Has your business had to take on additional debt or use more credit due to the ever-changing circumstances of the Covid-19 pandemic and recession? If so, you're not alone. Many businesses, facing restrictions and less customer traffic, have utilized everything from government loans to loosened vendor terms in order to stay afloat.
But the key to preventing these sources of added debt from becoming a weight is to properly manage them. How can you do this? Here are a few important ways.
1. Keep Up With Accounts Payable
Your business will have a hard time keeping up with what it owes, when, and to whom if it is not entering vendor invoices into the books as soon as possible. If you record invoices into accounting software as they arrive, you can then use this data to create time-lines for payment due dates, claim early payment discounts when possible, and avoid missing any payments.
If your business is still recording expenses only as they are paid or is using pen-and-paper to track invoices, now is a good time to develop a more proactive and efficient system.
2. Prioritize Debts
When you take on debt from different sources, the business should prioritize repayment of those obligations for maximum benefit and minimum added cost.
Governmental emergency loans, for instance, often have a long repayment deadline and low-interest rates. You do well to lower their priority and focus on higher interest rate debt, such as company credit cards. But, as with invoices, managing multiple loans requires entering the data into software early and tracking it regularly.
3. Consolidate When Possible
Consolidation is a solid strategy both for minimizing cost and simplifying repayment. Remain on the lookout for opportunities to consolidate several smaller or more burdensome debt — such as from high-interest equipment loans or company credit cards — into a single, stable, low-interest loan. Repayment will be easier and long-term expenses will be lower.
Communicate with your bank or credit union, trade associations, accountant, and agencies like the Small Business Administration to learn about new options that may come up as the recession continues and through its recovery.
When your small business makes changes now to stay on top of the debts your business has taken on and to manage new credit, it will be in a better position to weather these volatile years. Want to know how to adapt your particular enterprise to new debt-tracking methods? Start by meeting with small business accounting experts in your area today.