One of the realities that has stood out starkly through out this Covid-19 pandemic is the inability of many businesses to meet their financial obligations immediately after their revenue flow was stopped or reduced.
It shows that most businesses, not only individuals, live from hand to mouth. This situation has been worsened by the fact that most businesses operate on debts they stagger to service.
Studies show that even in good times, nearly half of business owners find it extremely difficult to manage their debt.
Failure to manage debts can easily wreak havoc to your health and plunge your business into crisis that becomes hard to solve as it progresses.
Normally, it is easy to fall into debt trap without knowing especially if you have suppliers who are generous and patient when it comes to settlement of supplies.
The first signal that things are falling apart is an insistent call from clients whose debts are long overdue, a call from your banker to deposit money in your account to avoid cheque being returned. Then you start spending more time looking for money to pay current bills or repay loans.
Learning how to manage debts is one of the most important skills that every business owner should muster to thrive.
First, develop a positive debt-fighting mindset. Control your expenses so that you bite what you can chew. Debt represents a fundamental obligation to honour the commitment another firm has made to yours, by supplying goods and services, for which you promised to pay. It should be your priority always to pay debts when due as an honest individual.
However, you must also ensure your firm survives by playing your administrative and stewardship roles well. This means you should not take personal debts as long as you have done your part faithfully. Your failure to pay debts could be caused by factors beyond your control.
Incessant call and threatening letters from creditors, should not paralyse you to a point where you cannot work well.
Your sanity and ability to concentrate on your core areas of your business such as marketing and product development are of utmost important even when in debts. If you spend all your time ‘fire-fighting’ and borrowing from Peter to pay John, you are doomed to fail.
Secondly, negotiate with your debtors to restructure your loans and pay your suppliers in bits in manner that allows your firm to operate. Avoid creating a disaster by paying your creditors all the money and fail to meet survival needs of your business such as paying staff and utility bills. This does not help either party in the long-run.
Finally, devise a long-term strategy that will ultimately get you out of debts. Sometimes you may still have to continue borrowing to survive in the short-term. However, you must ensure that much of your investment both in time and money is devoted into securing a better future so as to break the vicious circle of debts.
Mr Kiunga is a business trainer and the author of The Art of Entrepreneurship: Strategies to Succeed in a Competitive Market. [email protected]
Credit: Source link