Saturday, June 9, 2018

Staying out of the Red: How to Keep Your Business out of Bankruptcy

Just like a person, a business must find a way to pay its bills and keep a sufficient amount of money in the bank. Furthermore, companies also have their own credit scores that go up and down based on its ability to manage money. Good money management can keep a business thriving for years while also keeping it far away from a bankruptcy court.

Don’t Borrow Funds Unnecessarily  

Prior to borrowing money from a bank, friend or other ABL lender, it is important to know how that money will be used. It is also important to know how that money will be repaid and when. An accountant or other financial adviser can help a business owner determine if a loan is an appropriate way to help the company grow.

Don’t Overspend

One of the many problems that most businesses have, especially if they are still in their startup phase is they tend to overspend. The problem with overspending should be obvious, but by doing so, you may not be able to pay for the necessities for your business to survive. 

You have to be able to pay the bills and pay your employees properly. But overspending can be very easy to do. There are going to be times where you have unexpected expenses that come up. 

However, if you budget your money properly, not only should you be able to take care of those unexpected problems, you should be able to take care of all the necessities in your business and still turn over a profit. It is tricky, but if you are able to pull this off in your business, you will be successful in the long run.

Keep Labor Costs in Check

A company’s employees are among its most important asset. While you can attract quality talent by offering higher salaries and other perks, it could have negative consequences for your bottom line. 

Make sure that you pay what your company can afford to spend on human resources even if that means paying your people less than the competition. In some cases, you can make up for a lower salary with more robust health benefits or extra vacation throughout the year.

Don’t Expand Too Fast

Expanding too fast can cause you to overspend money in your business. When you try to expand, you have to be able to anticipate all of the unexpected expenses that may arise. Although opening a second or third location could mean additional revenue, it will also mean additional costs. 

It could also mean that you need to hire managers and other personnel to properly oversee these locations. By growing at a controlled pace, you can increase revenues in a consistent manner and ensure that each location is making enough money to justify its existence.

Make Use of Credit Monitoring Tools

Using tools like CreditRiskMonitor can make it easier for a company to determine where it stands compared to the competition. This may help a business take action to cut costs, pay down its debt faster or otherwise become a leaner organization. 

By taking these steps, it could be easier to secure an investment or otherwise increase its revenue and gross profit.

As a business owner, you want to make sure that your company is as financially healthy as possible. This makes it more likely that the business will be around for the long-term, which may instill greater confidence in employees, suppliers and investors. 

Ultimately, it makes it easier to grow your business from a small business into a regional or national power.

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