Sometimes, while you’re struggling to bring in the money owed to you, you can find yourself in a difficult spot with your own debts. The balancing act between pulling in debts and paying debts at the same time can be a difficult one to negotiate. If for instance, you’ve borrowed money to keep your business afloat – and then your debtors don’t pay up, there’s a danger your own debts can spiral out of control. However, there are a number of ways of handling your situation to improve matters and keep that tightrope manageable.
Bringing in the money
Chasing up customers who owe money
Getting more vocal about getting your invoices paid on time would be helpful. Sometimes customers just need a slight jog for a reminder that they owe you the money and need to pay. No threats, just honesty can work wonders here. Start with the oldest debts first, and keep at it. Many, once reminded, will pay up. Put this money into an account for serious debt repayment.
Raising more money
Organising a sale or special promotion can bring in the customers. Discounts, coupons, competitions could help you get rid of old stock or slow sellers. Innovative marketing via direct marketing, events, social media are all avenues you can explore to get stock moving. The most important thing is that all extra cash you raise, goes towards paying your debts.
Reducing staff, possessions and premises
This is rather a drastic move preferably left until last, but if you can scale back your infrastructure, you could save enough to contribute to debt repayment. If you downscale to a smaller premises, or even take your business home and work from there, you will be saving on one of your biggest expenses, which is rental. If you have any assets you can sell off and still keep your business going, this would be helpful. A second-hand vehicle, computer equipment, old printers or office furniture could be off-loaded, streamlining your business and giving you much needed extra cash.
Most creditors give you 30 or 60 days to pay a bill. Make sure you take the longest time you can. If you have 30 days, take the full 30 days. That will give you breathing-space money to take care of smaller debts. You will also have time to gain some interest on the monies you are building to pay bigger debts.
Negotiating better terms with your creditors
Sometimes it’s best to take the bull by the horns and contact your creditors, explain your situation, and make new arrangements for payments. Your creditors may be keen to assist you as their willingness to renegotiate terms will help them to get paid in the long run. So don’t keep your struggles to yourself; creditors are often open to negotiating better terms. They might be willing to let you pay smaller amounts over a longer period of time, or even under certain conditions, they might reduce the amount you owe, or cut the interest they are charging. Being honest is helpful. They may not be willing to change things, but they will appreciate your sincerity and if that keeps the relationship on a good footing, it may be enough to improve both your motivation and their attitude.
Try an extra string to your bow
Consider how you might raise more money by taking on other business projects without losing focus on your current business. If you have particular skills in any areas, consider offering your services for a fee, or think about establishing another line of work through an internet business. If you have the time, energy and skills to handle more, then plan a new line of work that might well bring in a few dollars more. From web design, to accounting, to picture framing, to making jam – there’s an endless list of alternative and innovative new fields you can try to initiate what could be a lucrative side-line business. And why stop at one?
Paying out the money
Critical expenses must be seen to first. The most important payments will be those that are needed to keep your business afloat. This will include taking care of key relationships –
your employees’ salaries or other benefits must be dealt with first as a matter of priority. Next see that you pay key suppliers before you lose your reputation or find yourself cut off from further credit and facing legal challenges. Once these major issues are dealt with, you must insure your tax situation is up to date because you don’t need unnecessary penalties added to your list of obligations!
Rank your debts
It’s best to pay off the debt that is charging the highest interest rate first, rather than paying a range of smaller debts. Paying many debts with small amounts may leave you feeling that you’re not really getting anywhere. You may prefer to rid yourself of smaller debts first, giving yourself time to concentrate on the larger or more costly debts later. It depends on what you feel you can cope with – but ridding yourself of debts that are costing you the most, and which may be adding penalties for late payment, is probably the most sensible route to go.
Consider debt consolidation
This means taking out one major loan to pay off all your creditors, leaving you with only the single debt to manage. There will be extra fees in this regard, so be careful who you deal with, and make sure you understand the agreement in the fine print. For it to be worth it, you need to be making lower monthly payments at the end of it. Your single debt should not cost you more than all your other debts. Be sure that debt consolidation is going to work in your favour, and work with professionals who understand this.
LegalTrack – how we do things differently
At LegalTrack we work with real people with real problems and therefore we apply a highly considerate and respectful approach to debt collecting. We understand that we need to be firm, but we are also aware that to negotiate successfully with an individual who is already in a difficult financial position, we need the skilful combination of empathy and experience, backed by well-honed communication capabilities. Our modus operandi is simple, direct, efficient:
- Our first contact is via an SMS.
- This is followed by a phone call to begin the negotiations on how the debt will be paid.
- All payment arrangements/negotiations are confirmed via letters, emails and text messages.
- Our promise is to constantly keep contact with our debtors in terms of all arrangements.
- Any legal action is considered the last option.
Please find out more at: www.legaltrack.co.za