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When it comes to managing our businesses, an important factor to consider is to make sure we have ways to ensure our survival in the market. This not only means making profit, but also making sure we have all the things we need in order to ensure that our finances are in check. Part of this process is always considering the risk of bankruptcy, and how to mitigate these risks. For some, this might seem like a rather odd proposition: why plan for something that we don’t want to happen? However, this is precisely why we should be aware of the risks of bankruptcy to our businesses, as this can allow us to find key ways to help reduce these risks.
It’s important to remember before proceeding however that the points to be discussed below are not the only steps in reducing your risk of bankruptcy in business. The tips below are to be considered general reminders for all sorts of businesses, and you may want to consider asking for assistance from a professional if you want to assess how these tips could work based on your business structure.
In This Post:
Recognise the Possibility
This is sometimes the one step a lot of people tend to neglect, because we may have a mentality that states that we shouldn’t be thinking of things we try to avoid. This shouldn’t be our business mindset when it comes to emergencies such as bankruptcy in business, because this is an eventuality we have to prepare for. We don’t always have good business days, and bankruptcy is an eventuality that is better assessed instead of ignored.
- Try to make an assessment of your current budget, from your income to your expenses, and even down to your operational costs. This means making a good assessment of the current structure you have and the current workflow you’re implementing. This allows you to have a good idea on what sort of things you can adjust and modify if there are evident financial red flags.
- If you have regular negative cash flow, try to assess with your financial advisor if it’s a good idea to try to put personal money into your business. You don’t have to do it yet, but the option is better considered than completely forgotten.
Revise the Budget Accordingly
We’ve said earlier that it can be a good thing to assess your current budget and expenses, and this is for good reason. A thorough look at your expenses allows for the opportunity to find ways to optimize your budget that can be appropriate for all sorts of situations. If there are expenses that are putting your company in debt, maybe now is a good time to remove them.
- Are you willing to downsize your office space, if the option is considered? How can you optimize money for utilities, rent, and other costs for running the business?
- Try as much as possible to get all your debt repaid, or at least get a repayment scheme that works for your business trajectory, so you won’t stay in debt for a long time.
Assess Your Customers and Assets
Aside from assessing your budget, try to look at your customer and asset list. Take a good look at everything your company owns for now, and try to see what you can sell for additional profit.
- Excess baggage such as unused equipment or customers you can transfer, or even assets other companies can consider buying, would be able to give you the kind of money that would be useful for other plans you have for the company.
Negotiate Your Debt
In speaking of debt, perhaps you could find some way to negotiate the terms of your debt. Paying for your debt can be stressful, especially if you have scattered repayment schedules, and your fleet of financial staff may not be able to do their responsibilities correctly.
- If you can negotiate for a different payment plan with your creditors, then it might be a good option to consider.
- Try to see if you can consolidate your loans into one loan instead, which can potentially help you get a better handle on your current financial status.
- The United States Courts offers a few basic reminders on what to remember about bankruptcy, should you need a refresher. It’s also best you review these reminders with your lawyer and/or a financial professional to determine your potential financial plans in the future.
Understanding how these factors and key methods play out can greatly help in ensuring bankruptcy in your business is avoided. Knowing your plans on the matter is a good way of making sure you are prepared for all sorts of situations in your business, instead of treading in unknown territory and being caught off-guard when these situations happen. Remember, preparation is important when it comes to situations like these, and bankruptcy can be avoided once we’re aware of its risk and how we can mitigate them.