- Update Your Budget: When you find it hard to pay monthly bills, sit down and review your budget. See where the cash inflows are failing to meet expectations and where expenses exceed the budgeted amounts. If the changes seem permanent, update your financial plan accordingly. Typically, the changes will involve variable expenses — changes to fixed costs should not come as a surprise, but in any case should be reflected in your budget and financial plan immediately. A revenue shortfall needs to be analyzed to see whether it is a temporary blip or a permanent change. Revise your budget so that you can continue to pay down your debt.
- Cut Expenses: You can devote more money to repaying debt by reducing your expenses. Think of cuts that will not cripple your business, such as unnecessary rented space, professional memberships, non-critical travel, non-essential employees or work hours and delayable inventory purchases. The trick is to make cuts that will increase net profits. For example, if you cut too much inventory, you may not be able to sustain your sales revenue. If you lay off too many employees, you may lose your operational edge. In some cases, it might be cheaper to use contract employees. If you explain the problems to your employees, they may agree to pay cuts until things begin to look up. If you have discretion over employer payments to workplace pension plans, omit your matching payments this year. With the advent of Obamacare, you might consider terminating your company’s health insurance plan. Offer incentives to higher-paid employees to take early retirement.
- Increase Revenue: Offer markdowns, volume discounts and better terms for cash payments. Speak with customers and see if they would be willing to move up the timing of their regular orders. If possible, increase marketing and advertising to stimulate sales. You might want to factor your accounts receivable to collect revenue sooner. Sell off assets you no longer need. Concentrate on inventory items with the biggest margins. You might have some goods or services that don’t really generate profits, so replace them with higher-margin alternatives. Introduce loyalty programs that reward repeat customers with special discounts and deals. If you run a brick-and-mortar retail business, perhaps you can expand into online operations and even begin selling to international customers. Online selling is very economical and can allow you to cut your fixed costs.
- Work with Vendors: Often, vendors will respond positively to requests to delay payments and may even float you a note for three to six months. It’s in vendors interests for your business to survive, so don’t be shy about negotiating with them. Prioritize vendor payments based on which ones have to be paid first.
