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Lizzie Weakley
Lizzie Weakley has written 79 articles for SB Informer.
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Business Startup: How to Reduce Your Company Debt

Lizzie Weakley

June 03, 2015


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Debt is an important consideration with a new business. Too much of it can kill a new business, and many businesses fail because business owners cannot generate enough revenue to keep up with mounting debt. Here are ways to keep your debt low, and reduce it effectively when you have it. 

Keep Your Inventory under Control

Hopefully, when the business was started, prior planning was given to the amount of starting inventory that would be needed. It is important not to carry too much inventory, particularly inventory that you know will not be used for a while. Space is needed for such inventory that will become a dead expense. Ideally, supply and demand should be as close to each other as possible, at least initially, without running out of inventory when it is needed. 

Heighten Customer Service

If you have a crucial debt that needs to be paid off, you may want to consider offering your product at a discounted price to your customers for a limited time so that they will buy more of it. You could also offer them more services for the same price, or higher discounts for bulk purchases. Once your debt has been satisfied, you can raise the price again.

Customers love to make deals, but sometimes they will try to delay paying bills by assuring you that they will pay at a future time. As a new small business owner, no matter how tempting their offer may be, it is unwise to agree to such transactions. If a customer will not provide you with cash or some type of verifiable order number or credit card for payment, it's a good idea to deny the transaction. Later, when your business has established itself, you will be able to have more options in extending payments for regular customers that you know well. 

It goes without saying that you should be as attentive as possible to customer requests, which can produce present and future orders. Make sure you have a phone number that is available during working hours, and afterward, if you are running a service business. It may be necessary to employ an answering service to do this more efficiently.

Keep Close Track of Records

Keeping close track of your business budget is very important during the period of startup. If you are sole proprietor, don't mix personal and business expenses. Ask your bank for a dedicated business checking account. You can purchase your business checks inexpensively by shopping online at such websites as Checks-SuperStore.com. Some of these websites also offer computer checks that can be easily run off on your business printer.

As a business, there is the temptation to apply for a number of business credit cards, but the less of these you have, the better. Look for a business credit card with a rate that is as low as possible, and use it only when necessary. To avoid accruing unnecessary finance charges that add up, only pay by credit card if you know you will have the cash to pay the full balance when the bill arrives. 

Ask Suppliers for Easier Terms or Discounts

Be sure to check with your regular suppliers for discounts that can be used when you purchase their items. It always pays to ask, because sometimes a discount will only be given when it is requested. You may be able to work out a different payment schedule or better payment terms. You can also try to barter services to your suppliers that they need. For instance, you might agree to offer them free advertising in exchange for a better product price.

Being as conscientious as possible to keep business debt low will increase your chances of getting your business firmly established, and will result in a higher profit margin.


                   



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