The majority of businesses will be tightening their commercial belts after the festive season what with slow sales and reduced income in the last month of the year and the first month of the new year. But some are looking to get on top of and clear their debts.
Clearing the previous year's debt can be daunting for many companies, but with stirdy cash management plans, it's possible to clear some or all of what you owe within the first quarter.
So what can a business do to manage their debt to improve their overall cashflow?
1. Prioritise your debts
Set a budget and create a cashflow. This will enable you to work out how much you owe, how much you can pay back and then pay your urgent debts first, such as the revenue and suppliers. Ensure you prioritise those that you need to keep your business running. Pay any non-urgent debts last and ensure to communicate with all of your creditors with what you're doing and how you intend to pay them back as quickly as possible without toppling over the business.
2. Save any money you can
Go through all of your overheads and work out where you can make cuts. Any saving can then be put towards paying back the debts that you owe. This could be operational costs such as staff, company vehicles, unnecessary IT/marketing systems, as well as negotiating better rates with suppliers, including moving to different ones if you must. Get rid of anything that you don't need and only keep what the business absolutely needs. Those elements that have to be paused, can always be unpaused once your cashflow is back on track.
Sometimes the easiest way to get in control of your debts owed is pulling all of the amounts together into an easier monthly payment plan. For example, getting a business loan to clear the debts off entirely and then having a fixed monthly amount to pay the loan back over a number of years. You pay more in interest but debt consolidation is a good way to get in control of your debt repayment.
4. Get paid
Get every single outstanding invoice from your debtors (clients/customers that owe you money) paid and collected within a very strict and short time frame. Why should you give them a line of credit when you need to settle your debts. Ensure that you have strict credit control for all outstanding invoices that have not been paid, ensure any current invoices are paid on-time and any that cannot be, find out why and put in place a collection plan and include that in your cashflow. If necessary employ a debt collection agency to recover any amounts that cannot be under standard amicable credit control methods.
Once you're in control of your debt management and debt repayment, the bigger picture becomes clearer and you're then able to actively continue running your business without any severe financial worries. Cash concerns hanging over your head means you're not doing what you should be doing, you're not concentrating on what you should be focussing on, which is running the business and improving its income.
For help with getting your debts collected from your overdue invoices by our credit control experts, contact us on 0208 720 7309 or email firstname.lastname@example.org