Financially speaking, there is no way to keep a business on one smooth trajectory forever. There are ebbs in flows as shifts in the economy and market behaviour affect your expenditures and stream of income. That said, this doesn’t necessarily mean that it’s normal for a business to keep accruing debt without seeing enough profit to overtake it. Though many factors contribute, some ways can help you swim your way out of a whirlpool of debt or even prevent that from coming.
Around 70% of small businesses have outstanding debt, but this statistic shouldn’t scare you off and leave you resigned to being in the red. With a focus on paying back your debts and finding ways to increase income, you should be able to get back on the wagon and, at the very least, make enough to keep moving forward without deficits. Here are the first things you need to do to make that happen:
Pay off accounts and debts and consider consolidation.
Even though you need to find a way to sustainably put money into your accounts to continue paying off what needs to be paid, you need to first focus on paying the outstanding debt that is already there and racking up. Put together all your books and go from the highest value and go from there. If it seems like there’s too much debt and not enough resources to spread around, no matter where you make adjustments, it may be time to think about consolidating your debt. That can help you significantly as it can lower the total amount you owe, open you to the possibility of lower interest, and make it easier for you to pay it off faster.
In every industry, making the best financial moves for this option would be much smoother with the aid of a reliable accountant. There are accountants for dentists to lawyers or entrepreneurs and more, so picking one with the right speciality is vital. They can help you take account of all your expenditures and resources to best tackle the debts you have. That can also help you move forward so that you can monitor your records and find ways to cut down on costs based on the data.
Cut down on what you can
If you can monitor what is taking up the most of your finances, you should also figure out where you can cut some corners without sacrificing much of the end product or service you provide. That can be a challenging decision-making process that you have to put a lot of time and thought into, as the wrong move can prove more detrimental than helpful. Done effectively, though, this can significantly ease up your expenses and help you streamline operations as you figure out which things are essential to keep things running.
The last thing you want to do is cut down on your staff, so make sure that’s the final area where you’ll be looking unless you’ve truly exhausted your options and you find some redundancies in roles. It’s important to remember that, emotions aside, this can also end up being even more costly than simply retaining your employees and improving production. If you end up needing to hire again, there are added costs to recruit and train them. That added to the blow in morale your team will likely get. Instead, look onto things like the always-running coffee machine or the extra phone lines that don’t end up being used anyway.
Create a new financial plan
Part of getting over debt is looking ahead into the future. To move forward, you need to formulate a flexible financial plan that can help you stay out of the red and avoid the pitfalls that may have gotten you there in the first place. Make sure your plan includes strategies for increasing your revenue and revisiting the budget now and then.
An accountant can help you during this process, as well. Still, the most important things you want to incorporate in your plan are realistic goals, alternative options, monitorable sheets for spending, investments, and savings as well as emergency scenarios. This way, you can better anticipate any losses and adjust accordingly so that you are always earning or, at the very least, making enough to get to the next month. With the right ratio, you should eventually be able to go above that consistently, even if it takes some time and effort.
Nobody wants to fall to their debts, especially when an entire business is at risk if things go too far south. Remember that not all hope is lost if you’re in the red and that if you identify your problems and solutions in time, you can still make your way out of it.