The truth is, debt should never be ignored but most businesses will have some form of debt at some point, and this is to be expected. Problems arise when you ignore this debt in the vain hope it will disappear; the debt accumulates to the point where you unable to make the repayments. Things can quickly spiral out of control, and your business can become insolvent before you know it.
If you are beginning to struggle under the weight of your debt, then you should begin to deal with the situation by distinguishing between priority and non-priority debts.
Priority debts are just that, debts that should be first on your list to clear. Money that is owed to the government be it tax, VAT, National Insurance or business rates. Non-payment of these debts can result in very hefty fines or legal action so it is best to clear them as soon as you can. If you owe money for the rent on your office, then you will want to take care of that, not paying your rent could result in eviction which would do irreparable damage to your company. Pay off your major suppliers if they put you on stop, would you be able to survive?
Non-priority debts are still important but wouldn’t have such an impact on your business if they remain unpaid; typically these type of debts can be reduced by smaller payments. If you have a company credit card, make the minimum payment required. While interest is added every month, you can increase the amount you repay as you clear your priority debts and meeting the minimum payment will keep any collections teams off your back.
If your business has enough income to continue trading and pay off your debts, then you will survive, speak to your creditors and negotiate payment options. Many creditors will allow you to pay off your debt monthly or will offer a settlement figure or discount if you pay the debt in full. If your debts outweigh your income, then you are on a limited timeframe where you need to increase your cash flow.
A quick way to revive your cash flow is to collect on any overdue accounts that your clients hold with you. Late payments can cause serious problems with your finances if you struggle with bad debtors then consider using the services of a collections agency like Commercial Domestic Investigations. Our team are highly motivated and will work tirelessly to recover any money owed to you while maintaining your business relationships; if you want to find out how we can help your business then contact our team on 08444 159200 or email firstname.lastname@example.org.