Debt is one of the top killers of businesses around the world. Fortunately, being in serious financial debt doesn’t have to be an impossible hole for a business to dig itself out of.
If a businessman like Anik Singal, author of Circle of Profit, could go against all odds and dig himself and his business out of horrendous debt, then so can you with these following tips:
Remove Excess Costs
You can accomplish this by first figuring out what aspects of your business led you into debt in the first instance. Once they’ve been identified, immediately proceed to take them out of the equation. If the problem is your clients aren’t paying on time for goods or services already received, or your business is overspending on unnecessary expenses, then you need to bring about a change to rectify both problems.
Start by first changing your policy on payment for services such as by adopting a “no payment no service” policy. Then proceed to drop and avoid all needless expenses to avoid spending unnecessarily.
Review Your Budget
If your business’ debt is on a constant rise then there’s probably something wrong with the business’ current budget. Erase the former budget and formulate a new budget that better suits the current financial constraints of your company. Also be sure to ascertain that your business’ current revenues are sufficient to cover the fixed costs of your business (electricity bills, rent, etc.)
Next step is to apportion a realistic amount of your business’ budget to settling your old debts. Why? Because the sooner you get rid of old debts the better. Debt is likely to accrue interest as time passes. The more time passed, the larger the debt becomes.
Prioritize Your Debts
The biggest debt that’s accruing the most interest should be placed at the top of the list of creditors and should be paid off as soon as possible before it consumes your business. The number one source and the most insidious of such debt is usually credit card debt.
Although in certain instances, a creditor or supplier may begin claiming your personal assets after you’ve exceeded an agreed upon time of payment. In such an instance, such creditors or suppliers will also require a seat at the top of the list of debts. It will now be up to you to determine how to share what you have, when you have it, between each of your top creditors.
Woo Your Creditors
This is not the time to be proud or stuck up. Appeal to the kindness of your creditors and let them understand the financial rough patch your company is going through. You can then ask if they have any alternatives they can offer that’ll provide you better settlement terms. If a creditor says, “No”, you can then suggest a mutually beneficial payment plan or try bargaining to have the settlement amount reduced. When doing this, be sure to humbly point out that you’ll be able to repay the debt quicker if the amount is reduced.
If such a bargain is agreed to, it will be in your best interest to ensure you satisfy your end of the bargain before the expiration of the agreed upon time frame.
You don’t have to go through your period of financial distress alone. You can speak to a mentor who has gone through the same thing and ask for guidance to get your finances on the right track. There are also credit counseling firms that can offer debt management advice.
Use Tools to Fight Your Debt
Asides from the assistance of other people, there are also tools – apps you can download on your mobile device to help you monitor and control your debt. Some of these highly useful apps include:
- Debt Manager: It’s an easy to use app that allows you monitor all sorts of debts and loans, including car payments, medical loans, mortgages, student loans and bank loans.
- Debt Eliminator: This app actively pushes its user to escape debt by driving you to first pay off debt with the highest interest rate.
- Mint.com: It is capable of easily integrating with your monthly finances, as well as creating and tracking your financial goals. If you need to save money, plan for future spending, or pay off debts, Mint.com has got you covered.
Other notable apps include Unbury.Me, Undebt it, Debt Free, Debt Tracker Pro, Ready for Zero, and Debt Calculator.
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