7 Tips That Can Help You Improve Cash Flow by Eliminating Business Debt

7 Tips That Can Help You Improve Cash Flow by Eliminating Business Debt

It is difficult to run any business without accumulating some debt. According to England’s central bank, one-third of small businesses are highly indebted. However, when debt becomes excessive, it can have a negative impact on your cash flow and make it difficult for your business to take advantage of opportunities or handle unexpected expenses. Fortunately, there are steps you can take to reduce your business's debt load. Author and executive coach Chris Edwards shares a few below.

1. Create a Debt Inventory

Most business owners have a general idea of how much debt they have, but it can be easy to underestimate the total amount. Creating a debt inventory allows you to clearly see how much you owe, how much interest you are paying on each debt, and what your monthly payments are. This makes it possible to prioritize which debts to pay first and makes managing your cash flow easier.

2. Increase Your Revenue

There are three basic ways to reduce debt. Lower your expenses, increase your revenue, or do both. Exploring ways to boost your sales is one way to tackle increasing your revenue. Loyalty programs are a good way to improve customer retention and encourage customers to spend more. Increasing prices can also bring in more revenue, but monitor your results carefully to make sure lost sales aren't eroding your gains. Amp up your social media presence to increase customer engagement and draw in new customers. You can even apply for grants for additional funding.

For extra help, employ the talents of experienced salespeople. Work with a recruiting agency to make it easy to find qualified individuals that will make up your sales team. This ensures you’re only sent candidates after they’ve been vetted for you.

3. Reduce Your Expenses

Avoid cutting corners. This can damage your reputation and lower your revenues, which won't help you pay off debt. However, do look for wasteful spending. Sell any equipment or supplies that aren't being used. Consider relocating to a smaller facility with lower rent and utility costs or, if your business is small enough, work from your home or a coworking space. Reach out to other business owners to see if there are any common expenses you can share.

4. Refinance Your Debt

If you are carrying high-interest debt, such as credit card balances or loans that you took out when your credit score was lower or interest rates were higher, consider refinancing. You may be able to get a debt consolidation loan at a lower interest rate than what you are paying, which will make your debt easier to pay off and may result in a lower monthly payment.

5. Form a Limited Liability Company

LLCs have tax advantages over some other business structures. You can apply the tax money you save to paying off your debt. The regulations on forming an LLC vary by state, so you may want to use a formation service. Formation services are familiar with the rules and regulations and can save you the time and effort of researching them yourself.

6. Work With a Debt Relief Company

If you are struggling to make minimum payments, negotiating with your creditors may help. You can attempt the negotiations yourself, but a professional debt relief company can often secure better results than individuals can on their own.

7. Go Back to School

As weird as it might sound, going back to school for a degree in business can be a great way to glean a better understanding of business management. Plus, you can diver deeper into business concepts like cash flow, accounting, operations and communications, which can all help you become a better business owner. Online programs make this an easier feat to manage thanks to flexible coursework.

If you are feeling overwhelmed by business debt, don't despair. Start taking steps to reduce what you owe today. It may take a while to eliminate your debt, but you will improve your cash flow and reduce the financial pressure on your business with each step you take.

Katie Conroy is the creator of Advice Mine. She enjoys writing about lifestyle topics and created the website to share advice she has learned through experience, education and research.

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