It's considered normal practice for businesses to carry debt, particularly in the start-up and growth phases. Indeed, accessing credit can allow you to navigate your way through difficult times that may have seen your business fail. However, too much debt could impact on your business's ability to grow, secure new contracts and it is often the reason for a business closing down.
It's sensible for any business to have a good business savings account, but if yours has any debt it should be considered essential. You can click here
to review the range of accounts on the market and take a positive step in securing the future of your business.
Many organisations consider their current circumstances when deciding if they can afford to take on more debt, but if those circumstances change you may find that the business can't service the debt repayments. There are some simple steps you can take to strengthen the position of your business and become debt free.
When your business is feeling the pinch of increasing interest rates, take charge by scrutinising your accounts and getting your business on a written budget. Write down everything that is owed and the interest rate attached to each debt, then write down the monthly running expenses for your business.
Look for any way that you can save money, from using less paper to shopping around for your utilities and moving debt to a card with a lower interest rate. Then deduct your expenses from your monthly income and commit to using almost all of what is left over to pay down that debt.
Seek Professional Advice
If you are struggling to create a budget or the numbers just aren't adding up it would be wise to seek professional advice before the situation deteriorates. There are several organisations that offer debt advice to businesses, but many will charge for their services.
Debt charities such as Business Debtline offer a free and confidential service that provides impartial advice for anyone struggling with business debt. Debt counsellors can assist you to negotiate more manageable repayment terms with your creditors or give advice on Debt Management Plans, Debt Relief Orders and budgeting.
Save for Security
It's vital that you start to create financial security for your business as a buffer against rising debt repayments, fluctuations in income and market variance. Utilising a business savings account will allow you to prepare for and counter financial obstacles.
Saving a portion of your turnover every month is encouraged as best practice and you should aim to commit to this in the same way that you commit to paying your business rates and utilities.