There are challenges that come with operating a company and coping with debt. Unfortunately, managing some amount of debt is usually a part of new businesses or challenging economic times.
You can’t predict things like COVID, but you can plan for general crises by putting money into savings. At the same time if you keep pumping the brakes with savings, it can be just as difficult to succeed, especially in the beginning stages.
I was listening to a podcast while traveling earlier this month with Mike Michalowicz as a guest. Many of you probably know him for his book Profit First that talks about accounting for profit, taxes and your own pay first. Then whatever is left over is free for the company to spend.
How exactly should this be done? Setting up additional bank accounts can help you from spending money. Mike Michalowicz gave an example of having an account at a bank that was over an hour drive away. His whole purpose in doing so was to prevent unnecessary spending. He didn’t have a debit card or any checks. Taking the money from that account meant it was something the business really needed.
Wouldn’t it be nice if we all had that discipline and foresight? Congratulations if you do!
I’ve come across multiple businesses over the years where debt can get out of hand if it isn’t watched closely. If you find yourself with debt that feels overwhelming, know that you are not alone and that there is light at the end of the tunnel. You must stay optimistic and focused to climb out.
Here are some steps that will help you tackle your debt:
Tips to Manage your debt
- Take inventory of your debt (loans, credit cards)
- Sort them by interest rate and monthly payments
- Find ways to cut costs and refinance high cost debt
When tracked carefully with a debt planner, it allows the business to gain control and work on minimizing interest and minimum payments.
Taking action today will help minimize greater problems and keep your business running.