Managing Debt as a Small Business Owner

Managing Debt as a Small Business Owner

Running a small business – or business in general, requires taking risks. One of these risks, is debt. In some instances, debt can be used as a tool to fund business growth; however, if debt levels increase, concern grows, and it can become a big problem. 


This highlights the importance of implementing a strategy early that helps manage your business’s debt, and creating a payment plan. Agilis CA can help with creating a strategy, and weighing out your options if you find yourself anxious about your debt levels.


September Debt Blog Image



Being prepared for the unexpected is a primal part of running a business. Events such as pandemics, recessions, and natural disasters; all of which can’t be planned, have the ability to downturn your business, and cause debt. 

The ramifications of failed debt payments can include employee loss, seizure of stock and business assets as well as potentially personal assets, bankruptcy, and government intervention. This last point is particularly important, as the ATO has begun clamping down on businesses with over $100,000 worth of tax debt.

The key, is to take action and control, implement high quality accounting software, and monitor your payments.  

Here, we have some points to keep in mind, to help manage your business debt: 



Prioritize your Payments


Below are 7 payment priority recommendations; their prioritization order is for you to decipher based on your current position. 


a) Credit Cards

It is important to ensure you steer clear of credit card penalties and interest charges, as these can rapidly mount up.   


b) Bills

Not paying your bills such as rent, electricity and water can impact your credit rating. 


c) Payroll 

Penalty’s can apply when employee wages aren’t paid on time. 


d) Insurance 

It is fundamental to ensure you stay on top of insurance covers such as professional indemnity and public liability. 


e) Secured Debts

You can be held personally liable for outstanding debt, and your assets in jeopardy if you are a sole trader or partner in the business. 


f) Aged Payables

If these aren’t paid in 60 days or more, your credit rating has the potential to be impacted, which subsequently impacts your future ability to borrow money. 


g) Suppliers and Business Partners 

Debt can impact your relationship with loyal suppliers and business partners. 



Increase Your Revenue 


Boosting your short-term revenue could reduce your debt payments and help you get back on track. 

This can be done through: 



a) Reducing Prices

Discounts and reduced prices on products and services are a way to encourage customers to buy, and quickly boost cash flow. 


b) Ensure You Meet Customer Needs  

Actively ask for customer feedback to ensure that your products and services are meeting their wants and needs. Prices could be increased to meet exclusive demand. 



Reduce Business Costs 


Actively contemplate where you can cut costs in your business. 

However, it is important to strategic about this to ensure what you cut is not counter-productive. 


Here are 3 areas to consider: 


1. Unused rental space – However, ensure you can still fit all your stock and employees comfortably. 

2. Employee redundancies – Be strategic about who you hire, as hiring short-term employees can be more costly. However, you must ensure the workload can be effectively handled and there is still a high-level of skill. 

3. Negotiate costs with suppliers – Especially if you are purchasing in bulk or a large order, and have a loyal relationship.



How Agilis CA Can Help 


It is important to be realistic about your debt situation, and seek help and be proactive early to avoid dire conditions. 

If you find yourself anxious about your debt levels, contact Agilis CA today. 

We can review your business’s current financial position, weigh out your options going forward, and work out a payment plan corresponding with your cash flow.  

Agilis Chartered Accountants

Agilis Chartered Accountants

Agilis Chartered Accountants provides tailored accounting services, offering clients a high level of personalised advice and support - from individual tax to business consultancy. With a commitment to driving success, we provide comprehensive accounting and advice solutions that ensure every stage of your journey is met with the utmost efficiency. From startup through expansion and growth, our services make it easier for you to achieve business objectives – ultimately leading towards greater financial stability.