Running a business is difficult enough, but when you find yourself in debt, it feels like there’s no way out. Fortunately, it’s possible to go through a business rehab to get out of debt – and increase your business’s long-term financial health at the same time.
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Here are some tips on how you can get out – and prosper.
Consolidate Your Debt
A great place to start is consolidating your debt. You may have opened one or two lines of credit to get your business going in the first place, not to mention expenses like company credit cards. Debt consolidation allows you to combine your debts into one loan. That way, you have one payment per month at a fixed rate. Pooling your debts this way may even save you money in interest and fees in the long run.
The first step to consolidation is refinancing your loan. It comes down to redistribution: you’ll take out a larger loan to pay off your smaller debts. If your business is your collateral, you’re likely going to get a larger loan at a better interest rate. Keep in mind that you don’t have to go to your original lender. You have the freedom to shop around to find the best interest rate.
Streamline Your Invoicing Process
By now, you certainly have your own system for your invoicing process. But don’t be afraid to branch out and try something new. There are all kinds of programs and resources to help you create an effective process. Not only does this help streamline everything, but your accounts payable (AP) department will also thank you.
Consider, however, consulting with your AP department staff before deciding on or implementing any changes. Those who actually process your business’s invoices will give you insight into what they like, don’t like and wish for.
The goal of the invoicing process is to get paid as soon as possible. Start by standardizing the invoices themselves. Along with many other websites, Vertex42 offers an abundance of templates if you’re ready for a complete overhaul. These templates allow you to include your logo, text, and photos.
Are files too big and taking up too much space on your AP department’s computers? Try an easy PDF compressor to scale things down as much as you need to.
Create a Budget
Once you’ve worked to ensure you’ll be getting paid properly and on time, you’ll need to create a budget for your business. A budget isn’t just about counting your money. As Ramsey Solutions explains, it’s a plan for spending your money as well. It helps you anticipate the outcomes of the near future, both profit, and expenses.
Here are a few ideas to consider while creating your budget:
- Arrange expenses into categories: one-time purchases (like new equipment), variable expenses (like mailing costs), and fixed expenses (like insurance).
- Decide what kind of system you’ll use to track and maintain your budget. There are all kinds of computer programs and applications online to help you get started.
- Keep your business and personal budgets completely separate.
Make it part of your weekly process to check in on your budget. Are you overspending or coming in under? Is there one area of operations that needs more funds and one department that doesn’t need as much? Evaluate monthly, as well as weekly, to see exactly where you stand and what adjustments (if any) need to be made.
Reduce Expenses
Though you may think you’re already pinching pennies as much as possible, there’s always room to cut costs. Shop around for better deals on your fixed expenses. Businesses are often targeted specifically by internet providers, so investigate to see if you can find a better deal than your current one.
You may not want to cut ties with your current suppliers, so look into other options there, too. Get multiple quotes from multiple companies. It’s a competitive market and you should take advantage of that competition.
Although you usually can’t control variable expenses, it’s another area where you can look for and find the best deals. For instance, if you consistently use one mailing service and their prices keep rising, switch to one with lower and/or more fixed rates.
Office supply costs are sometimes categorized as a variable expense as it depends on need. However, you can convert those costs from variable to fixed by putting a cap on spending in that area. Don’t slash it completely or unreasonably, but assess what’s actually used on a monthly basis and see where you can reduce it.
Increase Revenue
The main goal of any business is to increase revenue and profits, but when you’re in debt and feeling frantic, it’s difficult to come up with ideas for doing so. Start by increasing your customer’s incentive to buy. Offer special discounts on holidays, certain days of the week, or have flash sales sporadically.
Essentially, you’re looking for a way to convince customers that they must purchase right away, boosting sales and the chances that your customers will return.
You should also make it a point to keep every member of your team motivated and excited. Poor attitudes can spread like viruses in working environments and spill over into every aspect of your business — including brand image and customer experience.
Think about it: do you enjoy going into stores that seem to have a dark cloud over them, where employees seem absolutely miserable? Of course not. Your team is your direct link to your customer, so by taking care of them you’re directly impacting, and thereby increasing, sales.
Ask for help
Particularly if you’re a new business owner, it’s vital to know when to ask for help. Getting out of debt is one of those times. Business consultants, accountants, and efficiency experts can all take a look at the various areas of your business and help you see where to make changes. You may find opportunities on your own, but having a professional to guide you is always a good idea.
You can also use this opportunity to reach out and network with other business owners. They may have been in your shoes before and know exactly where to start. They might even have recommendations on which companies and professionals are the most thorough and reliable. It may seem intimidating to admit to a peer that you’re struggling, but many will be happy to help and could even come to you in the future for advice.
Being in debt is scary. Bouncing back and finding ways to increase your long-time financial health is possible, but be prepared for it to take some time. You may not see improvements right away, but in the long run, these tips will help bring your business out of the muck and into the sun.