5 Ways Companies Can Reduce Their Debt

When running a business, one of the issues that often gets in the way of success is excessive debt. If your business debt is growing at a rate that you are not comfortable with, it is generally in your best interest to address the problem now. How exactly can businesses reduce their debt? Here are five ways to help get your business back on the right track.

1. Collect Unpaid Invoices

One of the best ways that you can more easily deal with your debt is to collect unpaid invoices. Some businesses have large numbers of customers that have not paid their bills, and it puts a hamper on operations. Put an emphasis on being able to get as much money as possible from your customers on the front end of a deal. Then if you have any left-over that hasn’t been collected, consider using accounts receivable financing. This allows you to get an advance based on the value of the invoice. This has the potential to change the way you run your business and cut down on debt.

2. Liquidate Inventory

One of the biggest problems that many businesses have is a buildup of extra inventory. They pay money to buy inventory and then they just have to sit on it for a long time. This can lead to unnecessary levels of debt. In this situation, it makes sense to liquidate the inventory and use the proceeds to pay off your debt. It’s important to get a solid grasp of how much inventory you need on a regular basis.

3. Evaluate Tax Strategy

In some cases, businesses are paying too much money to the government in the form of taxes. They are not taking full advantage of all the tax breaks and credits that they are eligible for. Have a CPA look over your taxes and determine if you’re getting all of the tax breaks that you should be getting. Sometimes, just by making a few different business decisions throughout the year, you can significantly lower your tax bill. The savings that you realize can then be used to pay down your debt.

4. Cut Overhead

Many times, businesses spend way too much money on overhead. By cutting out some of these unnecessary expenses, you may be able to significantly reduce the size of your debt. For example, you might consider moving to a location with cheaper rent or utilities. You could eliminate unnecessary positions within the company or look for a cheaper supplier for materials.

5. Negotiate With Suppliers

You may also be able to negotiate terms with your suppliers in order to cut back on the amount of debt that you have to incur. For example, if you could extend your payment terms to 90 days, you might not have to use your line of credit to buy supplies or inventory.

When you take the time to implement these changes, you may be able to significantly reduce the amount of debt that you have to incur.

R. Swingle is an article writer for Business Finance Corporation; a privately held business finance company serving the southwestern United States.

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