In this constraining economy, collecting receivables is increasingly difficult. Along with the cost of supplies, marketing, and the overall increasing operation costs typically associated with running a business today, it is no wonder so many businesses are finding themselves falling into debt. Before you jump the gun and declare bankruptcy, there are some debt reduction strategies that can help you get out of the red and back on track.
1. Create a plan
One thing every business needs to do regularly is to revisit your budget, especially when your financials are in the red. With less revenue coming in and more money going out, you need to start cutting out expenses that you can no longer afford across the board. This is one of the best strategies to minimize the amount of money being spent while still maintaining business functionality. Eliminate some degree of spending throughout your business. By spending a little less in each department while still addressing their needs (which will result in a greater savings in the long haul for the entire business), you will be able to operate your business without sacrificing an entire department, which could otherwise compromise your overall business efficiency and performance.
2. Reevaluate your financial habits
Creating and examining the budget will help you be in the know when it comes to your business’s spending and paying habits. Consider what departments, services, and goods you are spending the most on and determine which areas you may be spending too much on or too little on. You would be surprised at how many businesses do not have a budget and just simply pay bills according to when and if they have money.
Apply a fresh approach to break bad money habits for long-term payoff. Start with credit card spending. Evaluate what is being charged to business credit cards and who has access to those spending benefits. You may find some of those charges are not all necessary for maintaining your business and that this is only costing you high interest debt for no reason. Determine what expenses that can be cut out and paid for in cash, instead of debt-building means. Once you stop piling on the unnecessary unsecured debt in your business’s name, you can begin to pay down the debt you already have, or maintain current debt without adding to it.
If you are really hit hard and are too deep into debt to climb out without making drastic changes, consider ways to downsize. Downsizing does not have to include firing key employees, as spending habits can be downsized, too. To keep things tight in a tight economy, offer employees flex-time or even part-time instead of resorting to layoffs. To avoid layoffs, consider cutting back on expenses by offering part-time positions or intern opportunities when employees leave. Lower car lease payments, reevaluate your supplies, and downsize inventory, office space, and even phone expenses to help streamline costs. Consider eliminating any subscriptions you may not use, whether it is a service, program, or magazine subscription. Every minimal monthly expense cut out can be re-allocated toward more critical business expenses. Applying these strategies can help you find ways to keep your business afloat until your market and business pick up again.
4. Increase revenue
Easier said than done. In this dismal economy, getting return customers to continue buying can be difficult. With your current clients being your best resources, invest in your clients by taking a taking a ride out to them in person or picking up the phone, which are inexpensive ways to keep in touch and tell your clients how happy you are to be working with them. Do the same with old contacts to reignite prior business relationships and let them know that you have them on your mind and are always readily available to help them.
Sometimes, you have to spend money to make money. Employing some new marketing strategies, especially use of social media web sites, may help increase revenue. E-commerce for services and sales has become the wave of the future and much of the online work can be achieved at low expense. Maintain connections on such social networking sites as LinkedIn and use them to your advantage for maintaining and sparking business relationships. Beyond social networking, good old fashioned on-site networking never goes out of style, so attend networking events whenever possible to also form a network of business referrals and synergies for a mutually beneficial symbiotic relationship. Many are free or offer guest accommodations as an incentive to help you get out there.
No matter what business strategy you use for keeping your business afloat during a dismal economy, the businesses and the people running them who are able to readjust old habits for new approaches are the ones likely to not only dig themselves out of debt, but also more likely to successfully stay out of debt for the long run.
Leslie H. Tayne, Esq. is the founder and managing director of The Law Offices of Leslie H. Tayne P.C., a law firm dedicated to debt management, debt resolution and bankruptcy avoidance that is based in Melville, NY, White Plains, NY and Mount Kisco, NY. She can be reached at email@example.com.