Deloitte reports that the total debt outstanding for non-financial businesses in the US was $17.7 trillion at the end of 2020. Debt is a critical part of running a modern-day enterprise, and it can even be a good thing since it can help you purchase equipment, hire employees, and finance growth. However, too much debt can suppress your cash flow and put your company at risk. Therefore, it is crucial to get out of business debt and save your company from sinking. If you want to know more about getting your small business out of debt, consider the points below.
Consolidate your debt
According to LendingTree, 35.7% of loan applicants in the last month of 2019 were looking to consolidate their debt into a single large debt. And doing so might work for your company. Debt consolidation involves taking out one huge loan to pay off all your debts, leaving you with one debt to make payments towards. However, remember a single payment is not the ultimate goal of debt consolidation. Instead, the target is to get a loan that offers better terms than your other loans combined. Consequently, only consider debt consolidation if you benefit from less interest, extended payment terms, or lower monthly payments.
Increase your revenue
Money is necessary to pay off your debts, so you need to raise your revenue to have more money. Consequently, explore various tactics that can help you increase revenue and even expand your business. You can increase your prices if the value of your products and services are worthwhile, ensuring that existing customers will pay more for your business offerings. Also, you can free up excess inventory, hold a special sale, and discount promotions and coupon campaigns to boost revenue.
Get your customers to pay sooner
Typically, there is a lag between the time clients purchase from you and when they pay you if you bill them through invoices. Therefore, it is critical to get your clients to pay faster so you can get your small business out of debt quickly. For this, consider shortening your payment terms so clients can pay you sooner rather than later. Most patrons will take all the time you give them before making payment, so think about the maximum amount of time you are willing to wait before getting paid. Furthermore, you can also track down late-paying customers as a great way to get your money. Consequently, check your records for outstanding invoices and call these clients to remind them of their bills. Investing in collection agency software might be necessary to empower your first-party collections team, so keep this in mind.
Many business experts agree that a quick review of your operating costs can reveal excess expenditures you can do without. Therefore, review your current operating costs to decide which operations and services are vital for your company's daily operations and get rid of the rest. Subscriptions you barely use, and professional memberships you can momentarily suspend are the first things you can eliminate to reduce your expenses. Also, consider whether you can negotiate reduced prices with particular vendors and stop spending so much on advertising efforts that yield little return. Finally, consider whether you can relocate to a smaller office with less utility and rent costs or move into a co-working space that doesn't demand a long-term lease.