Money Matters: How to Get Rid of Business Debt

On the question of how to get rid of debt, one might assume that the process differs when it comes to business matters. Well if there is any difference then it is very minimal and that is who is servicing the debt.

Budget

Debt has a very negative impact on business and the first step in eliminating it is by coming up with a good budget. Ensure that the budget you have reflects the true situation on the ground. You will never have full control over something till you put it down in writing. Include all the business expenses and compare this against your income. Whatever remains should be used to pay the debt.

Setting priorities

After coming up with a budget the second thing to do in getting rid of debt is prioritizing debts according to their interest rates. Ensure that you have other extra ways of paying for example using a credit card. The next thing that you should do is to close all the credit accounts that are new. Experts say that your business only needs four open credit accounts in number.

Any purchases you make should be cash transactions. Cash inhibits you from having new debts. Always pay upfront and simply buy what is affordable to you in cash.

Communication

Do not let things get out of control. It is always good to come to the negotiating table and let your creditors know what you are doing in order to pay them. This is especially a good if your bank statements are reading well. If you cannot speak for yourself then get a debt recovering company to help you sort things out. Remember a problem shared is one that is half solved.

Why debt is bad for business

There are two types of business namely the bad debt and the good debt. A debt out of accrued salary will always drag a business down simply because at that early stage no one has quit their job yet.

If you know what you are doing then simply distribute something that reflects the same. Put aside some percentage after the first cash contribution. It is from that percentage that compensation will come from.

The implications

It is not enough that you only know how to get rid of debt but it is also important you know why. First of all debt portrays a negative image to the would be customers in that if you cannot handle your financial issues how can they trust you with their money? Bankruptcy is another thing that drives a business to its knees. You will have to liquidate your assets so as to pay back everything. Some companies have even been sued by clients since part of the debt was paid using the client’s money and they couldn’t access it so as to put it into good use. It is true that not all debt is bad but a business should be on its toes when it comes to money matters.


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