7 ways to get on top of your small business debt in 2015

Written by admin on . Posted in Business, Finance

Debt can be a useful tool to start and grow your business, but small business owners need to make sure their debt is working for, and not against them.

When a substantial amount of expenditure goes towards servicing debt rather than investing in the business, small businesses struggle to grow and can often get into trouble when expenses and debt begin to consistently outstrip revenue.

As a small business owner, getting on top of your debt is one of the best New Year’s resolutions you can make. More than a third of small business owners feel uncomfortable with their levels of debt, but taking a few steps to get things under control now can go a long way toward making your finances easier to manage in 2015.

Here’s where you can start:

  1. Get visibility over your debt: If you’re managing your finances through spreadsheets, you probably aren’t aware of all your debt obligations. And, if you’re not aware of your debt, you can’t make a plan to get on top of it. You need to have this information at your fingertips at all times. Using accounting software, like Xero, will help show what you really owe as well as working out your optimum level of debt for your business.
  2. Prioritise your debt: Not all debts are created equal. Prioritise your debt by asking yourself “what would happen if I didn’t make this payment?” The more unpleasant the outcome, the higher priority the debt. Payroll is usually the highest priority, because if your people aren’t getting paid, they have no incentive to work. And, if they’re not working, they aren’t generating revenue to help you pay off the rest of your debt. The same goes for your top suppliers and business partners, although not to the same extent.
  3. Renegotiate bank loan terms: You can renegotiate your bank loan depending on your situation. If you need more cash in the short term, you can ask for a higher interest rate in order to reduce your monthly payments – even though the overall repayment amount will be larger.
  4. Work out a payment plan with your creditors: If you are having trouble paying off your creditors, talk to them before they come asking for their money. If you put together a clear payment plan, they will be more receptive. After all, it’s in their interests for your business to succeed; if you go under, they get nothing.
  5. Ask your biggest suppliers for a discount: Don’t be shy. The people you buy from in bulk and/or have a long history with are great candidates for giving discounts. These discounts can add up, and the savings can go into paying your debts.
  6. Cut short term costs: Accounting software gives you visibility of your largest outgoing costs, so you can see which ones to cut. For example, you could reduce the amount of office space you lease. Be sure to think carefully about where you cut costs – sometimes it can be counter-productive. If you lose your biggest customer because you cut your ability to serve him or her for example, you’ll be worse off than you were in the first place.
  7. Look for opportunities for more revenue:  Easier said than done – but it’s not impossible. One way to get a short-term boost is to offer clients a prompt payment bonus. You’ll lose a bit of revenue, but you’ll have the cash you need to service your debt faster.

For more information, check out Xero’s Small Business Guides on debt – How to manage debt and 10 ways to stay out of debt.

 

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Source: Xero Blog

Taking Stock Of What’s Important: Managing Inventory

Written by admin on . Posted in Business, Finance

Inventory matters. With your business, you are not only selling 3d4ebd3the brand but also the product or service as well. The consumer retail industry lives and dies during the holiday season so it is important to manage inventory. Optimal inventory should be just above “Goldilocks level”. Remember the fairy tale Goldilocks and The Three Bears where Goldilocks only what the middle bear’s stuff because it was “just right”? In fact, there’s a Goldilocks principle that says that the preferred state is between the margins-not too little or not too much.

When it comes to inventory for the holiday season, it is best have a little more than just enough. As it gets closer to Christmas, sales can increase significantly on the weekends when people are free to browse and shop.

Keeping inventory levels right is vital since it not only controls costs but also serves as a barometer of a business’ overall health. First, pay attention to your top sellers. Whether you are using Square, Shopkeep or some other Point-of-Sale (POS) system, there is a report that will show which inventory items are consistently selling well. Use this data as a guide to determine which items should be increased in your inventory.

Next, look at the bottom of the list to the inventory that is not selling. One thing that may be a quick fix is to change where it is displayed. If you are selling offline, move the inventory in the store next to items that are selling or that are complimentary. If you are selling online, you may not be able to change your website as easily, but you can feature items in your newsletter or social media.

Another reason that an inventory item could be under-performing is its price. The most obvious answer is that the price is too high. That can be true; however, sometimes it is because the price is too low. While working as sales representative for artisan jewelry designer, the owner actually increased the price of some pieces and sales actually increased. I think that customers perceived more value from the higher price. This is an important distinction. Value tends to more important than bargain for people especially when shopping for others.

The last reason that an item in your inventory is under-performing is that doesn’t fit with the brand of your business. For example, if your business is known for selling vegan leather accessories, then suede shoes should not part of your product line.

It is essential to establish good relationships with vendors. Despite all the technology and apps, small business retail is based on maintaining relationships with all vendors. That way, you can reach out to them to deliver product immediately if you sell out. Vendors can be lifesavers to your business when it comes to maintaining inventory level. Some vendors will even suggest other products to sell and may offer a discount. You have to communicate with them often and let them how sales are going. They may offer advice on what works best.

The accounting of sales inventory is pretty easy with Xero.com. When you add a new vendor invoice into Xero to pay it, you can associate each line of invoice to inventory item that you are selling. You can also enter unit price and product description as well. If your business needs a more robust inventory management software, check out TradeGecko which can be integrated with Xero as part of Xero’s Add-On Marketplace. Managing inventory is taking stock of what is going with you business. You can’t afford to ignore it.

by Nichelle Stephens

Nichelle is a blogger, cupcake enthusiast, editor, event producer, and social media strategist. She is the co-founder of Cupcakes Take The Cake, a popular blog about cupcakes. She is also the founder of Keeping Nickels, a personal finance and business accounting blog for freelancers and entrepreneurs. 

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Source: Xero Blog