Once you’ve got your business up and running profitably, you probably want to know all about how to reduce business debt, right?
Depending on the kind of debt that it is, it could be eating into your cash flow and keeping you from expanding the way that you want to. It makes perfect sense that you want to get rid of any business debt you accumulate as quickly as possible. Keep in mind that in some cases, there is debt that is “good” for your business. We will discuss “good” business debt in a future post.
In many cases debt is inevitable, especially during the earliest phases of a company’s development.
Fortunately, that debt doesn’t have be something that constantly hangs over your head and keeps your enterprise from being the best that it can be.
Let’s take a look at some of the different strategies that you can employ to reduce your company’s debt. You’ll see how you can gain peace of mind through business debt reduction.
- Work with your suppliers – In figuring out how to reduce business debt, one of the first places that you should look should be the suppliers from whom you buy raw materials
If you happen to be behind on supplier payments, you want to work out a payment plan with your suppliers that will help you to get current with them.
Your company most likely depends on what your suppliers sell you, so you want to settle any outstanding debts with them first and foremost.
Doing so will make sure that your relationship stays strong and that you continue receiving the items you need to provide your own goods and services.
- Sell, sell, sell – In order to reduce debt, you need to increase revenue. That much is obvious. There are several ways to go about doing that; the most straightforward of which is to increase your sales volume and move more product and services than you have in the past.
Offer incentives to your customers to get them to buy more, as long as its viable for you to do so. As you manage to sell more products, you can use the additional revenue to reduce your company’s debt.
- Restructure – When many business owners try to figure out how to reduce business debt, one thing they often fail to consider is how much restructuring might help them reduce debt.
From selling surplus inventory and unused equipment, to cutting back on excess around the business, there are a several small, but significant things that you can do to get closer to your goal of eliminating your company’s debt.
- Reduce Your Operating Expenses – This could fall in line with restructuring, or be its own strategy entirely.
Think about the things that always cost your money around your business.
You have your utilities like electricity and water, as well as services like your internet connection. Furthermore, you have the office itself, which you most likely pay to rent.
While it’s true that these things are the cost of business, it doesn’t mean that there aren’t ways to reduce them.
If it’s realistic for you to do so, consider moving to a smaller office or switching service providers for more cost-effective solutions. The money that you save could be reallocated to tackling your debt.
Likewise, you could consider alternative scheduling for your employees. If you encourage them to spend time working from home on their own schedules for part of the time, you can ease a transition to a different office. Likewise, you may not need to purchase, power, support, and maintain as much equipment around your office.
- Look over your taxes – Speak with your accountant, CFO, or any other financial expert that you employ and they can help you figure out how to reduce business debt.
One way that they might do this is by going over what you pay in taxes and making sure that you are counting all of your eligible deductions throughout the year.
It pays to do this often because tax laws are always changing and new ways for businesses to take advantage of tax breaks are always popping up.
You want to make sure that your annual tax bill is always at its lowest possible number, so that any money left over after you pay the IRS can go towards reducing your company’s business debt.
Keeping your debt under control is one of the most important things that you can do as a business owner, so you want to make sure that you’re taking every step that you can to pay back creditors and keep outstanding balances from impacting your company’s bottom line.
Remember, running a business successfully does not need to be complicated. Keep it simple!
For more ideas on how to grow your business, please check out our website at www.portalcfo.com.
Manny Skevofilax is a consultant and speaker that helps his clients successfully navigate the challenges of growing their businesses profitably. Since 2003, Manny helps businesses enhance their results by using his experience in strategic planning, financial statement analysis, operations, organizational development, and team-building. His consulting firm, PORTAL CFO Consulting, Inc., has attracted clients from diverse industries in the United States and abroad.
Manny can be reached at 410-808-3441 or via email at firstname.lastname@example.org.