The Federal Reserve Bank of New York reported that the total household debt exceeded $16 trillion in the second quarter of 2020. If you struggle to pay your debts, you may have considered debt consolidation with a lender, such as Symple Lending or court-supervised bankruptcy, as a financial option. So, how do you make the right choice for yourself?
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Running a company would be oh so much more straightforward if the money situation just took care of itself. If you knew that your finances were under control and healthy, then you’d be able to engage in the more fun aspects of owning a business, such as putting your ideas into practice. Alas, you can’t have everything your own way -- if you want to run your own company, then you’ll need to work on the finance part of things.
You’ll have a lot more peace of mind regarding your business finances if you know that they’re well protected. In this blog, we’re going to look at some of the best ways to do just that.
Active Management
If there’s one piece of advice that all company owners should follow, it’s to spend some time actively managing their financial situation. These things won’t take care of themselves! And while there’ll be some aspects that you can outsource, you should have a solid grip on the fundamentals. Spending a little bit of time going over your incomings and outgoings will give you a solid overview of where, if anywhere, you need to improve. By doing this, you’ll also be able to identify any potential problems as soon as possible.
Legal Safeguards and Professional Advice
Furthermore, as you actively manage your business's financial situation, having a legal professional by your side ensures that you're not only compliant with existing laws but also proactive in anticipating and addressing any legal issues that may arise. They can assist in creating a solid legal framework that aligns with your business goals and mitigates risks.
While we've discussed the importance of managing costs, maintaining cash-flow, and addressing late payments, it's equally crucial to invest in professional advice to secure the legal foundation of your business. By incorporating the services of an estate lawyer into your overall business strategy, you're taking a proactive step towards ensuring the long-term success and legal resilience of your company.
Cut the Costs
It sounds obvious to say that you can protect your company’s finances by cutting your costs, but it’s true -- you can. A lot of businesses end up spending wayyyy more money than they should, for various reasons. The biggest reason is that the costs keep on adding up and up, yet rarely get purged. So have a look at where you’re spending your money. Are all of those expenses necessary? It could be that you can cut some of them without having any negative impact on your business.
Don’t Write Things Off
There’ll be times when it seems like you’re not going to get the money that you were owed. At that point, you’ll have the option to write it off and move on. While you may eventually have to do this, don’t make it your first option. Take action first. You can use skip tracing software to track down a non-paying customer. If it’s a business that isn’t paying, then you may have legal options available to you.
Maintain Cash-Flow
The reason why so many companies fail isn’t that the ideas behind them were bad. It’s that they didn’t have a solid grip on their cash-flow. If you’re going to survive in the business world, then you need to have access to money. There’s no getting around it! Cash-flow problems can stem from investing too much in your business and by late-paying customers. Rather than buying hardware, you can rent. Instead of waiting for customers to pay, you can offer incentives to pay early (such as a 5 percent reduction).These tips will help you to keep a solid grasp of your financial situation and prevent things from getting too out of hand. They’ll be beneficial to both your business and your peace of mind.
Running a business with sufficient funds is the key to being successful over the long term. You need extra funds available in case you need to hire a new team member, market an existing product or service, or test the development of a new product. Avoiding taking on debt as much as possible for long as you can is essential to the longevity of your business. Continue reading to learn how to avoid going into debt or stop digging yourself into a larger debt hole.
It’s unfortunate but many businesses get into deep debt, which they are unable to pay off. In fact, 26,000 businesses go bankrupt every year in the US.
Knowing how to deal effectively with your debt can be important for reducing financial damage in the long run. There may be a way to keep your business afloat. If not, it’s important to find the exit strategy that’s going to cause the least harm to you and your associates. This brief guide can help.
Here are a few tell-tale signs your business is in debt and doesn’t have any way out of it.
You’re consistently accumulating debt (on credit cards, borrowing from family or friends, or taking out personal loans) faster than you can pay it off. You believe that every idea you have will be a huge success and yield massive results for your business but only results in failure.
People are chasing you for payments. You receive past-due notifications or telephone calls from those you owe money to. If you have vendors and suppliers calling you to make payments and you hide from them, then this is an issue. If you’re in business, paying your bills should be the first thing you do every month to prevent being turned over for collections.
You’ve lost track of how much you owe - and who to. If you don’t keep spending records, then you probably don’t know how much revenue you have coming in vs. going out. This is a recipe for failure.
If you don’t track your expenses, then there’s no way you will be able to prevent overspending. Creating a budget for expenses every month is vital to prevent spending too much and getting into debt.
You’ve made significant cutbacks (by laying off staff, closing offices, and eliminating excess waste) and you’re still struggling to pay off your debts. If you’ve cut out the extraneous expenses and are running with a skeleton operation, and you still can’t make your minimum monthly payments, then it’s time to evaluate how you can increase revenue so you can start paying your debt’s minimum monthly balances. Paying the minimum amount due every month isn’t ideal (because of high-interest rates) but it’s a start.
First, you need to decide how much your business means to you and your livelihood. If you’re eager to keep your business alive and continue running it yourself, it could be worth looking into debt consolidation options and debt reduction options, especially if you have tens or hundreds of thousands of dollars in debt.
A consolidation loan may be able to pay off multiple debts, turning your debt into one single reduced monthly debt payment. Meanwhile, there are specialist services that may be able to help you negotiate with debtors/creditors to reduce interest rates and lengthen terms so that your debts are easier to pay each month.
If you want to keep your business alive but don’t want to run it yourself, then there may be the option to sell your business in the near future. Selling a business with huge debts isn’t easy but it can be done with the right approach – some buyers/investors specifically target struggling businesses and turn them around to be profitable. You may have to accept a very low price and other unfavorable terms, as well as the option of continuing to pay off some of the debt yourself. But certain business brokers can help you with the sale process. This guide at https://www.forbes.com offers more information on selling a business with debt.
The third option is to close your business and go into voluntary liquidation. An IP will sell any company assets, pay creditors, and manage the closure for you. Most of your debt is likely to be written off and you can walk away without that debt looming over your head. This can be a viable option for those who have considerable debt and can’t pay it off.
There are other services such as https://www.dtss.us/ that can help you find the best option while causing the least amount of damage to your credit score. These services can educate you on your rights so that you know exactly what you can and can’t do.
Bankruptcy is the fastest way to wipe debts without resorting to total liquidation. You can go bankrupt and keep your business alive if you’re a sole trader or the sole owner, but this isn’t an easy path. Often assets such as your business or assets that the company owns will be used to pay off any outstanding debts. While this is not the right option for every business owner, it’s worth seeking the right advice before declaring bankruptcy.
There are also support services that you can use to help you recover after bankruptcy. These companies provide services that could involve finding lenders where appropriate and repairing your credit score.
In business, it’s incredibly important for us to ensure a routine and deliberate goal of optimization. Optimization may mean being able to review our staff every year to ensure they’re functioning as promised and trained, and if they’re not, we may decide to make adjustments to our ranks.
Additionally, we must manage our own skills. For instance, we may be expertly technically proficient, or able to run accounts carefully, but the other skills that ensure your leadership value include being able to manage people, and stay calm in the face of struggle. We may choose to optimize ourselves in this direction through careful training and reflecting on our experience.
Savings are, of course, also important to optimize. This is because by reducing your costs, your revenue has further room to help you break even or contribute to your profit levels. This means that looking to cut costs in a way that isn’t as indiscriminate as randomly letting people go, nor harmful to the overall operation of your company is important. In the following advice, we’ll discuss how to cost-cut wisely:
Loyalty
Over time, the loyalty you hold with a particular supplier or business to business connection can help you grow goodwill. This may result in particular discounts given only to you, or the ability to purchase extras to your order for a fraction of the price. You’d be surprised just how much businesses are willing to help one another out, even through a few complimentary items with each order, provided it keeps a regular and trustworthy client or connection happy. Provided you reply with the same goodwill in turn, you’re sure to achieve bulk business savings with your best supplier.
Bulk Orders
Crafting the inventory requirements necessary for bulk buy and storage of orders can help you gain massive discounts when regularly supplying yourself. Economies of scale suggests that the more products are sold, the more they can afford to be given away more cheaply. This means that negotiating with your potential suppliers in regards to bulk orders may grant you better terms than you had imagined to begin with. They achieve a large and reliable order, you gain plenty of items and some for a fraction of the cost. Everybody wins.
Pay For Use
Some services are so considerate that they allow businesses or regular clients alike to pay for what they use, not some artificially inflated fee to cause confusion or to put everyone on the same standard. For instance, when you visit Unishippers for shipping rates, you will be amazed at how clear and forthright their pricing options are, and how justified they will be through the fair use of their service. This is great pricing, and it’s important to understand that these standards can exist in other firms for other purposes if you’re willing to research your best options. To that end, you can reliably achieve savings by only paying for the value you receive.
With this advice, you’re certain to reliably achieve bulk business savings in the best possible context.
There is no denying the fact that the internet and the widespread use of digital information technology have entirely revolutionized the business environment. In some ways, modern technology has flushed out some traditional trading methods but also opened up new investment opportunities. For instance, some investors now trade in digital currencies, tech-based stocks, and even information.
However, there are still some investment and trading opportunities that have stood the test of time and are still viable ventures for the conservative trader. Here are three examples of such investment opportunities that have barely been affected by modern developments.
It might seem odd that in a world with so many currencies, some people still opt to invest in precious metals such as gold, silver, diamonds, and even gems. As it turns out, this is a highly lucrative niche if you can source and sell goldand other precious minerals. The prices of these materials often fluctuate as demand rises and falls, presenting unique opportunities for investors to make money. Investors in this field, however, have to be keen when deciding when to buy or sell gold, gemstones, and the like.
An antique can be anything from a piece of furniture, vehicle, house, or appliance that has a high value due to its considerable age. But just because something is old doesn’t mean it’s an antique; it has to be one of a kind, rare, and interesting. Antique hunters collect such items and usually restore them to their former glory to fetch a high profit during the sale. Some popular antiques include grandfather clocks, pocket watches, classic cars, and old exquisite furniture.
Some artworks, particularly old paintings from world-renowned artists, fetch ridiculous amounts of money in art auctions and exhibitions. Art lovers sometimes pay hundreds of millions of dollars for paintings, sculptures, and masterful craftsmanship. Traders in the art businesses are always on the lookout to identify and source valuable art pieces that can fetch high dollar in the market. Some of these art pieces are still being discovered today in people’s homes. Contemporary art is also making its mark on the trading scene as well.
The whole premise of trading and making investments has never changed, even with advancements in technology and changing times; it still involves putting some money on the line and hoping to rip rewards. Although the trading methods listed above have remained virtually untouched by modern technology, in some ways, recent times have boosted their viability as businesses.
Personal financing for business is a form of financial planning and self-funding through established personal and familial connections in addition to individual contributions. According to research conducted by fundable, the majority of startups are self-funded, either through family, friends, personal savings, and lines of credit.
Self-funding, also known as bootstrapping, is synonymous with maximizing human capital first before utilizing the self-generated funds. This is meant to reduce dependency on external financing and improving the efficiency and resourcefulness of the business. Besides promoting self-reliance, self-funding is also strategic for maintaining ownership and control in a business. Below are sources of personal financing.
Using personal savings to finance a business venture is a cost-effective method that comes with no interest or other added costs. In most cases, personal savings only cover part of the funding required, but there is reduced risk.
Funding a business with personal savings eliminates any form of repayment schedules associated with other methods, allowing you to develop your business without financial strain. Personal savings are available in different forms, such as; cash, checks, bonds, and liquid assets. This financing method is suitable for funding small businesses with manageable costs and risk factors.
This source of self-funding refers to taking a personal line of credit to finance a business. There are several different avenues of acquiring credit, ranging from family and friends to various financial institutions. Some of the available credit options include; borrowing from peers, personal loans, a home equity line of credit, mortgage and borrowing against life insurance, and investments.
Credit funds issued to entrepreneurs are limited based on their creditworthiness and security or collateral. Weighing the risk factors, some financial institutions offer home equity loans and second mortgages to add to cash flow. Another credit option that’s also available to some entrepreneurs is special business loans offered to specific target groups.
Self-funding through credit does carry risk, especially with collateral requirements and periodic repayments. To qualify for a line of credit, you are required to have a decent credit score and a clear business plan outlining the payment plan.
One of the critical factors in choosing personal financing is the vastness of untapped resources that won't burden the business. These funds are essential for acquiring new investments, purchasing inventory, and consolidating debt. One of the main advantages of self-funding is the self-awareness imposed on you towards managing finances and putting in place contingencies. Bootstrapping is an effective way of funding your business venture if you're not prepared to take on unnecessary business liabilities.
By: Barbara Davidson
Being the boss of your own company is a milestone, but it also entails being vigilant as you manage all the moving parts of your enterprise. As a small business owner, it pays to be smart about your finances. Before you become stable in a competitive landscape, you’ll first have to map out the road ahead and secure your financial standing.
Small business budgeting is one part of the equation. Successful entrepreneurs know when to cut back on expenses and invest in others, when to negotiate, and when to sit back and watch the money grow. Whatever venture (or adventure) you find yourself in, it’s bound to be a learning experience.
Are you ready to embark on your journey as an entrepreneur? Here are 12 tips on how to manage and keep your small business finances in order.
1. Set clear financial and strategic goals
It’s one thing to plan the day-to-day operations of your business; it’s another to set a clear vision of what you want out of your investment in the long run. Don’t lose sight of your future success simply because you’re caught up in present-day hustles.
Be sure to identify growth targets and the metrics that will define your success. Set a goal and timeline. For example: becoming a half-a-million-dollar company within three years. This will also help you create a strategy for seeking additional funding, building out your product line, or marketing extensively.
2. Plan for expenses and keep costs to a minimum
Knowing the nature of your industry and the demands of your business right from the start will lead you to better financial decisions. Identify production, operational, payroll, and marketing costs, as well as some contingencies, and plan for them at least a year in advance.
Learn to keep costs to a minimum by spending only on essentials and negotiating the terms of your contract with suppliers, partners, and affiliates. Develop a budget that accommodates these expenses even in lean months. It also helps to make financial forecasts by factoring in possible challenges ahead.
Look at certain expenses and what you could bring down. For example, you might want to look at the cost of your business phone or phone and get a better smartphone deal. Paying too much on your phone contracts is burning money.
3. Separate business and personal finances
A rookie mistake that small business owners tend to make is to mix up their personal and business finances. Failing to open a separate business bank account can prove disastrous if the cost of doing business begins to strain one’s personal finances. This typically happens among sole proprietors who invest their own money into a business without accounting for how much the venture is actually eating into their personal savings.
4. Get an accountant and an accounting software
Getting help from an accountant is an essential part of your business strategy. You wouldn’t want to lose time and be stuck doing invoices and calculating taxes instead of growing your client base or product line.
But if you prefer to do things in-house (and have a bit of leeway, too), then getting an accounting software is another option for your team. Automated features in these software solutions reduce the incidence of human error.
5. Monitor your finances closely
Be vigilant about where your financial resources go. Keep tabs on important factors such as gross revenue, expenses, net profit, and cash flow. Even the most lucrative businesses can run into trouble if they overlook loopholes in their financial management.
Using apps and software programs to help you keep an eye on your finances is important, especially if you are not an experienced accountant. An online percentage decrease calculator, tax software, and other help are available online and can benefit a business of any size.
6. Be wise about applying for credit or loans
Don’t wait until the rainy days to secure funding through credit lines. You are more likely to get approved while you are in good financial standing. Applying for a loan or credit should always be a strategic move: remember to use the additional resources as leverage for the business to grow.
7. Be strategic in your spending
When resources are tight, small business owners are often forced to cut back spending on non-essential items and redirect funds to cover more urgent expenses. Most entrepreneurs will choose to part with their dime if the cost will directly or indirectly lead to the business becoming more profitable because of it. For example, spending on top-of-the-line technology that will outlast cheaper options and deliver the best use value in the long run.
8. Negotiate the terms of your contracts
Being a small business owner requires you to be able to strike good deals with a host of suppliers, partners, and affiliates. Before negotiating a contract, decide on the terms and conditions, such as lease terms, payment options and schedule, handling costs, and possible penalties for late payments. Find out if you can also get a bargain on exclusive partnerships and promotional deals with suppliers. Aim to keep costs low and get the best value for your money.
9. Get insurance
Small businesses can benefit from having insurance if they ever run into misfortune or tragedy. A good policy will cover the costs associated with property damage and the legal claims made against the company. Disasters can leave tremendous financial consequences on a business, so entrepreneurs need to know the type of insurance their business needs. It’s all a matter of preparing for the worst since, in the absence of coverage, business owners might end up paying for costs out of pocket.
10. Invest in cybersecurity
Hackers and fraudsters are hungry for customer and financial data—and they’re eager to exploit any business regardless of their industry and size. Companies must set up their protocols and ensure digital security even before an incident occurs. Investing in firewalls, anti-malware, and threat detection tools should be part of the business plan right from the start since the financial and reputational costs of a data breach can cripple a small business.
11. Set up an emergency fund
Apart from raising capital and ensuring revolving funds cover operational costs, small business owners should set up a separate emergency fund that will help them stay afloat even during lean months. Companies that rely on seasonal sales will often prepare for the off-season by putting aside a percentage of their income in months when the business is booming.
12. Pay down your debt
Make it a point to reduce the size of your debt by allocating a percentage of your earnings toward debt repayment. Falling behind on your payments can leave you with a bad credit score and lock you out of additional sources of funding, which may be crucial to your business. Being financially responsible entails keeping a good credit score and ensuring bad debt doesn’t carry over to the next fiscal year.
Taking charge of your finances is the first step to ensuring the future of your small business and paving the way for its eventual growth.
Barbara is a Senior Content Writer at Enova International and a contributing writer to various business and finance blogs.
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