Debt can have dual effect in your business. It can either bring your business down or it can propel your lowering business to a new height. It all depends on successful management and controlling of debts. Not all debts are bad. It is all about a delicate balance deciding how, why and when you are going to use your debt for beneficial purposes. Rest assured that all business has debts. It is the way to manage it effectively that counts. You can drag your business to the right path to success, if you deal with debts properly for a few months to see everything falling back to place once again.
Listing Is Essential
There may be a time when you may lose track of all the debts that you currently have in your business. If you really want to succeed in your business, then you must have everything in your fingertip. It is essential to make a list of everything, including all your debts. It is true that due to prior engagements it is not possible for you to maintain such a list, but you can start by admitting that you have debt. Take help of your bank statements or your credit report for help to make the list. Enlist all along with due dates, total amount owed, rate of interest and total minimum monthly payment.
Differentiate Good And Bad
Next step is to differentiate between the good debts and the bad debts. Look for the debts which increase revenue to your business or add value to it. Mark all these debts as good. Others like luxury furniture or a vacation can be considered as bad debt. In the concept of the modern business world, you pay down a debt as soon as you start generating revenue from it. For bad debts you will continue to pay long after finishing using it. You need to stay as much as disciplined to stay away from such temptations of creating bad debts. If you lose your focus for even a month, your debt starts piling up. So, when you want to take any new debt, check whether it is good or not.
Make Payment Plans
Now that you know about the amount and due dates, start to make plans for repayment in time. If you have an account which you can dedicate entirely for such payments, then there is nothing like it. This is very effective if you know the balance in that dedicated account remains sufficient to make regular payments. Other way is to make a calendar yourself. Marking the due dates on it, make the payments regularly, higher than the minimum, if possible. Whenever there is any surplus payment, male sure to pay off the maximum of your debt with that extra amount of money.
Cost Of Credit
You have to understand the cost of credit just like you would have done for best credit card consolidation loans. As interest is compounded there, you have to pay off the debts of cards which carry higher rates of interest. Similarly, here also you have to pay off the debts which carry higher rates as soon as possible. Also keep your eyes open and yourself updated about the change in interest rates to make amendments accordingly. Doing all these, you will be able to bring your business back in track.