There are many debt management tips we can give you, however, with the amount of information on the internet it can get confusing quickly. If your business is already struggling with the stress of debt management, more tips aren’t going to help. That is why we have narrowed it down to 5 essential debt management tips.
As a business, there are many things you need to do to ensure you keep your books balanced. However, in the cost of living crisis delayed payments from clients can have a knock on effect. This can spiral out of control if you aren’t careful and result in your own debt nightmare.
With My Debt Recovery’s easy to follow debt management tips, you can reduce your debt and stress with it.
Budget and control spending
The first thing you need to do in order to manage your business debt is to create a solid budget. This will help you control your current spending and highlight any areas where you need to cut back.
Ideally you should also cut back on spending overall. As long as a purchase isn’t going to directly impact your business, you should consider if it is necessary to purchase it. Make smarter financial decisions, and assess the priority of each item. Combining this process with a strict budget and you will be able to reduce your debt effectively.
Remove any high interest debts first
Another important debt management tip is to look at all of your current business debts and work to remove the highest interest rate debts first.
Any debts that come with a high interest rate need to be paid off ASAP. This will save you money in the long run, as the lower interest rate debts won’t be as costly.
Some debts may come with a minimum overpayment limit. Always look into the details of the debt and select the ones that you can pay off quicker that have the highest interest rate and no overpayment limit.
Consolidate your current debts
One of the key things that causes stress and mismanagement with debts is the sheer volume of them. Many businesses will take out loans for individual items, these loans on their own don’t seem like much. But numerous small loans build up into masses of debt. It can be hard to keep track of each individual debt.
The best solution to this problem is to consolidate your loans. You do this by taking out a loan or credit agreement that will pay off all the business debts you have. You are then left with one monthly payment to manage. This reduces the number of loans and debts you have to manage and helps you keep in control of your finances.
Be warned, this isn’t a quick fix to solving all your debt issues so tread carefully. Always speak to a financial advisor to assist you with the best ways to move forward.
Communication is a key skill
Communication is essential when it comes to debt management. If you are able to speak with your debtors effectively you may be able to work out an appropriate payment plan.
Communicating your current financial situation to other businesses will help you in the long run. You may be surprised by the amount of businesses that are in similar situations, so don’t be ashamed to speak to those you are in debt to.
Improve internal processes
Another thing you should do as a business is to review your internal business processes. Look at what led you into financial difficulties and streamline your financial processes.
Once you identify what landed you in your current situation, you can then build on a new way of working. For example, if you forgive your own clients’ debt regularly you are the one footing the bill. Work out better ways to chase up late payments and invoices, and improve your invoice process.
Debt management is easier once you understand how your business ended up with debt. Actively work to combat those processes and implement new procedures to protect your business.
There is always an element of risk when setting up your business, especially when the cost of living rises and recessions are imminent. Understand your business finances and take carefully measured steps to achieving financial stability.
If you are having trouble claiming unpaid invoices from your clients which are causing you financial troubles, contact the My Debt Recovery team today.