Wednesday, 14 Jul 2021
Entrepreneurs are well-versed with debts as they need them to scale up and expand their businesses. However, the interest rate and the payback timeline can take a toll on financial management.
It can also lead to stress and anxiety and restrain the business owner from making further significant investments in equipment and stock. This is the reason why most of them wish to come out of debt as soon as possible so that they can have full control over their income.
Businesses dependent on bookkeepers in Melbourne are comfortably placed in the debt department as they have a professional to balance out their incomings and outgoings. Bookkeepers know several ways of becoming debt-free quickly without affecting the bottom line of the entity. So, here are the tactics employed by renowned bookkeeping companies to reduce debt faster.
The golden rule that every bookkeeper emphasises is cutting costs. Professionals in Melbourne usually begin the process by reviewing the expenditures. They categorise costs into constant expenses, varying expenses, and redundant expenses.
The constant expenses include operational costs that cannot be changed and have to be paid without any amendments, such as utilities, salaries, taxes, etc. Varying costs are those which can be reduced or altered.
For example, office rent in Melbourne can be reduced by moving into a smaller property or finding a place in the suburbs. However, it should not affect the sales and branding of the business. Other negotiable costs include supplies and equipment.
Lastly, the irrelevant expenses are the ones that are adding to the budget but not offering any value in return. So, you must do away with them. Identify your superfluous expenses and the ones that can be lowered to manage your debts better.
Your bookkeeper is the best person to analyse the loan as they can find out the terms that can allow the business owner to pay it off quickly. For example, when the business is doing well and making sound profits, the entrepreneur can increase the instalment amount to pay it back faster than expected.
A small increase in the instalment can reduce the debt significantly. The bookkeeper can also negotiate with the lender to reduce the interest rate or remove the clause of penalties in case of late payments.
However, the lender will need proof of financial deficit to allow such restructuring and it can affect the credit score of the entrepreneur. Remember that the loan terms cannot be adjusted for debts taken from suppliers and vendors. Also, they do not work in the case of credit card debts. So, discuss the situation with your bookkeeper to restructure your loan.
Small business owners in Melbourne make the mistake of taking too many small business loans with high-interest rates that become challenging to manage. Thus, bookkeepers suggest taking a single large loan with low-interest rate to pay off all the other debts. It reduces the burden on the entrepreneur and eliminates the chances of default payments.
It is recommended to take this path if the credit line is enormous or there are too many small debts that are raising the monthly payments. A professional can guide you to find a loan in Melbourne that does not become an overbearing liability.
Another easy way of managing debts without experiencing a financial crunch is to boost sales. There are several ways of increasing revenue in Melbourne.
These include offering a discount to sell more products, offering loyalty rewards to existing customers so that they keep coming back to purchase more, sell more products, offering loyalty rewards to existing customers so that they keep coming back to purchase more, introducing referrals, going paperless, and increasing prices of the products that are selling well to gain more from the sales.
Diversification of the product line and upselling can help in improving cash flow as well. Also, the business owner in Melbourne can avoid overstocking inventory that may lead to damage of goods and stick to the required limit to do away with such losses.
An aggressive marketing strategy can also help in acquiring new customers and entering new markets. Social media is a budget-friendly way of getting target customers quickly.
Besides boosting revenue, businesses in Melbourne can increase their cash flow by asking your bookkeeping company for advice. The first step is to make the customers pay on time through robust invoicing and follow-ups.
Offering a discount for early payment can help to get a quick response from the customers. The next step is to get equipment and office space on lease rather than buying to save money. Pay your bills on time so that the business does not incur any late fees or penalties.
Utilise electronic payments to keep track of all the transactions. Get discounted rates from long-term suppliers in Melbourne and sell off your old equipment and assets that are not being used currently.
If a business has many debts, the bookkeeper will make sure that they are paid off on the basis of importance. For example, debts that have the capability of affecting the bottom line of the business or can impact the relationship with a supplier must be paid off early.
Other high priority debts are those that have a high-interest rate since they can become a matter of concern in the long run. Understand the penalties and default terms to steer clear of them and do not fall into any traps that lead to additional payments.
Also, you can increase the payment timeline to minimise the instalments if the lender agrees to this negotiation. Usually, creditors in Melbourne are ready to adjust as they do not want to burden the entrepreneur and make them bankrupt as it will mean a loss of their investment. So, work with them to find the best way out for paying your debt.
If you are facing a bad debt or are feeling pressured to pay off the loans, you can get them paid faster with the help of a bookkeeper in Melbourne. Keep the tips mentioned above in mind to reduce your financial burden faster.