Credit is undoubtedly a tool that will allow you to accelerate the growth of your business if you use it properly. But also a lack of control over your debt can become an enemy that leads your business to failure.
According to information, the main causes of the failure of the SMEs are the lack of income and the deficiency in their planning.
I share 5 tips that will help you control your debt and boost the growth of your SME:
1. Create a budget
Having clear your income and expenses will allow you to make more accurate decisions when requesting a loan or paying it. Once you have identified the amount of your profit, you will be able to know the payment capacity of your business. The formula is as follows: Income – (expense + savings) = Ability to pay
2. Convert your debt into profit
Using credit in working capital will make the money you request become, rather than a debt, an investment that will grow your business. Having a projection of when you will recover the money will allow you to control the level of indebtedness that your business can support.
3. Domicilia your payments
Approach your financial institution to deduct the payment of your credit directly, so you will not forget your payments and you will not add extra interests that are generated by it. I recommend that you keep a calendar of dates and payments, plan so that the money that will be deducted from your account is always complete.
4. Avoid paying a debt with another
If you have reached the point where you can not pay your debts, it is best to build a strategy to pay them and keep them from growing. Obtaining a new credit will help you momentarily but at the end of the day it is a debt that you will have to continue paying. Here I share a 5 step plan to settle your debts.
5. Sell more, spend less
This last advice is totally linked to point one. Since you have detected your income (sales) and expenses (expenses) it will be easier to determine strategies that allow you to increase your sales or reduce costs. A financial plan will allow you to have a diagnosis of your business and make better decisions.