Tips on Effectively Managing your Debt
Debt is a great way to finance your small business. It allows you to receive a large sum of cash whilst retaining full ownership of the business, meaning you retain all the earnings. However, with debt comes a large risk, as you cannot easily plan for unexpected events such as recessions, pandemics, and natural disasters, which will impact your ability to pay back the debt. We at M.A.S Partners, the leading small business accounting firm in Sydney, specialise in managing people’s finances, and their debt as a result. We understand the great risk debt can have, but also the potential growth your business can achieve through debt. As such, we have provided some tips that will help your small business manage debt.
If you find yourself in a situation where your debt is increasing, it is better to take action as soon as you can rather than waiting for later. Failing to make payments on your debt will have disastrous consequences and cause the downfall of your business: such as a seizure of stock, loss of employees, expensive court cases, and government intervention. Debt such as taxes should definitely not be put off for later, as the government have authority to take their money whatever way they can- such as seizing business assets, and declaring you bankrupt.
Depending on the lender, you may be able to renegotiate the terms of your loan and spread it over a longer term- which will reduce interest payments and the monthly cost. However, due to the increased risk of default, banks may charge you a higher rate, but may give you some breathing space. The last thing you want is for your debt to pile up.
Increase Your Revenue
This advice may seem straight forward and obvious, but there are few a few things you can do to help increase your revenue in the short-term, which will help you pay off your debt. Consider offering customers reduced prices such as discounts, which will help improve cash flow and give you a temporary boost in revenue. Focus your sales on repeat customers, rather than new ones, as it will be much cheaper to do so. Consider looking for affordable marketing strategies such as social media or email marketing, which will help attract customers.
Reduce Business Costs
Within a business, there are so many underlying costs that can be reduced to help you pay off your debt. Things such as the amount of space you rent, or lease can be reduced; shortening staff or employees; or negotiating with your suppliers to reduce cost of stock.
Consider Hiring a Small Business Accountant in Sydney
With our extremely diverse client pool, we have experience in accounting for every industry, and know how to effectively manage your finances. Our small business accountants understand the importance of managing debt and can provide advice or connections to help you pay it off. For more information on our small business accounting services, click here.