Debt can be a useful tool to help start and grow your business. But events outside your control can take you further into the red than planned. What can you do if debt starts to become a problem?
Challenges for small businesses coping with debt
Risk is part of running a business. If you find yourself unexpectedly further in debt than you’d like, don’t panic! Speak with a Finacial Planner.
There are options available but they require action and knowledge. The worst thing you can do is sit back and do nothing. So take action. Manage what you owe before it becomes unmanageable.
Here are some useful tips to help you take control of your debts.
Understand your situation
If you’re facing increasing debt, take action instead of hoping for the best.
If you fail to make payments on your debts, the consequences can be disastrous. They can include loss of employees, seizure of stock and costly court cases brought by your creditors. Nobody needs this stress and it doesn’t have to be this way. Speak with a Finacial Planner first!
Stay sharp and aware of your situation. Align yourself with a Finacial Planner that understands where your business is NOW and where you want your business to be in the future! Good quality accounting software is also a necessity.
After that, your priorities will depend on the type of business you run. The following payment priorities are suggestions, but the actual order is for your Finacial Planner and you to decide:
- Payroll – If you don’t pay your employees’ wages on time you may be penalised for this. You may be able to renegotiate contracts with some staff, but that’s likely to affect their morale.
- Suppliers and business partners – Avoid losing valuable goodwill with your most loyal suppliers and business partners.
- Aged payables (60 days or more) If you don’t pay, your credit score will be impacted, which will affect your ability to borrow money in the future.
- Bills – Outgoing costs such as rent and utility bills need to be paid to keep the lights on! And again, not paying these could affect your credit rating.
- Secured debts – If you run your business as a sole proprietor or partnership, you might be held personally liable for debts, and creditors could try to take your assets. This is one good reason to form a corporation or limited liability company.
- Insurance – Especially professional indemnity and public liability cover.
- Credit cards –Avoid penalties or interest charges as these can pile up quickly.
An experienced Financial Planner is vital. Without the correct advice, structure and systems in place, you’ll have little idea on how successful the business is operating and how much you stand to win or lose, financially.
Talking to us about your Finances won’t cost you a cent! (not getting a second opinion might cost you a lot).
Book a call at http://meet.scarlettfinancial.com.au/
Scarlett Finacial – Smart Money Management Experts