How to manage your business debt
If you are going to be successful in running your business will need to focus on managing your business debt. This ability to successfully manage your business debt will be crucial in determining how long your business will be around. This can be a difficult prospect especially for new or smaller businesses that may have limited resources. In addition, if the business is has too much accounts receivable or is holding to much inventory it can also complicate the process of managing business debt. However, the good news is that no matter how difficult the situation there are guidelines that can help you reduce cost, increase revenue, and better manage your business debt. Here is what you need to know about how to manage your business debt-
- Have an open line of communication with your banker-One of the most important things that you need to have regardless of the amount of your business debt is an open line of communication with your banker. This way should things get tight you can sit down with your banker and come up with some solutions. You want to work with someone who is familiar with your business, your ideas, and knows your goals and concerns. When your banker has this type of information he or she can put you in touch with suppliers and other key contacts that can be highly beneficial for your business. Remember that it is in the bank's best interest for your business to succeed so they will do all they can to help you keep your business going. If you are unable to consult with your banker you should consider talking to your accountant or other financial professional for advice on business debt management strategies.
- Know what the current interest rates are-Business debt can often carry a different interest rate then other types of debt. In addition, this interest rate can change quickly. Savvy business owners will do all they can to stay on top of the current interest rate for business loans. If you find that you are carrying business debt at a much higher interest rate then you need to refinance for lower monthly payments. However, you should keep in mind that most likely you will need a spotless credit history. This means that along with your managing your business debt you should also be managing your business credit, as well.
- Control costs-While you may not be able to significantly reduce your business debt overnight you can take steps to make sure you are not adding to it. There are several different kinds of costs that can be adding to your business debt and weighing your business down. One of the largest costs of doing business is the physical space that your business takes up. You may need to consider downsizing, subletting unused space, or just finding somewhere cheaper to do business. In addition, it is also important to control employee spending. You want to have a process in place that helps to monitor employees who are using employee credit cards. Once employees are accountable for what they spend you can keep better control of costs and lessen the chance of adding to your business debt unnecessarily.
- Talk to your suppliers-You should constantly be having a dialogue with your suppliers. Keep in mind your suppliers want to keep you as a customer just like you want to keep your customers. This means that you should not hesitate to ask for discounts, better payment terms, and other concessions that will help you to better manage your business debt. You should also consider ordering in bulk to get better prices. If you are not able to use the required bulk amounts consider partnering up with another business in order to get the best discounts and reduce your amount of business debt.