Why are you in debt?
Starting a new business online can be expensive, and you might have taken out loans from different sources in order to get started. You might have been tempted to take out high interest bank loans or gone over your limit on a company credit card, finding it difficult to pay back your charges without significantly increasing your current debts. You might have overbought on stock which didn't sell well or used vendors who overcharged you for services that you could have got for cheaper elsewhere.
Getting into debt is never pleasant, but burying your head in the sand is not the best option. Completing a detailed financial analysis on your current situation and following the steps below should help you recover from your business debts, without causing yourself too much financial damage for the future.
OK , So what do i do?
The first, and most important step to get out of business debt is to run a complete financial analysis on your current business situation. You need to ask yourself the following questions (and answer them honestly if you want to really leave your debt behind!) What mistakes did you make that resulted in your accumulating too much debt? Which areas of your business can be reduced or downsized to save capital? Which areas can you strengthen to pay off your debt more quickly and easily? Completing this process may be difficult to do alone, especially since we often find it hard to be impartial about our own choices and decisions. Working with a professional may cost you extra short-term but could save you money in the long term by creating a solid business plan to follow.
Reduce costs wherever possible
The first area to consider for your financial analysis, and as a first step to reducing business debt is to reduce costs wherever possible without it impacting the overall effectiveness of your business. Consider areas such as shipping costs and shop around for cheaper shipping providers, or lower cost packaging. Use sites like money.co.uk to compare prices on your utility bills, and shave off extra costs. An hour on the phone or online could save your business money, and give you the chance to pay off your debt more quickly.
You can also look into downsizing your business premises. Looking for a smaller office, or in a cheaper area will cut your working costs, without having to lay off staff. Relocating your office to an area with better public transport could cut petrol costs for your team, and you could save by getting rid of company cars. If you work alone or with a small team consider moving your office to your home, or letting your team work from their homes. Business debt can add stress to your working environment. Letting people work from home can put a positive spin on the work situation, raising morale whilst saving costs.
One area of your business outlay that can be cut in times of financial difficulty is your marketing budget. You reduce your online marketing budget by targeting cheaper PPC campaigns on Bing instead of Google, or cutting your company text messages to once a week instead of twice a week. Identify which marketing channels bring you the most consistent return on investment, and reduce other channels, until you've reduced your debt.
Consolidate all your debts
Once you've identified all the areas that you can save costs, the next step to coming out of financial debt is to consolidate all your debts into one low interest loan. Debt can spiral out of control when it is spread out over several different sources, and it means you have to be on top of different interest rates and small print. By keeping all your debt in one place you can focus on exactly how much you need to pay off, and by when, putting you back into the driver’s seat to make payments more quickly and efficiently.
Don’t burn bridges
Try to avoid bankruptcy. Although it may seem like an attractive option when your business debt has piled up, it is an expensive process that will not only hurt your online reputation, but it will hurt your chances of getting business loans in the future. Online businesses are built on reputation, and customers will be less likely to trust you in the future if they think you let them down in the past. Whilst it is easier to open up online with a different name, it is also easier to track places and their histories via Google. Don’t underestimate your customer base and their ability to research you. If you do need to declare bankruptcy try you best to fulfill any last orders first, and be as transparent as possible with your customers so you don’t burn bridges.Thinking long term
The secret to recovering from business debt is to change your thinking to a long-term strategy. Prepare to run both your personal finances and your business finances with one clear goal- getting out of debt, and staying that way. Any strategies that you put into place to get out of debt should be continued once you are debt free. Don’t book any fancy holidays just because you've cleared your debt, or invest in expensive, risky merchandise just because things are looking rosy again. Once a month run a detailed cost analysis of every aspect of your business, so that you can see any problems before they overwhelm you.
Whether you are doing your own accounting or you are using a professional to do it for you, make sure that every single business expense is accounted for, and noted down clearly. Knowing exactly what you are spending, and on what means that you can cut costs before things become problematic, and increase spending in a sensible way when necessary. .Keeping a close eye on your finances, including any low-level loans or other forms of debt will allow your business to flourish, without the worry and stress of debt.The post How to recover from a business debt appeared first on ezbob.