One of the major causes for businesses collapsing is debt. Prudent financial management is a skill that most businesses lack and is brought to the fore very quickly as the business progresses. Most people tend to think that money is just comes out of the blue, or as the cliché goes, “grows on trees”. No it does not.
All businesses need to keep their books in order if they are to stay up and running. That is why most professionals insist on the business owners attend a business management course. These courses will equip them with the necessary skills to keep the business financially healthy and know when the business is in the red.
If you can’t afford those business courses, then you should instead focus your energy on getting the right education about the business and financial health. In your reading, you should know how to read the various signs that you are headed to the red. There are various solutions that you can use to get yourself out of the red and get financially healthy. This article highlights the various options that you can employ to make this happen.
1. Time to trim the fat!
Debt is brought about by some “anchors” namely unnecessary expenses. Do you really need to get your coffee from Starbucks when a simple coffeemaker can suffice? Do you really need to departments that are redundant just so that you can keep the staff happy at the expense of productivity and profit?
When you are deep in debt, it is important that you make very hard decisions. They won’t be popular, some will be very uncomfortable, but nonetheless, they have to be made.
While most businesses would feel that this exercise will lead to more debt, the opposite is actually the case. After diagnosing the problem, then a course of treatment has to be offered depending on the cause of the problem. With debt, it is important that you get to the root of the problem and not have a cursory approach by dealing with the immediate symptoms. Those unnecessary expenses have to go if you are to become solvent.
2. Evaluate the budget
The budget could be part of the problem that will affect the way you handle the debt situation. It is therefore very important that you look at the budget and identify the problem area. Only then can you rest easy knowing that the problem in budget was identified and steps to correct it.
If a large chunk of the budget is dedicated to solving one problem area, then you should examine how to cut cost of this problem area. Once the measures for cost cutting have been established, then it time to assign a new figure to the budget and money saved channelled to getting rid of the debt.
3. Get rid of the high interest debt first
Things like loans that have high interest, for example, have to be taken care of first lest you have accumulated debt that will be hard to get rid of. Most people are scared about using the money they have received to address this high interest debt area; they think it will get finished and there will be little left to take care of the other debt. This is not always the case because by taking care of the big debt first and squaring up to little debt, you can reduce the size of the mountain you have to climb very significantly.
4. Negotiate with your creditors
Tough times call for you to sit down with your creditors so that you can negotiate a deal in which everyone wins. The primary reason why most businesses file for bankruptcy protection is to keep the creditors from calling their debts in. As a business professional, you should seek to create an environment that is amiable.
After you have struck a deal that you will deliver the payment for the goods or services at a certain time, never default. It is very important that you keep your word.
5. Consolidate all your loans to get rid of them faster
Fighting on too many fronts is very exhausting. What consolidating your loans does is that ensures that you have one front to fight on. You should find out which companies offer great consolidation rates and get on board with them.
6. Seek legal counsel from your lawyer
If the debt seems insurmountable and you have exhausted all other means, then it is time that you called in your lawyer. He should offer you advice on what to do next on the legal front should your creditors come calling.