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Recently the number of bankruptcy cases being reported from small companies is on the rise. Bankruptcy may not result in the closure of a business, but it is a sign of financial distress. During this era of the unsteady economy, you cannot predict how your business finances will fare. However, you can save your small business from bankruptcy using the following tips.
Stop Spending on Non-essential Expenditure
Often you may find yourself paying for products and services that you do not even use, such as music subscriptions. This is the same case with business. You are likely to get used to spending money on non- essential things that the company can survive without. The necessary and non-essential expenditures vary depending on the business. You should analyze your expenses and classify them in the two categories. After singling out the things that your business can function without, cut them out from your expenditure. It would help if you reviewed the current essential expenses too. It is possible that a critical cost three years ago, or when you were starting your business, is not vital in the current situation. For instance, you may have been hiring a marketing agency to promote your products. If your company is already renowned, you can quit paying for the advertisements.
Cash Out Business Asset That You No Longer Require
If your small business is on the verge of bankruptcy, you are likely to have numerous debts already. Therefore, it is not wise to take more debts. You have to come up with mechanisms of acquiring money without incurring more debts. One such mechanism is converting useless assets into cash. Depending on the type of business, you are likely to have assets that are no longer necessary. For instance, a warehouse that is no longer used to hold stock or a fax machine has not been used for years. Selling these assets can help you acquire money to keep the business going or pay off debts.
Repay Your Debts
You can be undergoing a tough financial time in your business, but you should not overlook your current debts. Paying up will save your business from being auctioned and will help you have a good credit reputation. You can start by making payments for the debts with high-interest rates first followed by the ones with low interest. If possible, you should have an open dialogue with your creditors and request them to revisit the terms and incorporate a new payment plan. In case you have several debtors, do not play favorites; instead, pay all of them something.
Adopt a Consumer Proposal
It is a legal binding process that will enable you to pay off your credit up to a certain percentage or be granted an extended period to pay up the debt. The proposal will call for meeting your creditors, whereby they will vote in favor of or against your plan. If your proposal is accepted, you will enjoy numerous benefits. For instance, you will only pay a portion of your debt, debtors cannot auction your assets, and no additional interests will incur as long as the proposal is active among others. A Licensed Insolvency Trustee can administer the plan. You can easily find one by searching for a consumer proposal in BC or your particular locale.
Write a Business Plan
You may have started your company without a business plan because of its size. Nevertheless, every business, whether small or large, requires a business plan that describes its tactics and strategies. This includes all expenses such as operating budget, cash flow, sales, input costs, and capital funds. Tracking your business finances using a plan will enable you to make informed decisions. Ensure your business plan reflects the current financial state of the business. For instance, if you are making less profit, adjust it accordingly. A business plan will help you make informed financial forecasting and mitigate the chances of being bankrupt.
Managing small business finances is far from easy. If you fail to be cautious, you can fall into bankruptcy and eventually close down the business. On the other hand, if you employ effective financial tactics, your business will survive difficult times without falling into bankruptcy.