Trying to deal with debt as a small business can be really overwhelming and stressful, often not knowing the best place to start and not understanding how you got to the current situation. However, if you carry on with your head in the dark about what’s going on and what you owe, it’s only going to get worse from here. Instead, when you take on a new approach to your debt and are proactive to help repay it and prevent it from happening again in the future, it can be completely transformative for your business. From working with the right accountant to getting the right insurance and looking for ways to reduce expenses, we’ve got you covered.
Work With An Experienced Accountant In Your Industry
Firstly, it’s important that you work with an experienced accountant in your industry. Whilst the fees may be slightly higher, it’s absolutely worth the investment, as they will utilise their experience to analyse your financial situation, identify where the strengths are and where the issues are, then come up with a plan to help you take control of your finances and get back on the right track. From tax planning and advice on ways to cut back, helping you improve your cash flow, bookkeeping and investment strategies, it can really transform your business when you have the right accountant.
In order to choose the right accountant, look for accountants with relevant industry experience, strong reviews from their clients, and then also ask around if you have industry connections for that extra level of security. Of course, you need to make sure you check all of their qualifications and credentials, too.
Create A Thorough Business Budget
Once you’ve found a good accountant, you can begin to put together a business budget with them. To do this, you’d start with writing down all of your fixed and variable expenses including one off costs, write down guaranteed income, then from here begin to track your profit or loss. Within each of these sections, you’ll need to be extremely thorough, breaking down everything. You may think we only spend £50 here or £100 there but it adds up so quickly, so having everything mapped out is key. From here, you should also project your cash flow, as creating a balance is key to staying above the water.
Make sure that within your budget you take into account seasonality, for example if you own a swimwear brand, then you know that you will be making more money in the Spring and Summer when demand is higher. You’d then need to plan out your budget accordingly to ensure you consider your cash flow through these times.
Your accountant may advise on certain accounting softwares and automations to make everything easier, and will likely have recommendations for your industry. Just spending and hoping for the best won’t cut it for your business, especially if you’re already in debt as a result of it, so make sure that you have a thorough business budget in place to protect your business and plan properly.
Look For Ways To Reduce Your Expenses
Once you know where you are spending money, you will have a clear idea of where you can make cut backs. Every business and industry is different, so the things you spend money on will massively differ. However, here are some examples that can work across industries:
- Reduce energy costs with more efficient devices and machinery, lights on automated timers, efficient heating systems
- Use utility comparison websites
- Go paperless to cut all printing and paper costs
- Consider outsourcing some services that won’t impact the quality you can offer
- Reduce your office space and consider some form of remote or flexible working (this could also help with employee satisfaction)
- Do a review of your supplier costs to see if there are other options that are more affordable with the same quality of material
- Review all of your subscriptions to make sure everything is used
- Look for most cost effective marketing strategies like SEO
Although it may be time consuming, sitting down and identifying where you can make cut backs can be really valuable and make a considerable difference. A really important part of the process when wanting to beat debt is to identify exactly what you owe to who, and prioritise your repayments, with the help of your accountant. Things like debt consolidation might be a viable option for your business, for example.
Get Adequate Insurance
Another vital thing you can do to help protect your business is to get adequate insurance. The last thing you need is to be getting into worse debt, and if you don’t have insurance or the right insurance, there are so many dangerous gaps that could cause your business to crumble. As a small business, the type of insurance you need will depend on the industry, however there are a few types that will be suited to most businesses:
- Public liability insurance
- Professional indemnity insurance
- Contents and equipment insurance
- Key man insurance
- Cyber insurance
- Employers liability insurance
- Business interruption insurance
Identify Ways To Improve Cash Flow
Lastly, you should work with your accountant to identify ways to improve your cash flow. There are so many different ways that this can be done, but it’s all about ensuring your incomings and outgoings are aligned in a way that means you always have access to the cash you need to pay for your outgoings. Things like leasing property and machinery instead of buying, offering discounts for early payment, doing credit checks to ensure companies will pay on time, carefully plan your inventory so you don’t hold too much stock and consider increasing pricing.
If your business grows there will likely become a time where you no longer need to worry so much about things like leasing or discounts for early payments, however for a period, it can be really valuable to strengthen your financial situation and help you to repay debts more consistently.
Final Thoughts
So, there you have it! Trying to deal with budgets and debt as a small business can feel allconsuming, however there are a few things you can do to ease the stress, with two of the most important being working with a well recommended and reliable accountant, then also getting the right insurance to prevent any future debt that is preventable is key. Whether you’re a construction company, work in digital marketing or create personalised gifts, taking time to identify your current financial situation, then make a plan for when you’re going to move forward, may be time intensive and a bit stressful, but it will absolutely be worth it in the long run for the future of your business.
