We all start our entrepreneurship projects with high expectations. Then we face a grim fact that says that more than 90% of startup companies fail in the first three years of their existence. One day or the other during these three years our company will fall into debt. In this article, we provided you with a few tips that will help you to overcome this difficult situation.
The first thing you need to do is to identify unnecessary costs your company is making. When doing this you should introduce austerity measures to departments that created the highest amount of debt first. After doing that, you need to evaluate all other costs, especially service ones. This includes costs of printing, managing costly phone systems, cost of rent, etc. If your company has a network of offices in different locations, you should think about closing the ones that proved to be less lucrative.
Some companies are stepping away from bankruptcy and they still have huge sums to collect from bad debtors. Of course, we all know that we should try to avoid bad debt, but when everything starts going downhill, you accept every order that shows up, without thinking too much about the purchaser’s liquidity.
There are several ways to collect a debt, and the one you will choose mainly depends on the sum and on the time that passed since the debtor’s last payment. Most companies that decide to collect a debt by themselves do it by introducing interest and late payment fees. They also send reminder bills and letters and call debtors at least once a week. In the end, if all this doesn’t help, you could seek help from a Sydney-based debt collection agency, because this is a much faster and more efficient way to collect your money, than by suing your debtor. Remember that you need money to settle your own debts, and lawsuits last long and don’t provide any guarantees.
Revise your budget
Piling debt is a clear sign that company’s budget doesn’t fit its business model or current state of the market. The budget should be revised and created in accordance with the current market situation. It should focus on minimum financial requirements that the company needs for maintaining its business at the current level. If your current revenue can’t cover fixed monthly costs that include: rent, utility bills, taxes, salaries, and raw materials, you definitely need to make huge budget cuts.
Meet with your creditors
Remember that suppliers and loan companies won’t receive the full amount of your debt if your company files for bankruptcy. This means that your company’s liquidity is in their interest as well. In situations when you have piled debt that’s threatening to close your company’s business, you should be straight and frank with all of your creditors. Explain the current situation and present them with the list of austerity measures you will take. Ask them to provide you with a better repayment plan or offer them a settlement amount. Try to use this situation in the best way to cut your debt, but don’t make unreasonable claims, because then they will think that your company is literally on the brink of bankruptcy, which can result in them hiring debt collection agencies or taking the matter to court.
Increase your products’ and services’ promotion
The time when your company is in debt is definitely not the time for big product development projects, but you still can increase your sales by putting more effort into marketing. Digital marketing is the least expensive and the most efficient type of marketing today and it provides very important insights into customer interests and market trends. Period of crisis is definitely the time when companies should increase their digital marketing budget (mainly Facebook Ads and Adwords), which will bring them extra orders and put them back into the business.
Although falling in debt is definitely not pleasant, you should stay calm and try to reassign your company’s resources in order to answer both creditors’ claims and future market challenges. The most important thing when trying to pull your company out of debt is to keep employees motivation at a high level and the best way to do it is by serving as a role model.