If you’re currently struggling to keep your business afloat due to a growing mountain of debt, don’t worry because you are not alone. Many small businesses find themselves in a similar situation and even though this can be stressful, there are things that you can do to get your business’s finances back on track. In this blog post, we will highlight 5 tips that you can use to help your business get out of debt and back into profitability. So if this is what you need, keep reading to learn more.
1. Get a Realistic Picture Of Your Business Finances
The first thing you need to do to get things back on track is to be more organized. You can start by taking inventory of your debt and relevant business finances. Arrange all your debt according to interest rate and monthly payments, this should also include any payments made on business loans, business credit cards, or lines of credit. You also need to arrange all outstanding payments that are due to vendors. By engaging with this process, you can determine which debt is a priority and should be tackled first. It is recommended by experts that you start with the highest interest-rate debt first. New businesses should make it a goal to repay all company debt within the first 12 months because this lowers the risk of bankruptcy. Professionals like C.BUHLER & Associates Ltd., which offers credit counselling in Winnipeg, can be a great help with this step.
2. Create a Budget And Stick To It
If you don’t have a budget, this needs to be the second thing you implement. You can create a basic budget by reviewing your last few months or 1 year’s worth of bank statements. The aim is to identify all your sources of revenue and expenses as well as your income and expenses. This will help you determine which part of your business is the most profitable. For a little extra help, you can use a budget app that will provide a review of your financial situation. But, it is always a better idea to trust these kinds of plans to professionals like these tax accountants in Winnipeg, so you can rest assured that everything is done right.
3. Renegotiate Contracts With Creditors Or Suppliers
Another tip to help you get out of debt is to renegotiate better terms. Do this by asking for a lower interest rate, extended payment plan, or smaller minimum payments. Creditors do not want businesses to fail because if businesses fail, no debt can be repaid. This is why you might have success renegotiating your contracts with your creditors or suppliers.
4. Cut Costs Where You Can
If sales do not generate enough revenue to repay debt, you will need to cut costs. If your expenses are too high, you can cut down by selling some of your equipment, office supplies as well as other things you do not use as often. If you need to buy equipment, prioritize used equipment or leased equipment. You can also cut costs by downsizing to a smaller office space that has lower rent and utility costs. Co-working spaces are a great alternative because you won’t have to commit to a long-term lease. Another option is to split costs with other companies. You can do this by finding people with a business similar to yours and then working on a plan to share resources, internet services, and even employees.
5. Take On Extra Work Or Start Selling Products/Services Online
Finally, you can pay off your debt by increasing the revenue of your business. There are many ways to do this such as creating promotions that will interest your customers, sales, coupons, and increasing prices depending on your margins. You can also start selling products and services online by utilizing a website or social media which is the most affordable and effective form of marketing available to businesses.
Nobody wants to be in debt. It’s sticky and hard to get rid of, however, it is possible. If you follow these 5 steps you will be well on your way to financial freedom. You need to have a realistic understanding of your finances, create a budget, renegotiate contracts with creditors and suppliers, cut costs wherever possible and lastly, take on any extra work or start selling your products/ services online.