Paying Off Business Debts Quickly

As a nascent entrepreneur, you know that to make money sustainably, you need to master the delicate balancing act between spending and saving.

While overhead costs are inevitable in any business, it’s up to you to find creative ways to mitigate them without impinging on your business’s function or quality of service. Thus, overheads must be carefully managed, while unnecessary expenditure that doesn’t produce a healthy return on your investment must be scythed down.

You also know judicious spending can make or break your business. The right purchases can aid productivity, boost sales, increase your time efficiency, boost employee morale and lead to a whole range of other factors that will help your business to grow in sustainable ways.

The key, then, lies in finding ways of curbing unnecessary spending while freeing up enough liquid assets to move on to potentially lucrative opportunities when they develop. To do this, however, businesses must ensure that their debts are paid promptly. In other words…

It’s all about cash flow

A business’ liquidity (or lack thereof) can be its success or undoing.

The healthy cash flow can allow you to pick up that super excellent value bundle of stock, hire that promising new employee, buy that more efficient equipment, or move to that better-located premises with better foot traffic and a more significant market share.

The trouble is that businesses (even those with comparatively few overheads like online startups) have expenses coming at them from all sides.

If startups have employees, they need to pay them promptly. Plus, ensure suppliers are delivered on time and repay any loans they incurred as part of their startup costs, the rental on the premises, insurance, and various utilities and communications costs that come with running a business. That’s a lot of plates to spin!

If entrepreneurs aren’t careful, if just one of these plates slips and come crashing to the ground, the delicate machinery of your business’ finances could well come shuddering to a halt. Thus, companies must pay off their debts quickly to keep a healthy cash flow and ensure their business is ripe with opportunities for growth without being stunted by the quagmire of debt.

How To Pay Your Creditors

Here are some ways to pay your debts promptly, no matter the nature of your business.

Use A Credit Card

Need credit instantly? Not just this month, not just this week, but today and right now? You may think a credit card can’t help you, but you’d be wrong. Many instant approval bank cards on the market can be a valuable lifeline if you have an urgent debt that needs to be cleared quickly.

While you may need to wait a day to two for the physical card, the credit card number is issued at the point of approval and can be used to clear debts in minutes.

Plus, there are virtual credit cards now, and we have an article on what they are and how your business can use them.

So long as you factor the repayments (including interest) into your usual monthly expenditure, there’s no reason why you can’t lean on credit cards to dig yourself out of a debt hole.

Maintain open lines of communication with your creditors

Your creditors are not mustache-twirling profiteers trying to drain the life out of your enterprise. They’re businesses like yours and are usually amenable to working with their debtors to ensure a mutually acceptable outcome.

Suppose your repayment schedule is demanding in a time of slow business or reduced custom, and the repayments are impinging on your cash flow. In that case, it may be worth contacting your creditors to see if an arrangement can be reached whereby you reduce your monthly repayments. This may involve a slightly higher interest rate and/or prolonging the debt, but if a few months of healthy trading will help you right the ship, it may be the perfect way to navigate a dry spell.

Revisit your business budget

Entrepreneurs are usually so embroiled with the operational aspects of their business it’s not in their nature to take a step back and look at their business from a more macro perspective. Set aside some time to revisit your business budget (or establish one in the first place).

Take a good look at your monthly outgoings and try to find ways of freeing up cash by making cuts (if only temporarily). Remember that making cuts across the board may free up capital in the short term but will likely impede long-term growth (which is why the UK’s policy of austerity is leading to the slowest period of post-crisis recovery in the developed world), so look for the areas of spending with the lowest fiscal multipliers and cut where you can.

Find ways to increase revenue

As well as addressing the problem of debt, it’s also essential to address the cause, which is almost always a lack of revenue. This could be because of a seasonal slump, a lack of sales, or a failure of marketing. Whatever the reason, it’s essential to find ways of increasing your revenue if you’re to pay off your business debts quickly now and in the future.

You likely guard the profit margins on every item of stock in your inventory, but while this is admirable, the store won’t generate any profit if it sits untouched on the shelf.

While many retailers and other businesses tend to let the passing of the seasons or external industry factors dictate when they throw sales, there’s never a wrong time to throw a deal to get more people through the door and shift some stock units.

You may not generate as much profit, but you’ll develop business. Impress these new customers, and they’ll keep returning to you, even when you return your prices to their usual rates.

You should also incentivize customer referrals. If it’s good enough to help Uber launch one of the most successful business models in recent history, it’s good enough for you. Giving your loyal customers a discount for referring friends, family, and colleagues to your business are always worth the initial profit dip as it leads to a broader customer base.