The idea of dealing with the burden of business debts probably never occurred to you when you first started your business. Organization borrows some debts from the market or any financial institution that help in managing his business but the organization needs to keep all record of borrowing and lending money in a proper way so they can analyze the financial position of the business organization.
Every organization should maintain all business record and transaction in a prescribed manner, there is so many Free accounting software which helps to manage all data and business record in a secure and efficient way.
Reason Of Bankruptcy
The number of small business bankruptcies increased from 20000 to 45000 in 2008. When a small business his hard time and can’t recover. Bankruptcy generally considered a last resort and it only makes sense in a certain condition
Life in a business can be tough. For growing pain to investment headaches, growing and developing a company is far from easy sailing.
❖ Over Extension
Growth requires investment, but many companies even otherwise healthy ones, for this reason, they borrow a lot of money from the market and some financial institution like the bank and Non-Banking financial institution and after some time he will unable to repay the principal as well as interest amount.
❖ Over Optimization of resources
Their expenses increase anticipation on new revenue, but if work they expected to come in get delayed or canceled, getting they are left scrambling or worse end up in bankruptcy, Owner of the organization should work within his limitations and do not optimized the overuse of resources.
❖ Deficiency in Accounting and Bookkeeping
The organization should maintain the proper book of account and record so they can analyze the financial position of the business organization and arrange some working capital from financial institutions. Businessman borrows debt from the market, by the time the problem is out of control, it’s often too late to fix it.
How to Avoid Bankruptcy
➔ Priority Debt Repayment
If you are paying off debt, you should give priority to a secured creditor and pay those, which charging high amount of interest rate, after that come to unsecured creditor and vendor.its best not to play favorites and pay all of them something.
➔ Prefer cash settlements
This may sound like a statement of obvious if cash was plentiful, the business would not be failing, In the early stage of struggling, you might be able to borrow money or conceive investor to step up. You should prefer cash settlement to know about the liquidity of the business.
➔ Have a Business Written Plan
Every business should have a written plan that describes strategies and tactics related to things likes sales capital expenses, operating expenses, cash flow, fund flow, working capital, performance objective, and a mean, to track performance.
➔ Elimination of unwanted expenses
You can analyze your bank account statement and cash record and remove and decrease a load of unwanted expenses in business, this may help in maintain liquidity of the business. Take a tour at your bank and credit card statement on a monthly basis.
➔ Stay in touch with
If you are having a problem in business and you are late on debt repayment or miss some installments, it will raise a red flag with your lenders, If you are in trouble then you can discuss with your lender regard this delay in repayment of the money.
➔ Sell of unnecessary assets
Business is full of non-essential expenses that you have been conned into believing are essential but which are extra in your premises. You should not just do this once, but regularly at least once a year to ensure that your business finance in the proper manner.
➔ Deal with your Personal debt on priority
The businessman should prefer to repay his personal debts this may help in building trust and maintain good credibility in the market, so at the very least, just take your own current financial situation into serious account before proceeding.
The amount of businesses that cannot even survive for a single year is alarming, In order to increase your chance of success they need to maintain liquidity in business so they will perform without pressure, due to this reason every businessman should use GST software which helps to know the true financial position of a business.
“Always Maintain an updated business plan and be totally committed to its achievement,” says turnaround expert “Chuck Benjamin”