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It's no joke feeling out of control with your finances

It’s no joke feeling out of control with your finances

It’s the start of the New Year and you may find yourself with numerous bills to pay, plus a tax bill once you’ve filed your tax return by then of January. As a small business with a limited income, being in debt is scary. If you’re worried that you’re not going to be able to cope with your finances, you need to take action straight away.

Acknowledge your debts

Just by acknowledging that you are going to have issues with debt you have taken the first step. From here-on-in you need to remain positive and take steps that will help you to solve your issues. This is entirely the right attitude to have.

The piggy bank is running on empty

The piggy bank is running on empty

First step

Sit down and take a long, hard and HONEST look at your finances. Where exactly does your money go? Write everything down, even how much you spend at the sandwich shop or on buying teas and coffees or bottles of water.

• What immediately strikes you about your list of finances?
• What can you see that you spend too much on?
• What do you pay out on?
• How much do you pay?
• What can you live without?

Once you have this list, work out exactly what you can cut out that will help to ease your debt burden. Highlight anything else that could possibly be cut out as well.

Consider ways you can boost your income from the business

Think about all the things your customers don’t particularly pay for – this can be bags, packaging, postage etc. Where can you make savings on these items and where do you need to factor those costs in to what your customer pays for your goods or services.

• Make cutbacks or switches to reduce your expenses
• Consider where you get your utilities from and consider swapping suppliers. This can be electric, gas or phone.
• Shop around for packaging supplies.
• Shop around for the various insurances you need for your SME
• Shop around for postal services. There is some competitive pricing going on out there.

Be brutal. Stop spending right now on anything that isn’t 100% necessary.

Consider who you owe and how much

Consider who you owe and how much

Who do you owe what to?

How much do you owe and who do you owe it to? Work that out as part of your financial plan. If your debt repayments make up more than 20% of everything that you bring in on a monthly basis then you are entering a danger zone and must take steps to cut back.

Draw up a schedule of repayments

Work out what you can afford to pay a month and still stay within your overall budget. Pay by direct debit. This will stop your reluctance to pay.

Consider swapping your bank account

It’s possible that you aren’t getting the best deal with your High Street bank so you could consider using an internet bank, many of which offer far more choice, and have fee-free banking and lower overdraft rates. However, tread carefully. There’s something to be said for having a business relationship manager that you can meet face to face if you want to. Beware of any short term offers that banks will use to entice you – these don’t last and you invariably end up paying through the nose later.

Try and keep your head above water

Try and keep your head above water

Paying off your debts

If you have the money, pay off the most urgent debts first. Then attack the smaller debts while keeping up with minimum payments on everything else.

If you don’t have any money left to pay off your debts and you think your circumstances are unlikely to get better soon, you will have a few options for dealing with your debts. These might be:

•asking your creditors to write off your debt
•applying for bankruptcy.

You could also consider applying for a consolidation loan if you know that you will be able to keep up the repayments. A consolidation loan is useful to pay off things like credit card debts and loans. You need to be able to afford repayments on the loan while simultaneously being able to keep up with your usual finances.

If you are considering a consolidation loan then shop around for the best deal, take advice and make sure that you don’t borrow from a loan shark (someone who lends money without a licence. This is illegal).

Your local Citizens Advice Bureau can help you with advice about your options – where to get advice.

Useful Contact Information

Report Loan Sharks – confidential helpline: 0300 555 2222

Money Advice Services website at www.moneyadviceservice.org.uk

National Debtline telephone number: 0808 808 4000 and the website: www.nationaldebtline.co.uk

StepChange Debt Charity Freephone helpline: 0800 138 1111 and a website: www.stepchange.org

Business Debtline is a dedicated advice service for small businesses. Phone: 0800 197 6026 or the website is www.bdl.org.uk

Fingers crossed for a successful outcome

Fingers crossed for a successful outcome

With any luck you’re just having a temporary blip and things will soon be back on track. Tread carefully with your finances, put a sensible plan in place for saving and making money and don’t lose heart. Stay positive and when you’re ready to start selling again check out our bargains right here.

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