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5 simple ways to pay down debtNews Article: February 22, 2018 by dwaoaktree Save Money
Debt can be a crippling problem for small businesses wanting to grow or just break-even during difficult times. By reducing debt you can improve the value of your business, its financial situation, and its ability to continue operating into the future. So impropve your overall financial situation and reduce your debts where you can. Check out our simple tips below!
1. Assess your debt situation
Take a detailed look at all of your debts – both current and long term. Evaluate which ones are more urgent and which can be parked until some progress is made.
The key determining factor should be the interest you’re paying on your debts. For example, those with the highest levels of interest should be paid first.
Also list your debts from smallest to largest. Maybe some of those smaller debts can be paid off quickly without much hassle to enable you to focus on the larger ones. Consider consolidating all your loans into one payment if possible.
2. Cut costs and free up cash
Try to cut any unnecessary costs and free up some cash in the process. Think about how much you spend on each of your daily expenses and analyse where there is room to cut costs.
For example, a building firm may shout takeaway coffees for its workers a few times a week. A cheaper option can be to continue providing coffee, by using instant coffee and transported hot water on site, rather than expensive takeaways.
Look at how long it’s taking your debtors to pay you. If your customers aren’t paying on time, come up with some solutions for encouraging them to pay quicker.
One method to use is early payment discounts. Alternatively, tighten up invoice periods so there are less days for your debtors to pay before penalties. Ensure that you let them know about any changes and the reasons for them.
3. Reassess funding
Have a look at how you’re using funds to pay off your business’s debt. Do you have funds available that could be better used to reduce debt further? Perhaps you have money in a current account that isn’t being used optimally, to lower debt and future payable interest.
Examine your cash cycle, when payments come in and when they go out. Where does the incoming cash go before it gets allocated? Is there any you can reassign to debt payments?
4. Sell your assets
Another option for freeing up funds to reduce business debt can be to sell assets. Do you have money tied up in assets that are not used often enough to be justified?
Any equipment that’s not being used could be sold off. One example could be a builder who has an oversupply of power tools. By making a detailed list of all their tools and how frequently they are used, might reveal surplus assets that can be sold.
5. Make sure you’ve calculated depreciation correctly
Have you depreciated all the assets in your business that need to be depreciated? It’s important to get these figures correct including the ratio of personal to business use, if necessary.
For example, a company vehicle will need to be accurately depreciated in relation to its usage over time. We can help you calculate depreciation correctly and also check whether you’re entitled to any tax rebates.
If debt or cashflow problems are stopping your business achieving it’s objectives, speak to us today and we can help you restructure debt and improve your cashflow management for a brighter tomorrow.
Book in for a FREE, No Obligation Business Review and we can discuss your individual situation and create a tailored solution to your problem.
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