Debt can be a crippling problem for small businesses wanting to grow or just break-even during difficult times. By reducing debt you\u2019ll improve the value of your business, its financial situation, and its ability to continue operating into the future.<\/p>\n
Take a detailed look at all of your debts \u2013 both current and long term. Evaluate which ones are more urgent and which can be parked until some progress is made.<\/p>\n
The key determining factor should be the interest you\u2019re paying on your debts. For example, those with the highest levels of interest should be paid first.<\/p>\n
Also list your debts from smallest to largest. Maybe some of those smaller debts can be paid off quickly without much hassle to enable you to focus on the larger ones. Consider consolidating all your loans into one payment if possible.<\/p>\n
Try to cut any unnecessary costs and free up some cash in the process. Think about how much you spend on each of your daily expenses \u2013 is there room to cut some of those costs?<\/p>\n
For example, building firm may shout takeaway coffees for its workers a few times a week. Maybe a cheaper way can be found to continue providing coffee, such as instant coffee on site with hot water from a thermos, rather than expensive takeaways.<\/p>\n
Have a look at how long it\u2019s taking your debtors to pay you. If your customers aren\u2019t paying on time, come up with some solutions for encouraging them to pay quicker.<\/p>\n
Early payment discounts could work well but make it clear on each customer\u2019s invoice. Alternatively, tighten up invoice periods so there are less days for your debtors to pay before penalties. Make sure you let them know about any changes and the reasons for those changes.<\/p>\n
Have a look at how you\u2019re using funds to pay off your business\u2019s debt. Do you have funds available that could be better used to reduce debt further? Perhaps you have money in a current account that isn\u2019t being used optimally \u2013 lowering debt and hence future payable interest could be a wiser choice.<\/p>\n
Examine your cash cycle, when payments come in and when they go out to pay your creditors. Where does the incoming cash go before it gets allocated? Is there any you can reassign to debt payments?<\/p>\n
Another option for freeing up funds to reduce your business\u2019s debt might be to sell some assets. What do you have money tied up in, but don\u2019t use often enough to justify?<\/p>\n
Any equipment that\u2019s not being used could be sold off. One example could be a builder who has an oversupply of power tools \u2013 making a detailed list of all their tools and how frequently they\u2019re used might reveal some surplus assets.<\/p>\n
Have you depreciated all the assets in your business that need to be depreciated? It\u2019s important to get these figures correct including the ratio of personal to business use, if you use an asset for both.<\/p>\n
For example, a company vehicle will need to be accurately depreciated in relation to its usage over time. We can help you calculate depreciation correctly and also check whether you\u2019re entitled to any tax rebates.<\/p>\n","protected":false},"excerpt":{"rendered":"