As an entrepreneur, you're bound to encounter some ups and downs when it comes to your cash flow. Starting a new business requires a lot of money up front, and thus, often involves quite a bit of financial risk.
As a result, incurring debt usually goes hand in hand with being an entrepreneur, and is a challenge that you should be prepared to face head on. Taking on financial debt is scary for anybody, but for an entrepreneur it can be even more daunting simply because you may be taking on a burden you won't be able to repay.
As such, it's important to manage your money effectively and find ways to cut back wherever and whenever you can--without sacrificing vital elements that make your business successful.
You may not be able to predict when a rainy day will strike, but you can plan ahead and take steps to improve your financial standing and reduce your debt. The following tips will help you lower your debt and look forward to getting in the green.
Start With Your Budget
To cut your debt right off the bat, start with analyzing your budget. You may find all those "little" costs are adding a lot to your monthly budget. "If your budget or spending is unorganized, it will be easy to accumulate debt quickly and get in over your head. Make an outline of all of your expenses, allocate whatever amount of money is necessary in order for you to operate, and adhere to the limits that you set yourself," says Howard Dvorkin, CPA and personal finance expert for Debt.com. If you have your budget planned out to the dollar, you will be able to keep track of where your money is going and avoid unnecessary spending.
Trim The Fat
Once you've looked over your budget and made adjustments, you will know exactly where your funds are going, which makes it easier to figure out where you can trim the fat off your spending. Try to identify any areas that aren't absolutely necessary to your business's daily operations and cut them. Don't be afraid to be brutal. Two monthly subscriptions to stock photos sites? One will work just fine. Monthly subscription to an online marketing tool? Look for a free (or lower priced) one instead. Perhaps you should try outsourcing some of what you're currently paying a couple employees for, from social media campaigns to content creation.
By doing this, you should be able to stop most potential sources of debt ahead of time and start saving some much-needed cash.
Consolidate When You Can
Consolidating your debt payments is a great way to reduce your overall monthly costs and to help preserve your credit score. There are a number of different options out there, but typically the best route for a small business is to combine all of your short-term loans into one larger payment.
You should also try to talk to your creditors and renegotiate your payment terms to a more affordable level. Simply ask if they offer a hardship plan or a reduced settlement amount and see how they can help you. As long as you're able to make the negotiated payments, this can be a great option for whittling down your debt.
Make The Most Important Payments First
If you want to get yourself out of debt, it's important to minimize the amount you spend on interest. Thus, you should prioritize your payments and put your highest interest accounts at the top of your repayment list. By eliminating high interest loans, you will be able to quickly scale down your debt amount and get closer to getting in the green.
Seek Professional Assistance
As an business owner, you've got a lot of responsibilities. You don't have to do it all. And in many cases, you shouldn't try. "When it comes to paying back your debt, it's a good idea to get some help from a professional. You don't have to deal with your debt payments all on your own, and if you seek out some professional assistance, it's likely that they can help you improve your situation faster than you could on your own," advises Dvorkin. There are plenty of accountants and credit counseling services available, and when it comes to your debt, you shouldn't hesitate to use to these resources to your advantage.
As an entrepreneur, you're probably very familiar with debt and loans and monthly payments, but just because you're willing to take risks in the business world doesn't mean you should risk your personal finances.
If you've accumulated debt you can't seem to fight off, try these tips and get your finances in order. Your pocket -and your business- will be better for it.