October 9th, 2013.
Easy advice to avoid business debt
The number one factor for businesses struggling is the inability to recover after falling into some sort of financial debt. While this may seem obvious, there are many ways that businesses find themselves in this situation. Often it feels as though this is entirely out of your control, but that’s not always the case. Here are some of the best ways to avoid business debt:
You’re probably thinking that that is pretty obvious, but you’d be surprised at the number of times that businesses buy things or spend money without considering overall finances. It may be that there are several little things you’re spending money on without thinking about it, which could be creating a big cost to your company. Setting out a company budget is the best way to avoid going into unmanageable debt, make sure you have money set aside to cover you if the income takes a hit.
Don’t give credit
Credit is quickly becoming a thing of the past, as it is becoming far too easy for customers to refuse payment after using a service. If this is a repeated problem with a number of customers or partners then you could end up out of pocket. It may be that once you have established long term working relationships and have built up trust, then you can offer credit to loyal customers but be careful!
Collect your debts
If people owe you money then make sure you collect! Continuing to ignore your debtors will only see you further in financial trouble; however the predicament lies in the method of collection. By pressing legal action you can damage relationships with your clientele, which is why many businesses choose to use invoice factoring. This is useful as invoice factoring gives you a percentage of the amount you are owed every time you bill a client, giving you an income you can rely on, and they will then be responsible for chasing up payments – helping to maintain your relationships.
Find the problems
Generally with business debt the biggest problems can be easily pinpointed and attacked head on. It may be that you need to change your prices to be more competitive or adapt your services to better suit the market. It could be that you are overpaying for services like cleaning or IT support which is eating into your budget every week. Make sure that any unused equipment is sold off to help create a bit more cash and free up some vital office space.
Seek financial advice
Sometimes self-help articles on the internet aren’t enough to work out where you’re going wrong. It may be that a professional needs to look at your financial reports and show you exactly what can be done to prevent your business from going under. They can advise you on the best ways to save money, from employing invoice factoring to having a commercial re-mortgage to achieve better, more affordable rates.