Every Monday as @DorethiaConner & with my co-host, @BenitaTyler, we interview experts during our weekly Twitter Online convo #MoneyChat held from 8pm-9pm est. This post pulls the highlights from our #MoneyChat topic 'Get Out of Debt in 2011' Last week we discussed getting out of personal debt, this week our very own resident expert, @BenitaTyler, of TBSUSA Tax, Accounting and Small Business Consulting, gave us advice on how to trim business debt.
What are some common sources of business financing?
Common forms of debt that in a small business include loans, lines of credit, venture capital and accounts receivable factoring
Is it possible to run a debt-free business?
Absolutely! It really just takes good financial management. Plan finances in advance and use tools like accounting software and spreadsheets to help you make good decisions with cash flow.
What are some of the cons to business debt?
Using borrowed money takes away some control in your company. Profits belong to lenders and investors. You may also have a significant amount of interest that drains your cash flows. Without financing you may not be able to reach as large a market as quickly as you’d like. The upside is you’re avoiding high cost of interest and the risk of non-payment. You are able to keep more of your profits.
What steps can we take to create a debt-free business?
Strategically increase sales so that your business can cover operating expenses and generate surplus. Watch your spending –keep overhead as low as possible and always invest back into the business. Aim to create a cushion of 12 months’ worth of operating capital .
Any final resources to help us manage business debt?
My last bit of advice would be to trim costs but not quality. If you are currently renting office space, but find yourself not utilizing it – virtual offices are good alternative to expensive leases. Try a Google search to locate one near you. Here are a few other resources for saving money in your business:
- Google Voice - free phone service
- Rapid Fax Service or Efax Service - affordable fax services
- Square Up - credit card processing for your iPhone or iPad - a low cost alternative for merchant equipment with low transaction fees
- Quickbooks and Freshbooks both offer online solutions that run about $19 a month. Evaluate the features to see if these work for your accounting/bookkeeping needs.
Oh and yes, there was homework! I didn't forget ... List all your debts smallest to largest. Develop a plan to pay them off in that order. So if you've been avoiding the letters, shoving them in a drawer or on top of a shelf - dig them out. It's time to take control of your finances, whether personal or business, instead of the other way around!
-Dorethia
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