Three handy hints to help you manage your debts

So, had a rough month?

It happens to every small business (some more than others).  Your turnover was not up to it’s usual high standards.  Your invoicing is out of line with your cash flow.  Or in some cases, the industry you are supporting hits a lull and you are left scratching.

Usually, the stars will align and these downturns will coincide with a particularly heavy bills month – you know the ones – when your insurance, registration, rent and tax bills all come due at once.  So what do you do to meet your obligations whilst still maintaining your sanity?

Firstly, if you can you should have sufficient ‘buffer’ funds to cover these downturns.  I know, they are unpredictable and that shiny new ‘thing’ that will make your business ten times more profitable is financed right there, but it is critical that you are disciplined.  There is a huge difference between feeling pressured because there is too much work to do and feeling the same pressure because you don’t know how you are going to pay your next bill.  I can speak from experience when I say the latter is the far more stressful of those situations.  Plus let’s face it, that shiny new ‘thing’ is only good to you if it is being used – it just looks like a big lump of capital that could have paid those bills with leftovers when it is not working…there are times to invest and times to be cautious. Pick them carefully.

Secondly, negotiate.  Your bills (especially with Government organisations) can be adjusted or paid back in instalments when you get back on your feet.  Phone your debtors and speak with them about your situation.  Most will have been in the same boat at some stage and will be primarily interested in you paying – even if that means a delay.  Arrange for your annual bills (insurance, registrations) to be paid in instalments.  Spreading costs over a number of months during downturns may be slightly more expensive in the long run, but the cost to your health and your sanity may be worth the extra funds… Don’t be afraid to make those calls and get yourself a deal that you can manage.

Lastly and perhaps most importantly, you need to keep your business funds separated from your personal funds unless you can be sure you can recover them quickly.  Using your home savings, or worse, putting your personal assets in jeopardy to save a failing business is a folly you should not entertain.  Better your business goes down leaving you with a roof over your head than the alternative.  Paying yourself after all, is the reason you got into business in the first place, correct?

It can seem like an easy fix to draw funds from personal accounts.  I would urge you, should you find yourself entertaining this scenario, to go back again and have a good hard long look at your situation and your business potential, and how much your business already owes you. Talk to your accountant or business advisor, honesty is the best policy and honesty with yourself in this scenario could save you from more heartache in the long run.

Find the time and headspace you need!

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In this workbook you will work out where you are overcommitting, which areas you can really cut back or take control in and figure out just what is your number one priority right now.

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