The very idea of owing money, especially large amounts, makes many people feel anxious and even frightened. But an experienced entrepreneur understands that debt is a natural part of conducting business. Every company out there today will have some form of financial obligation. Many businesses even deal with multiple debts at a given period of time.
So how do you make sure your liabilities don’t overwhelm you? The answer is simple: good debt management. This means staying on top of the debts you have and creating an organised process for dealing with them.
Here are some simple yet effective debt management tips that business executives can implement:
1. Learn basic accounting processes
As a manager or director, it’s perfectly understandable that you would want to leave most accounting tasks to professionals who are actually trained in the job. After all, you are busy with other crucial business matters. However, this does not mean that you should be totally ignorant about the state of your accounts. Ultimately, it is your responsibility to know how to read your account books and understand what they are saying about your financial position.
Educate yourself about basic accounting processes so you are able to understand what’s going on in your account books. This will also help you identify any potential cash flow problems ahead of time so you can take the necessary precautions.
2. Prioritise debt payments
Another crucial step towards effective debt management is learning to organise your payments according to their importance. Make a list of all your bills and identify which ones you need to pay right away. By prioritising the most urgent debts, you can avoid late fees and other such negative consequences.
- Priority 1: Employee salary
- Priority 2: Supplier fees
- Priority 3: Outgoing expenses, such as rent and utilities
- Priority 4: Insurance premiums
- Priority 5: Credit card bills and bank loans
3. Use a debt management software
Get technology on your side and invest in a good debt management software. With this tool, you can quickly obtain a snapshot of your company’s daily payments and outstanding debts. You can even schedule reminders so can make sure you never miss a due date. This way, you can always stay on top of your overall financial situation.
There are many different types of debt management tools and software packages available in the market today. All you need to do is choose the right one that suits your budget and needs.
4. Stay on good terms with your creditors
To ensure your company’s future growth, you need to maintain a good credit rating. The best way to accomplish this is to always pay your lenders and suppliers on time. This will put you on their good books and you can use this amiable business relationship to your advantage. Perhaps you can negotiate for a payment policy or for more favourable terms in the future.
The financial success of a business lies not only in knowing how to sell and market your products, but also in learning to manage your financial obligations properly. By following these smart debt management tips, company directors can achieve that goal and more.
For more useful advice on how to properly manage your debts, give us a call today 1300 794 290 and take advantage of our free consultation. We can help review your accounts and provide debt management solutions that will help you minimise risk and achieve your goals.
Liam White joined the Slater Byrne Recoveries team in early 2013. He has worked across the credit & dispute resolution industry for a number of years. He is currently working in a Marketing/Head of Sales capacity at Slater Byrne Recoveries.