies you’ll have a hard time selling. Monitor the demand and supply as needed. Overstocking your inventory is never really a wise decision for small business owners.
Research on loans
When you want financing for your business, make sure to do a lot of research. Go with a financial institution that offers the best interest rates and payment terms.
Be honest with yourself when you apply for financing. Study the fees well and make sure that you are financially capable of paying off the debt in the foreseeable future. overestimation is a common mistake that business owners make and you wouldn’t want to be tied down to a debt that is hard to pay off.
Be mindful of business waste
We’re talking about garbage here — business waste is a way to describe aspects of your business that can still be further improved or even eliminated if the need arises.
A poorly managed inventory might spell overstocking of low demand items. Your productivity rate is too low. Your team is not efficient. These and many other factors can spell disaster when you don’t take the time to tackle them one by one.
Pay off debt
Don’t be one of those business owners who pretend their debts don’t exist. They do, and until you pay them off, they’re not going away soon. It can be tempting to ignore the realities of debts and the money you owe, but you need to avoid this.
Paying off debt as soon as possible will help you improve your cash flow in no time. The sooner you pay it off, the sooner you will see an improvement.
Try to negotiate with your creditors too. Most of the time they offer flexible payment plans when they see clients exert effort to pay off debt.
Consolidate your debt
If you have too many different debts, consolidate them!
In a nutshell, debt consolidation allows you to bundle up certain debts into one account so you can pay them all at the same time. You won’t have to worry about different payment deadlines when you consolidate your debt and most of the time the interest rate is lower compared to paying off debt separately.
Take a look at debt consolidation here and decide whether this is a course of action for you and your business.
Improve your terms and conditions
If you are a supplier or service provider yourself, take a look into your terms and conditions. There might be a section or clause that is preventing you from improving cash flow.
Your terms and conditions is a legally binding contract between you and a client. It should state when you want to be paid, how, and your commitment to giving them quality service or products. Look at the payment terms you offer. You might be offering plans that take too long to complete, forcing you to look for other ways to get cash.
Get out of debt soon
Say sayonara to debt when you employ these simple strategies to your business. Remember that over the course of time, you and your business will slowly evolve to keep up with the changing times. Always have a positive attitude and watch out for ways to improve how you manage your business.