Small Business Help: Dealing With Debt

All right, no one really wants to talk about this subject, and even fewer want to admit that it’s a problem for them personally. But debt is one of those things that afflicts most of us; steering clear of it should certainly demand more attention.

Entrepreneurs, especially, are prone to debt accumulation because we just assume that our businesses will make enough money to cover our costs. Unfortunately, that doesn’t always happen so quickly. Then you can get into trouble. Yes, I’ve been there, too, and because of it, I learned a few important things about debt that I hope can help keep you out of trouble.

Small Business Help: Dealing With Debt

Always Know What You Owe
My father used to always tell me that at any given time he knew how much money he had in the bank, how much was owed to him, and how much he owed. I used to think that avoiding thoughts like this kept the stress away. Maybe in the short term ignorance is bliss, but long-term, it means big trouble!

Keep Good Records
If you don’t keep track of all your financial records and obligations, you could miss mistakes (that other people make), miss payments, miscalculate what you do have, or worst of all, be audited and fined.

Make Regular Payments
Understanding that you don’t always have the same “paycheck” at the end of the month, I’m going to suggest that you always try to just pay something to your debtors. Of course you want to try to pay the minimum due, but sending something, anything, shows goodwill and good sense.

Stay In Touch
As a small-business owner, you’re more likely to do business with other entrepreneurs who will be more casual in their collection efforts than larger corporations. If you are having trouble paying what you owe, don’t avoid collectors, talk to them. Find the person in the accounting department who is most likely to be the one hassling you for the money, and then level with them. They want to get the money they’re owed, so if you show you’re going to abide by your obligation to them, they’re more likely to work with you. Just don’t make them chase you. That will damage your reputation fast.

Cut Your Overhead
Overhead expenses are the worst contributor to small-business debt. Once you start building your monthly expenses, it’s very hard to whittle them down again. Start slashing fixed monthly expenses and other variable costs that may be non-essential. At the very least, you’ll slow down the accumulation of expenses.

If You Get In Big Trouble…
There is always bankruptcy, but that’s a very serious decision with major repercussions. Before you even talk about something this drastic, talk to a debt consolidator or financial counselor. They can help you reduce your interest rates, make settlements on accounts, and limit the number of checks you have to write each month. They analyze your personal situation and give you solid action steps to get out of the proverbial financial hole. Consolidators can sometimes also help you rebuild your credit and earn more of it over time.

Few of these tips on their own can make debt problems go away completely, but combined, they represent some of the best advice I can give. They also bring some insight from quite a few who helped me when I got into trouble myself. I guess you could say that these are all tried, true and tested. So, if I can admit that to all of you, do me this favor…admit it to yourself if you need help. Then start doing something about it.

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