A guest article by James Wilson on the 5 ways to protect your small business from bankruptcy. James loves numbers while working in the financial industry. Although finance and accounting are his first love, he found his second love in writing. His passion revolves around marketing, business, traveling, and lifestyle.
A Bitter Pill: Not All Businesses Will Succeed.
If small businesses get off the ground, the question is, will they last long? The thought is rarely entertained when we start a business. We often subscribe to the naïve notion that our dreams, passions, and perseverance are enough to provide success. So when everything falters, we cut and run and raise the mental health card. There are 5 ways to protect your small business from bankruptcy and we will explore these safeguarts in our article.
While it is true that a good business requires vision, a wise business owner expects losses and prepares for storms. An economic downturn is always in the cards, and businesses will always be affected by one. Businesses thrive not just because their patrons are aplenty but because their business owners are equipped to survive during the colder seasons of the market.
Bankruptcy is just a summative word for the lack of preparedness, leniency, and toxic positivity. After all, when you fail to plan, you plan to fail. Thank you, Benjamin Franklin and Winston Churchill.
It becomes tremendously challenging when we consider small businesses. With their scale, their financial challenges will be pronounced. And while bankruptcy is not a good look for any business size, it becomes more debilitating to small business owners who have to tell their workers they have to wrap.
So what measures can small business owners take to safeguard themselves from bankruptcy? Here are five ways to protect your small business from bankruptcy.
5 Ways to Protect Your Small Business from Bankruptcy
These 5 Measures could safeguard your small business from bankruptcy.
1. Consider Revising Your Contracts
Business owners should always look at their accounts payable, whether they’re trying to weather a bankruptcy or balance their books. For the former, checking APs makes business owners aware of their vendor contracts. This gives them perspective, allowing them to sort out their priorities, negotiate vendor payments, or even extend the payable terms.
Some of your vendors will agree and some will not. Nonetheless, vendors will agree if it means you’ll stay in business. This is crucial because if you close down, they lose a client.
Accounts payables and other financial matters that need to be resolved should be laid out plainly and clearly in the business owner’s accounting plan. Keeping a tight, well-thought-out, and regularly updated plan helps the business owner make better financial decisions.
2. Be Keen On Collecting Debt and Unpaid Dues
Collecting debts and loans should be one of a small business’s priorities. Check your invoices and make sure you have issued them with a specific purpose. It is advisable that you issue the invoice in accordance with the milestone of the work reached, not for the entire service that has yet to be accomplished.
Small businesses should make it a point to stay liquid regardless of what business phase or quarter they are in. Staying liquid allows the business to offer discounts in the long run, creating the conditions for high retention rates.
3. Increase Your Company’s Productivity
Because the business scale is small, owners should learn to delegate as much work to their workers which may only amount to a few.
While this creates precedence for extending work hours, this would be better for employee costs. If the extension of hours does happen, the business owner should be able to negotiate humane terms and measures.
If a small business subscribes to a bigger workforce, it runs the risk of falling short on budget, leading only to heart-breaking furloughs and layoffs.
Business owners can also increase productivity and efficiency by shifting to entirely online work setups or at least hybrid ones.
4. Look Into Government Programs
In 2020, small businesses were eligible for loans from the government’s Paycheck Protection Program (PPP). The program was developed for businesses struggling to keep their employees at the height of COVID-19 restrictions. While it was a successful program that helped numerous businesses during that period of uncertainty, it ended on May 31st, 2021. The program offered $210 billion worth of grants before ending.
However, this is not the last of such programs. The Federal Government has provided businesses grants which can be accessed through Grants.gov.
These federal programs safeguard businesses from insolvency and apparent closures due to bankruptcy. If your business is struggling to find relief from piling accountabilities or just wants to prepare for the rainy days, head on over to Grants.com to see your options.
5. Look To Credit Counseling and Debt Consolidation
Credit counseling allows small businesses insight not only into consumer credit but also into debt management, money management, and budgeting. With checks on these financial aspects, credit counseling helps debtors avoid bankruptcy when they are stuck with piling debt.
Credit counseling providers represent borrowers to creditors when negotiating interest rates or requests for waiving fees. They can also tackle and strategize a repayment scheme that would not prove burdensome to the borrower.
In this regard, small businesses could also consider debt consolidation. This allows owners to apply and be granted a loan for the purpose of paying off their liabilities.
As the name suggests, getting this loan consolidates the business owner’s multiple debts. The loan benefits small businesses because bigger loans have lower interest rates or lesser monthly payments. The owner should discuss the latter with the lender or credit line. Together, they can decide on the best terms that will not overwhelm the business owner.
Fail To Plan, Plan To Fail
Businesses that have just begun operations keep the notion that there will come a time they will become stable. But while determining ROIs does give them a semblance of assurance, no business will ever be stable.
The success of a business is a mix of vision, marketing, and preparedness, with the last, we usually fall short on. So if you are building a small business, looking into the 5 ways to protect your small business from bankruptcy will help you anticipate the worst and take action before you need to be under bankruptcy protection.
If you are looking for strategies to avoid business closure, we are happy to connect with you for a 30 minute complimentary session to explore how we can help you.
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