As a business owner, you must be prepared for the highs and lows of entrepreneurship- including the times you may find yourself facing financial trouble. While every entrepreneur wants their business to be successful, statistics show that around 82 percent of businesses fail each year. This year is also set to be another record-breaking year for businesses in the U.S. as scores of businesses file for bankruptcy.
While it can start as a small issue, it can quickly spiral into a case of missing payments, being late on payroll, and racking up debt. For any entrepreneur, it can be a daunting time. However, if your business is facing money struggles, it does not have to mean the end for you- or your business. By acting early, identifying your financial gaps, and being proactive on your debt you can improve your business's chances of bouncing back after financial woes.

Act Fast And Quickly On Signs Of Distress

Your reaction and timing to financial trouble in your business can make such a difference. Identifying the signs your business is in distress early means you have more time to react and avoid consequences like filing for insolvency. This includes increasing payment/collection periods, negative cash flow, and declining margins. Doing so early also means you have more time to find a better solution to your financial roadblocks and weigh their suitability.
For instance, you can weigh the advantages of filing for chapter 11 vs 13. While individuals can file for Chapter 13 and structure a repayment plan of 3 to 5 years to manage their debts, Chapter 11 is suited for businesses and allows them to be operational throughout the process.

Shift Your Focus To Your Accounts Receivables

A vital part of getting your business's cash flow healthy again is to reduce your business' collection period. Many times businesses experience financial troubles due to the lack of funds. This also stems from the build-up of missed payments from customers, which impacts the incomings in your cash flow. If you want to improve your business accounts receivable collection period, start with an aging report of all of your receivable debts.

It also helps to be proactive with your invoicing and new customers. Make sure they are aware of your payment terms. Keep an eye on your aging accounts receivables and contact customers soon after they become overdue. Sending a payment reminder 3 days before the payment is due is also a good addition to keep payments on track.

Have A Conversation With Your Creditors

When it comes to navigating your way out of financial trouble, restructuring your debt is key. Restructuring your business debt could provide some much-needed relief to your cash flow and in some cases, even reduce the costs of financing your business. A good place to start is by taking a look at your accounts payables and having a conversation with your creditors. If approached correctly, you may be able to reduce your regular payments, get late charges removed, or be granted a limited payment respite while you work on getting your business back on its feet. Remember that your creditors would prefer to be paid so they are often very willing to work with businesses on a payment plan.

You may also want to consider other opinions for debt restructuring like debt consolidation or increasing the loan term for long-term debt. The result is often smaller monthly repayments and a higher chance of your business affording those payments. It also lessens the negative impact on your business' credit profile with fewer missed payments.

If you do need help, speaking to a financial planner or advisor can provide some clarity on your options. Financial struggles do not need to mean the end of your business venture. With quick action and decisive, proactive strategies, you can turn things around- rebuilding your business after financial difficulties.


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