Guest post: How to manage your business debt

US-PDGov

 By: Mickey Colon

Managing your business debt wisely is a top priority if you want to run your company efficiently. In some cases the debt is tied to the business entity instead of the owner. But even though the creditor can only go after business bank accounts and assets, poor management of the account can negatively affect your business reputation.

In other cases creditors will hold you, the owner or representative, personally responsible for a debtyou accrued while running the business — particularly if you signed a personal guarantee to start the account. Either way it’s important to stay on top of your business debt accounts and make every effort to get them under control.

Create a Business Budget

Whether you’re a large tech conglomerate with over 100 employees or the owner of a small main street flower shop, you must have a business budget in place. Lack of a budget is one of the top reasons why many business owners get into debt in the first place and also why they continue to stay in debt.

Your business budget should accurately list your estimated monthly business income and expenses. That includes employee wages, office rent, office supplies and other costs to operate the business including your monthly debt expense. Your income may vary each month depending on the type of company you run, so estimate the revenue for each month in advance.

Pay Down Plan

Make a commitment to funnel your business profits (income less expenses) to your debt accounts until your balances are more manageable. If necessary, be prepared to make major sacrifices to put your business in a better position debt-wise in the short-term. For instance, you may have to pay yourself a lower wage or no wage at all for a few months until your accounts are paid off.

If you find yourself with a shortfall (loss) or breaking even every month it’s time to make some tough decisions on how to run a more lean and mean operation. In the meantime, avoid continuing a pattern of accumulating debt — if your past expenditures haven’t helped you turn a profit, it may be time to re-evaluate your entire business strategy.

New Habits

Once you get back on track with your business debt, make it a habit going forward to try to pay off your balances before each billing period ends. So for instance, if you charge $1,000 at the beginning of the billing cycle for inventory, make it a point to pay off that $1,000 as soon as you receive the proceeds from the associated sale. This way you avoid interest expenses.

Also, as a savvy business owner you should constantly be on the lookout for a better credit deal. Shop for new business card deals periodically and talk to your local credit union.

Bio: This article was provided by America’s debt help Organization, serving the public with unparalleled content about a range of topics, such as reducing debt, credit card consolidation help, mortgage modifications, planning retirement and helping Veterans get out of debt.