Tackling financial struggles for small businesses
Business debt can be caused by a myriad of factors.
Sure, mistakes happen, but sometimes external elements that are beyond your control can play a part as well.
In fact, since the COVID-19 pandemic, the number of company insolvencies has risen by a whopping 76%.
It can be severely discouraging if your business is sinking into debt with no apparent way out.
If you’re spending sleepless nights worrying about your company’s financial state, don’t panic. Here are several steps that you can take to reduce your business’s debt.
Face your problems head on
It can be tempting to bury your head in the sand. However, if you passively sit back and hope that everything will sort itself out, chances are, it will only get worse.
Taking action and facing your problems head on is the first step. In doing so, you will be able to assess exactly how much debt you are in and begin to logically deal with the situation.
Consolidate or refinance your loans
Debt can become burdensome and difficult to manage if you have several loans at various high-interest rates.
Consolidate your existing loans into one loan at a lower interest rate, or simply refinance your loan. This way, you can start to reduce your business’s debt and have a more simplified and controlled way of managing your loans.
Better managing your cashflow is a vital step to reducing your business’s overall financial state. Ensure that you do all that you can to collect payments from clients quickly and be diligent when it comes to record keeping.
It will also be prudent to create a realistic cashflow budget to enable you to understand where your money is coming from and going to, as well as how your business is performing overall.
Cut back on expenses
Once you’ve assessed your cashflow, it’s important to highlight which expenses are necessary and which expenses you can cut back on or eradicate altogether.
Take a look at your staff, for example, do you need to have all staff working in house, or can they work remotely? It’s also beneficial to track your labour costs to keep a close eye on your payroll.
Remember that it won’t be forever. Cutting back on expenses is a temporary solution to help your business. Decisions such as having office-based staff can be reimplemented when your company is in a better financial state.
Use social media to boost revenue
Boosting your revenue can be achieved through raising your prices, offering discounts, and selling unused inventory or equipment.
However, one way that can see businesses bounce back from the depths of debt is through social media. In fact, 1 in 4 users are following brands from which they’re likely to make a purchase.
Through the use of this free digital tool, you can create a page for your business, build brand awareness, and catch the eyes of influencers and customers. Plus, it’s completely free to use. A win-win marketing tool that can do heaps for your financial position.
Communicate and seek expert guidance
It is vital that you openly communicate with anyone that you owe money to. By explaining your financial difficulties, they are likely to understand and even take steps to help you resolve it. Additionally, if you’re open and honest, they will be less likely to take formal action over unpaid bills.
Similarly, it is important to take on board any advice from experts. It is essential that as soon as you become aware of financial struggles, you seek guidance. The sooner you act, the better your chances are of resolving the problem.
Seek out funds, grants and support
As well as exploring various options of support and funding, such as liquidating your assets, looking for investors, or borrowing money from friends or family, you can also turn to grants as a means for offsetting your debt.
Similar to the grants launched in reaction to the COVID-19 pandemic, there are numerous grants available for almost every business area. Be sure to check your eligibility for such grants before losing hope or turning to more extreme measures.
Don’t forget to plan
When managing your debt, it’s easy to get caught up in the day-to-day struggles that accompany it. Stay focused on the future with a realistic five-year plan.
Set a clear date for when you’ll be able to repay your debt and tick off any milestones that you achieve along the way. A plan-based vision will show your progress and keep you and your team motivated along the way.
Take note and learn from your mistakes and experiences
If all else fails, there are still options such as selling parts of your business, liquidating assets, or declaring bankruptcy. But don’t let the worst-case-scenarios overwhelm you.
Business debt can feel paralysing; remember to take note and learn from your mistakes and experiences. Follow these steps and with perseverance you can turn your business around and bounce back even stronger.