Whether it’s on a personal or business level, discipline is key to eradicating debt. Creating a brand new, non-negotiable budget is a sure-fire way to reduce your business debt. Try to strictly follow this budget without deviation until your business is out of debt. In some cases, it might even be beneficial to continue with that budget even after you are debt-free. Included in this budget should be a list of your debts, prioritised in order of importance. Once this budget is in place, you will need the following tips to help you effectively follow through with your new budget plan.
1. Question your interest rates
Bank interest rates and insurance rates can often be amended due to small details that may have changed – if you don’t inquire, you never not that you are spending an unnecessary amount of money every month.
2. Rent out office space
Look around your office and see if there is a space that you could rent out. Do you need an employee lounge or a separate room for photocopying? Could these rooms be rented out for a bit of extra income?
3. Manage your customer credit
The easiest way to manage customer credit is to not get it in the first place. However, this is often easier said than done. If your company has a lot of customer credit, it can be dealt with in the following ways:
a) Give each customer a deadline
b) Offer a discount for quick account settlements
c) If, after 90 days the account is still not settled, begin legal proceedings
d) Be willing to negotiate a payment plan if necessary
4. Look for cheaper alternatives
Take a look at all your business expenses, from equipment and stationery to cleaning products and Internet providers – investigate all other options; more than likely, you will find that there are many cheaper alternatives that can save your business a lot of money
5. Get creative and make sacrifices
Lowering your business debt will require some out-of-the-box thinking:
a) Think about what business assets you can sell, rent out or even share with another business.
b) What other jobs can you take on in your spare time?
c) Which small, everyday expenses can you cut down on, such as lunch, coffee, petrol (initiate a carpool), electricity, and even water?
d) Are there any trade or barter exchanges you can negotiate?
Your business debt means taking a long, hard look at your everyday expenses and your hidden expenses. If you start with an amended budget and prioritise your debts, a solution will not be far behind – ignoring the issue will only make it worse; face your debt head on and take it one step at a time.