Filing for bankruptcy can relieve businesses of their short-term debt challenges. However, it can cripple your business rating and personal credit score. Read on to know about different tips which can help businesses avoid bankruptcy:
- Entrepreneurs can start by eliminating all non-essential expenses by going through the budget stringently. Some examples of expenses that can be avoided are employee lunches, gym memberships, modern office improvements, premium phone plans, company-paid transport, off-site team events, etc. You can try and swap these costs with lower-priced alternatives such as a VOIP solution in the place of your existing phone plan.
- Every business has some idle assets which can be liquidated for some quick money during a financial crisis. The assets constitute more than physical equipment. If your parking space is too big for your employees, then you can rent out some space to surrounding businesses for efficient utilization of resources. It is essential to use everything owned by your business to its full potential. Otherwise, you can either downsize or earn some extra revenue by selling off those assets.
- An array of factors come together to force a company into bankruptcy. Crushing debt is one of the biggest causes of bankruptcy which can be avoided by prioritizing debt repayments. Entrepreneurs should have a clear notion about the bills to pay first and the order of payment. Some examples of debts that need to be paid in high priority are payroll, phone bills, business rent, utility bills, court judgments, secured loans, payroll taxes, etc. Once you have cleared these expenses, you can proceed with less-pressing forms of business debt like entertainment, advertising, and marketing, repairs and maintenance, subscriptions and dues, and unsecured vendors and creditors. Entrepreneurs can get debt relief for businesses to circumvent financial crises.
- Every entrepreneur pens a business plan when they start with their business. But with time, it becomes essential to alter the business plan that was curated years ago. This document might have helped in sufficing all initial funding requirements of the business but the new version needs to be in sync with your current state of business. It should reflect your operating plan, enterprise strategy, sales and marketing strategy, cash flow projections, and capital-expense budget. Entrepreneurs need to keep an open mind toward business process reengineering for benefitting from more cost savings and better efficiency.
- Entrepreneurs need to have a close rapport with their business lenders and suppliers. They should also be highly transparent about their current financial situation. In developing a good relationship, they can ask for more feasible repayment terms. It is necessary to intimate them of the fact that you are considering filing for bankruptcy but are open to better alternatives. The lenders often help businesses establish a payment plan so that they can get back on their feet. At the same time, entrepreneurs can reach out to different contract holders to negotiate for better terms and obtain additional quotes for services you are currently availing of that are not under a formal contract.
Any unforeseen circumstance can put your business into a financial crisis. In such a scenario filing for bankruptcy might seem like the best way out. However, you can save various direct and indirect costs by following the tips mentioned above and avoiding bankruptcy.