A Step-By-Step Guide to Cut Your Small Business Debt

Most small businesses and entrepreneurs have business debt due to the costs of managing the day-to-day activities of the company. If you are uncomfortable with the amount of debt that you are carrying for your company, then you need to talk to an experienced accountant to put together a debt pay-off plan.

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In most situations, the debt wasn’t accumulated overnight. So, you shouldn’t expect to pay it off immediately. But, a financial professional will be able to make recommendations about the strategies that can be used to maximize your cash flow and improve your overall financial picture. Here at Easier Accounting, we can help with the financial strategy for your small business.

Our goal today is to provide an overview of some of the strategies that can be used to pay off your debt. Customize these ideas to create the fastest way to financial freedom for your company.

Get Clear on Your Financial Picture

It might be tempting to look the other way and only focus on minimum payments. But, burying your head in the sand won’t solve your debt problems. To get started, you need to consider the amount of debt that you are carrying and the cash and assets that are available to use.

Schedule an appointment with your bookkeeper and/or your accountant to take a look at the overall picture. Make a list of outstanding balances that need to be paid, ongoing expenses for business operations, as well as a budget you can maintain going forward. This budget needs to be designed with two goals in mind: avoiding additional debt and paying off the current balances. You need to be sure that you are earning more than you are spending if you want to pay off the debt.

During this meeting, your small business accountant might make suggestions about common budgeting and debt-reduction strategies. For example, it can be beneficial to sort through expenses to identify essential costs and ways to reduce overhead spending. At the same time, you need to look at strategies that might be available to increase monthly revenue.

Hands-On Debt Management

Now that you have a clear picture of your financial status, you might consider opportunities to negotiate better terms for your balances. Go through your accounts one by one to ensure that you understand the terms of the loan and the payment options that are available. Then, you can figure out the credit lines that need to be paid first to optimize your long-term results.

You can read the fine print in the loan terms. Or, better yet, call the company to learn about your options. This conversation can sometimes lead to a negotiation regarding the payment options. Some vendors will offer a discount or early-bird price if the money is sent ahead of schedule.

Consider using the snowball strategy to pay off all of the balances in the shortest period. If you can negotiate a quick payoff for a smaller balance, then you can roll the money that you would normally be spending for that payment into the next loan.

If possible, you should re-negotiate the terms for every line of credit. Most lenders know that it will be a huge loss if they send the account to collections. So, they are interested in finding a win-win solution for both parties. You could potentially negotiate a different minimum payment or reduce the interest costs on the money that you owe. Talk to them about late fees and restructuring the payments so that you can create an environment that will make it possible for you to pay the balance.

Set Up a System

After the negotiations are done, do everything in your power to make sure that you keep up with the payments going forward. The late fees and interest costs can make debt unmanageable. But, you can avoid these problems by making timely payments every month.

You need to have a system in place to ensure that the cash flow is available for debt payments. Make sure that you are paying your debt obligations before you consider investing money in other business development opportunities.

This system could be structured to allocate a certain percentage of your revenue to debt payments. Or, you might consider the option to set a specific dollar amount that needs to be paid each month, regardless of the revenue that you receive.

Should You Consolidate Your Debt?

Some people automatically assume that debt consolidation is the best answer to get out of the financial hole. While consolidation can be a good solution for some people, it isn’t always the best method. Make sure that you understand the terms of the consolidation before you sign on the bottom line.

What is debt consolidation? It is the method of acquiring one large loan to move all of the smaller balances into a single account. Consolidation could simplify your financial picture, and sometimes it can reduce the amount of interest that you are paying each month.

If you decide to move forward with debt consolidation, be warned that the lender might require some collateral. For example, you might need to offer a personal guarantee to back up the funds that are offered.

Be cautious to manage your spending after the consolidation loan is in place. Some business owners fall into the trap of paying off their credit lines with the consolidation loan, then running up the balances again because of poor financial management strategies.

Maximizing Your Business Revenue

Managing your debt payments is the first step to take control of the financial health of your company. In addition to looking at the amount of money that you are spending on debt payments, you also need to evaluate the money that you are receiving. Your repayment plan won’t work if you don’t have a solid cash flow to make the payments that are needed.

Aggressively building your income will be a fast way to pay down the balances. Generating more cash will help you feel motivated to reduce your small business loans and build your company for the future.

What are the best strategies to bring in more money? Here are a few solutions that might work for your company:

  • Increase Prices: Don’t bump your prices without evaluating how the increase will affect overall sales. A small price increase won’t likely have a major impact on the number of orders that you receive. But, if you sell a large volume of products, then this small increase could add up over time. For a quick boost in sales, you might make an announcement to current customers that the prices are going up. Many people will purchase products before the change happens.
  • Assess Inventory: How many items are sitting in the back of your inventory room, lost in the stacks of boxes? Your inventory represents money that is available for your company. Since you already have these products on hand, you don’t need to spend a lot out of pocket when the products are sold. So, you might consider offering a special sale to move those items. In the future, look for ways that you can optimize your inventory to avoid spending a lot of money on products that will sit in storage for a while.
  • Leverage Upsells: When someone is ready to make a purchase, it is easy to encourage them to add another small item to their shopping cart. Look for a way that you can offer bundles or incentives to encourage people to spend more money when they are making a purchase.
  • Reach Out to Current Customers: People who have already purchased from your company have shown interest in the products and services that you offer. Instead of spending your marketing budget to acquire new customers, consider the benefits of reaching to current customers. You will likely experience a bigger ROI from these marketing efforts.
  • Diversify Your Services: Is there anything else that you can add to your line of services? Diversification might allow you to break into new markets or offer your skills in a different way.
  • Ask for Referrals: Contact your best clients to see if they are interested in referring their contacts to buy from your company. You can sweeten the deal by offering a referral bonus or incentive. If people are happy with the service they have received from your company, then they will be more than willing to refer their business contacts, friends and family.

Schedule an Appointment with Your Accounting Team

These ideas should get the creative juices flowing to help you reduce your debt load. But, you don’t need to carry this responsibility on your own! Don’t be afraid to talk to an accounting expert to get customized advice to match your business. Ongoing suggestions from your accountant can be a valuable way to turn your business around and increase your future success.

If you don’t have an accounting team to help, then you need to contact us at Easier Accounting. We specialize in small business accounting, and we know the best strategies that can be used to maximize the financial outlook for your company. Call us for more information about the services that are offered: (888) 620-0770

Boost Your Success by Making Necessary Adjustments to Your Business Strategy

Entrepreneurs start out with big dreams and great intentions, hoping to make a difference with their business efforts. Even if you are thorough with your business plan, it is likely that you will face roadblocks and potential problems along the way. Being a business owner means that you need to be able to make adjustments to accommodate the changing needs of your company.

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Changing Your Business Strategy

Have you ever watched a football game, and noticed when an athlete “fakes” the ball? They try to confuse the opponent by pretending to throw the ball in one direction when the play will actually result in a different outcome. These athletes need to think on their feet and read the field, making adjustments and split-second decisions along the way.

In the same manner, entrepreneurs need to see how things are pulling together so that they can make the best decisions for the future success of their company. If a decision doesn’t look like it is going to turn out as anticipated, then you might need to make some changes to avoid problems. Sometimes, these decisions need to be made in an instant. Your goals of business success remain the same, even if you need to make adjustments to the focus or flow of products and services.

But, you should always be sure that you are making the decisions based on logic and reason, instead of emotion. It can be hard to separate your emotions and logic when you have been working so hard to build the company. So, you need to be sure that you have a team of financial professionals who can offer advice every step of the way.

Why Does Business Strategy need to be Changed?

There are several scenarios that might require adjustments and changes for your company. For example, if you encounter an obstacle or problem that is halting the growth of your business, then you need to look for options to move around the problem. Don’t let yourself get stuck in the rut waiting for things to change! Instead, be open to suggestions and look for other ways that you can solve the issues you are facing.

Here are a few reasons why you might consider changes in your company:

  • High turnover
  • Changing industry
  • Irrelevant product
  • Stiff competition
  • Employee issues
  • High turnover
  • Personal problems

Sometimes, small adjustments can go a long way to adjusting the trajectory for future success. Other times, it might be necessary to completely re-vamp systems or change product offerings to stay relevant in the industry. You might not be able to predict the changes that will be needed. But, you can stay up-to-date about current trends, successes, and projections for the future. Keeping current with the financial reporting will give you the information so that you can make changes when they are needed.

Business owners don’t often have time to worry about bookkeeping tasks or accounting reports. Instead of spending your valuable day crunching the numbers, you should consider the benefits of hiring a professional accountant to help. These services will free up your time so that you can focus on business growth activities. At the same time, you will still have access to the important financial information that will support the decisions that you will make for the company.

Setting the Intention for Your Company

Ultimately, you need to make sure that you have a clear intention for your company and you have laid the roadwork to ensure action to reach your goal. If you aren’t intentional with your daily, weekly, monthly, and annual plan, then you could be missing out on potential success in the future.

Most business owners don’t realize that they lack the intentional planning that is needed. Instead, they get side-tracked with problems and issues that need to be handled along the way. Then, the problems eventually get bigger when the foundational issues aren’t addressed.

Consulting with an accountant and other business professionals is important so that you can put together a successful business plan. Then, you need to keep your eyes and ears open on the market, so that you can identify when changes need to be made along the way.

Your business plan should outline the steps that need to be followed that will lead to the future growth that you desire. Without measurable, actionable items, it is difficult to know how things are going work out for your company. So, you need to be deliberate about hiring the right team that will provide the necessary support that is needed.

Focusing on Solutions, Not Problems

There is no doubt that problems and roadblocks will be encountered when building a business. The question is: how are you going to handle those issues? Some people get caught up in the problem, which slows down the action and stops important business functions. But, successful people recognize the problem, then identify potential solutions instead of dwelling in their disappointment or frustration.

It has been said that a large percentage of new businesses will fail within the first five years. What happened to those companies? Too often, problems arose, and the business owner didn’t have the flexibility to change or make adjustments to cater to the needs of the industry.

Business owners who are unwilling to change their strategy are on the road to failure. There is no doubt that the business world is rapidly changing, especially with the information that is available online. As you are starting a business, you need to be ready to go with the flow and make adjustments as needed.

Putting Employees and Customers First

Now that you can see how change is an unavoidable part of business ownership, the next step is to identify the types of changes that can be made to protect your company. Remember, change isn’t always a bad thing! But, it can be bad if handled incorrectly.

If you are getting ready to implement changes in your company, then you need to maintain strong leadership that will support your team. Put employees first so that they can see the benefits and hop on board with the new initiatives. Employees often feel terrified at the idea that changes are occurring in the workplace, which can sometimes lead to turnover.

These problems can be avoided by maintaining open communication with your employees. Be careful so that you cultivate an environment that is positive and encouraging during the transition. If management is grumbling, then the employees will likely be unhappy as well. So, you need to take a top-down approach to lead by example.

It is also essential to consider the needs of your customers, to avoid losing out on a long list of people who have purchased your product or service in the past. Proactive retention marketing can be a valuable way to offer information and highlight new services that are available.

Close Communication with Your Accounting Team

Whether you are maintaining consistency in your company or you are preparing to make major changes, it is essential that you stay in close contact with your accounting team. These financial professionals can help you see how the changes will impact your bottom line. They will be able to highlight information about potential growth or cash flow issues that might be downstream from your decision.

Additionally, an experienced accounting team can help you put a new plan in place. Strategically, you can minimize the risk when implementing changes, to protect the business interests of your company. You need to have an unbiased financial advisor who can look at the numbers and help you choose the best strategy to ensure success in the future.

Ongoing financial tracking is necessary so that you can continuously identify potential problems along the way. At the same time, your accounting team can help you see opportunities to maximize cash flow and profit. Staying agile in your industry will help you maintain your edge over the competitors, leading your company to bigger growth in the future.

An Experienced Accounting Team to Support Your Business

Are you missing out on potential opportunities for growth in the future? It is important that you are working with an experienced accounting team who will offer you the necessary support as you are building your company.

Our team at Easier Accounting focuses on accounting solutions for small businesses and entrepreneurs. We understand the nuances of starting a business and working through common growing pains. We are here to help with the financial tracking that is necessary to ensure the success of your company.

We will help you stay ahead of the numbers and manage tax requirements so that you can focus on the strategy of managing your business. With the right financial team, you can rest assured to know that you aren’t overlooking important information when you are making big decisions for your company.

When you are ready to work with a top-notch accounting team, then we invite you to contact us to learn more about the services that are available. We are here to help! Call anytime for information about how we can support your business efforts: (888) 620-0770