Extirpating Business Debts

Smart Tips to Increase the Profitability

We live in a constantly changing world and no single person is aware of what is going to happen next. As the global pandemic has caused the economic break down in many countries, the chain had continued to affect the businesses and their debts. The profitability of every business has got hit tremendously. The epidemic has already shaved off the global market cap to a large extent. In such times, the debt of any company is a crucial issue; be it either business loan, credit cards, accounts or any other payables. Here, in this article, I am going to discuss some of the smart tips which will prove to be an effective debt management tool.

The Snowball Method

This method suggests paying off first the smallest debts. This technic has a behavioural aspect linked to a human brain as when you pay off the smallest debt first you feel you have been free from one of the debts out of so many pending payments. Initially, in this method when you start paying off smallest debts, gradually such debts get eradicated quickly and you can increase the instalment for the larger debts. This way, it will not only motivate you to pay off timely but also your lenders or creditors would feel that you increase their repayment instalments from time to time. 

Cut off the Avoidable Debts

Analysing all the expenditures thoroughly will give an idea about which expenses we incur unnecessarily. Can we avoid spending money on such items? There are certainly some spends which we do not pay attention to and are incurred unnecessarily. For example, subscription fees to monthly journals or magazines will fall into the unnecessarily incurred cost if no one reads it regularly. Therefore, one can avoid such costs if we are not able to utilise its benefits to the fullest. Many times, it is not as easy to avoid such expenses just in one go e.g. subscription to online food delivery application. If you are not able to decide to straight away remove such expenses, then give a fixed time period – two months or three months; to yourself to stay committed to the usage of such application. If you observed that you could not utilise its benefits it is certainly wastage of your money and you may now decide to obliterate this expense.

Consolidation of Loans

Under this option, you can ask your lender to consolidate all loans if you have more than one loans outstanding with the lender. This will not only help you merge all your loans into one single but also allows you to negotiate a lower interest rate with the lender. However, the effectiveness of this option lies if you do not accumulate debts while repaying a consolidated loan! It is obvious that it will turn out to be an unfavourable option if you keep on piling up your loans and debts. No matter what, in case of the ample number of financial assistances are sought by any business this option works out to be the best. 

No more Credit or Debit Cards

Apparently, payment through credit or debit cards is the most comfortable method where you do not need to carry physical money and you have an option to buy anything online. However, when you are planning to reduce the debts if you cancel your credit or debit cards will allow you to get rid of the card charges at first. Secondly, all your payments will not get deducted automatically as they will have to first notify you of the payment thus, giving you more time to pay off the dues. 

Ask Your Creditors for Lower Interest Rates

It is quite normal practice to charge interest on late payment to secure the receipts of payment timely. Usually, suppliers and other creditors include such clause in the contract itself to make sure the credit period allowed is not misused by anyone. Nevertheless, when you plan to reduce the debts you should always ask your creditor to lower the interest rate and allow more credit period. A famous saying supports the idea of negotiating well with your creditors which goes ‘If you speak well, you can pay back huge debts’.  While negotiating the terms of the payment, the creditors will be able to see the genuineness and willingness from your side to pay off their dues. This helps increase the profitability of your business and you will get more time to settle your dues.

Succinctly, repaying huge debts is not everyone’s cup of tea. But once you know the above tips you can rearrange them and manage to repay smartly. It is important to remember ‘Better to go to bed hungry than to wake up in debt’. However, no business can run smoothly without taking risks. The above tips allow you to reduce your debts easily and in turn, will allow your profitability spurt in the right way.