The thought of losing your business more than likely keeps you up at night, especially if you are struggling with spiraling debt.
While your first instinct might be to ignore the problem and hope it goes away, you need to adopt a proactive approach to improving your organization’s finances.
If you want to ensure your business is in good financial standing in the future, here are the five best practices for dealing with business debts.
- Gain an Understanding of Your Finances
It is impossible to eradicate debt if you don’t have a firm understanding of your company’s current finances. To ensure your business’s survival, you must assess your budget to identify your:
- Various income sources
- Daily, monthly and annual costs
- Variable expenses
By identifying exactly how much is leaving and entering the business, you can make the appropriate tweaks and changes to your budget.
For example, you could change suppliers, eliminate corporate expenses, or find a new income stream. It might also be a wise decision to hire an accountant to help you effectively manage your budget; they will provide informed financial advice.
- Review Your Debt Repayment Options
Thankfully, there are numerous ways you can gain tighter control of your debts and improve your company’s finances. For example, you could reach out to a lender to potentially negotiate a lower interest rate, which can take some of the financial pressure off your shoulders. If you routinely make debt repayments on schedule, a lender might be more than happy to decrease your rates.
Another alternative is to consolidate multiple loans into one debt repayment, which can lead to a smaller monthly cost over a longer period. The process also will not damage your credit score.
- Raise Your Company’s Prices
If possible, consider raising the prices on your products or services to generate a bigger annual profit margin, which can help you to pay off corporate debt at a faster rate. Increasing your pricing to match the quality of your products could improve your business’s financial future and ensure its longevity.
- Consider Insolvency
If you are struggling with serious company debt and cannot see the light at the end of the tunnel, insolvency could be a viable option. It can be an effective way to negotiate a realistic settlement plan or debt repayment with one or more creditors, and it can prevent your business from entering bankruptcy. If this sounds like the best option for your organization’s needs, get in touch with Hudson Weir to learn more about the process.
- Choose Bankruptcy as a Last Resort
If your business is struggling with spiraling financial problems and you have no way to repay your creditors, you might have no other option but to apply for bankruptcy. The process should, however, be a last resort, as it is likely to either close your business for good or impact its operations. So, you should consider the above alternative options before you even consider applying for bankruptcy.
