Mrs Ramat Ebella Whajah Ellis is a Banking Executive with years of experience. Last week, she told us the importance of having a bank account for your business; no matter how small that business is. This week, she teaches us some ways that you can manage your debt as a small business. Welcome to The Entrepreneur’s Corner.
Check Your Financial Position
One of the most basic things that you need to do in order to make sure that your businesses doesn’t end up in debt is to check your financial position. You need to know exactly where you stand—in terms of money, so that you don’t over-extend when you’re making decisions.
To do this—to check your financial position—you need to take all the money that your business has made over a period. And then subtract the cost of business expenses. You’ll either have a profit or a loss. Hopefully it’s a profit. However, if it’s not, the other tips in this article should help. If it is a profit, now you need to take out any other commitments. That is, bank loan payments, any other debts and money that you might be giving family or money used for similar purposes.
This will give you an idea of exactly how profitable your business is.
List Your Debts And Your Expenses
So these are things that you need to do in the process of checking your financial position. Knowing your debts and expenses, and having them listed solidifies your understanding of cash flow from your business. You will know exactly where all the money from your hard work is going. This also makes it easier to put measures in place to limit your business’ expenditure.
Save Excesses From Cost/Expense Reduction
During the early stages of lockdown, we saw some government intervention. Utility costs; namely the costs of water and electricity were reduced. If these are costs that your business was incurring, there is an opportunity for saving.
The Fact That Bills In Certain Places HAve Decreased Doesn’t Mean That The Money Has To Be Spent.
—Mrs Ramat Ebella Whajah Ellis
Mrs Whajah Ellis advices that once you know your financial position; you know your debts and your expenses. You can purpose any savings to one of those ends instead. It’s a decision that you’ll appreciate better in the long run.
Seek Repayment Extensions From Your Suppliers
When you’re in business for a while and have gained some credibility, your suppliers might be able to arrange certain flexible terms for payment. For example, they might give you supplies on credit or even come up with flexible payment plans for you.
If you have trouble meeting any of those payments, the best thing to do is to seek repayment extensions from those suppliers. You don’t wait until payments are due and then make excuses. That will harm your credibility. Instead, notify your creditors in advance and seek a repayment extension.
You don’t want to create the impression that you’re defaulting.