Getting Your Small Business Out of Debt

You know what they say, “you have to spend money to make money.” ‘They,’ apparently, have never been in serious business debt. While some business debt is good, there’s a point where even good debt turns bad. That point occurs when you can no longer afford to pay what you owe. If you have far surpassed that point and are now desperate to get back into good financial standing without declaring bankruptcy or selling your business (as the majority of SMB owners do), Oasis Consulting Group offers these tips for getting your business back on track today.

Make a New Small Business Budget

According to Bench, overwhelming debt is often just disorganized income. If you struggle with business debt but cannot identify where every dollar of profit is going, your debt-paydown solution may be as simple as restructuring your budget to optimize your income.

Look at your current numbers to see if there are any places you can cut back on spending. Is there money going out that doesn’t need to? Can you free up some money by reducing expenditures in other areas? You may be surprised to learn that your found money is enough to cover your payments each month.

Cut Your Costs

This tip goes hand in hand with the above point, but it needs to be said … If you struggle with business debt, chances are it’s because you spend too much money. Go through your monthly and annual expenses and be honest with yourself about the need for each one. If you cannot say with conviction that you need to pay for XYZ, cut it. If you know you can get a better deal on a product or service, either switch providers or renegotiate your costs. When times are tough, you must be extra frugal and brutally honest with yourself regarding needs.

Collect on Overdue Accounts

Of invoices sent in the United States, 38% are paid late. Nearly half of all customers always or almost always pay late, and 52% of businesses say they routinely receive requests for payment extensions. When an invoice becomes more than 90 days past due, there is less than a 50% chance that the customer will pay it.

Past due invoices cost SMBs billions of dollars each year. If you have outstanding invoices in your books, chase late-paying customers down. Even if you must settle, partial payments are better than no payment.

If your repayment terms are lengthy — as in, greater than 30 days — shorten them. For existing customers with outstanding balances, offer early payment discounts to incentivize them to pay debts down sooner. If customers really need payment extensions, consider invoice factoring.

As long as you’re revamping your invoicing process, you can use an online invoice generator to create customized invoices tailored to your brand. Choose from a premade template and then add your own images, font, text, and color scheme.

Consider Debt Solutions

If all else fails, consider common debt relief solutions. Think more along the lines of debt consolidation, debt refinancing, and debt restructuring rather than bankruptcy. However, don’t discount bankruptcy entirely as, depending on the amount of debt your business has, it could be the best option.

Personal Business Skills

How you relate to your clients when it comes to invoicing and billing makes a bigger difference than you would imagine. Having good people skills, like how to approach your clients when you need to talk about money, and using communication effectively can impact your bottom line as much as anything.

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