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When you run a company, debt is inevitable — especially during growth periods. If you take on too much, however, the payments can eat into your operating budget. If your business is struggling to cover everyday expenses, it’s essential to pay down debt and improve your company’s financial health.
Establish and Follow a Budget
A budget creates a clear picture of the business’s finances, so you can make a plan to pay off debt.
- List your debts. Write down everything your company owes.
- Catalog fixed and variable costs. Include all expenses, from payroll to advertising.
- Calculate revenue. List all your income streams.
- Create a budget. Decide how to allocate your revenue each month.
If you’re not sure where to start, consider working with an accountant. They can look at your books objectively, explain best practices, and identify which debts to pay down first.
Cut Business Expenses
When you’re making a budget, you may discover that your business spends far more than it brings in. Reducing your expenses can increase cash flow. To cut costs:
- Stop unnecessary subscriptions. Cancel subscriptions for rarely used software, apps, services, and tools
- Eliminate business travel. Use phone calls and video meetings whenever possible.
- Move to a smaller space. A compact office can save money on rent and utilities.
- Pause extra events. Host fewer parties, retreats, and company meals.
Find Ways to Boost Revenue
Cutting business expenses only goes so far. At some point, you must make more money to get out of debt. To increase revenue:
- Reach out to past customers. Encourage repeat business with exclusive discounts or sales.
- Host a promotion. Special limited-time offers can motivate potential customers to take the leap.
- Expand your marketing. Boost visibility with Google ads, social media, email, or blogging.
Unpaid invoices are an often-ignored drain on business profits. You may be able to reduce payment lag by improving your invoicing process. Make sure the terms of payment are explicit, send out invoices as soon as work is completed, and allow customers to pay you in a variety of ways, including through your website. You can create a branded invoice by using an invoice template and adding your business name and info, logo, and colors.
Small business grants are another way to get out of a tight financial spot. In a tough economy, expect plenty of competition for award dollars. Position your company for success by seeking out grants that are directed to your field. Check availability and eligibility criteria carefully. When you find potential grants, include an updated business plan, and focus on preparing an impeccable application.
Consolidate Your Debt
When your business is drowning in interest payments and fees, a debt consolidation loan can help. It provides the money to pay off your debts. Then, you only need to deal with a single payment every month. Companies with steady revenue and a long history can get excellent rates. To find a loan, look to:
- Banks or credit unions
- Government programs
- Private lenders
Start Today to Reduce Business Debt
Getting out of debt takes time. By taking action immediately, you can regain control over your company’s finances and prepare for long-term success.