Business debt is not uncommon. In fact, managed right, business debt can help support your business growth plans and chances of success.
However, it’s vital that you keep control over business debt, and we mean tight control. Managing repayments effectively and efficiently to avoid debts spiralling and ultimately running your business into the ground.
In addition, businesses also require effective procedures for credit control to avoid late payments and overdue invoices negatively affecting how your business operates and survives.
Reports throughout 2023 have highlighted poor credit management and a lack of access to funding, two of the main reasons why businesses today fail.
(Of course, if you’re looking for an agency for debt recovery, look no further than our professional, experienced, and qualified team at Direct Route.)
To help avoid these pitfalls and to maintain your business’s good financial health, it’s crucial that you understand areas where you could reduce your debts.
This post looks at specific ways you can reduce your business debt as much as possible, making it more manageable and putting you in complete control.
How to Reduce Debt UK
Know your costs
From the cost of your raw materials to labour and premise costs, understanding your outgoings down to a penny can help you find areas where you may be overpaying or potentially reduce by changing stock, moving to different suppliers, etc.
Working on your budget and knowing clearly your current financial position can help you manage your costs and expenses more effectively, and reviewing your costs regularly ensures you’re always receiving a good deal.
Check your stock
Stock and inventory can be a significant cost for your business in terms of purchasing stock and also the cost of wastage.
Evaluate your stock levels and analyse what you really need and where you can reduce waste, i.e., only order what you need and not just reorder stock because it’s on the list.
Analysing your expenses regarding what is absolutely necessary and what you could axe allows you to be much more pragmatic about your outgoings, reducing wastage and debt as you go.
Is now a good time to review your prices and potentially look at communicating a price
Monitoring market trends and shifts and regularly reviewing your competitors and your pricing strategies are vital to ensuring you’re not undervaluing the goods and services you’re providing.
Check your fees
If you have business debts, check the rate of interest that you’re paying back. Is there an opportunity to review these? Could you consolidate multiple loans with a new term that will allow you to reduce debt and simply have one monthly payment rather than several?
Look to prioritise debt payments (if agreeable with your creditors/lenders) and schedule these into your budget for planning and forecasting.
Change your terms
Is there an opportunity for you to reduce your business debt by reviewing and changing your terms? Can you extend these to give you a little extra breathing space and lower your monthly repayments?
Speaking with your creditors and staying in open communication is the best way to support negotiations to a change of terms or switching to alternative deals.
Note: A debt restructuring company can negotiate with creditors and collection agents on your behalf to change existing credit agreements, helping to achieve extended terms or reduced monthly repayments, which also leads to gradual credit improvements.
Hire a debt recovery agency
If you’re losing money due to overdue and regular outstanding invoices, speak to a professional and experienced debt recovery agency that can help with credit control procedures and implement finance solutions that successfully help you to reduce business debt.
Saving you time and resources, debt collection agents can recover outstanding sums of money on your behalf, so your balance sheet continues to stay in the green.
If your business is struggling with increasing debts, you can also speak to a debt recovery agency about hardship plans and payment plans that are agreeable to both parties.
Agree payment terms
It is vital in order to help you manage late payment of invoices that you set and pre-agree payment terms with your customers.
This helps to reduce business debt and ensure you’re not wasting valuable time and resources chasing unpaid invoices every month.
To help, you can introduce late payment charges and fees, set up overdue invoice emails, and even offer incentives and discounts if payment is made early.
Change what you can control
Taking control of your expenses is the most effective way of reducing your costs and reinvesting additional money back into the business to support future growth strategies.
This, matched with ensuring you have robust credit control procedures in place, can save you time and money and make sure you’re paid on time every time.
At Direct Route, we have supported over 12,000 UK businesses with overdue invoices and commercial debts.
Providing you with straightforward debt collection, keep your business debts to a minimum and let our team collect on those outstanding invoices costing your business money.