The COVID-19 pandemic has brought difficult times to people all over the world, especially the small business owner. Trying to keep your business afloat without income is difficult, especially if you owe taxes. What’s important to know is that if you owe taxes and are facing bankruptcy, those taxes don’t get wiped out like the rest of your debt. You still owe them. Bankruptcy and how it works is that it clears you of the debt you are unable to pay, but you still owe your income tax or business tax. Bankruptcy and IRS debt does not clear this debt away so there is no reason to claim bankruptcy and destroy your credit score unless you need to clear away other debt in order to pay your back taxes. The same goes for bankruptcy and state taxes. If you’re ready to file bankruptcy and taxes owed have you worried, contact local bankruptcy attorney services to help you get your financial life back on track. In the meantime, don’t overextend your finances by continuing to accumulate debt.
The unique situation of running a business during a worldwide pandemic has had a lot of business owners concerned about how to continue a stream of income. In fact, it’s projected that as many as 7.5 million small businesses could close due to the pandemic. You may be dealing with a sudden drop in income due to the pandemic. Or you may be working with workers compensations lawyers because of an accident at work and paying for all of the fees that come along with legal situations. Figuring out what to do if your business is losing money and how to avoid bankruptcy can be a stressful situation. If you are trying to keep your business floating financially during these unique times, here are the steps you should take as a business owner.
What Leads A Business To Bankruptcy
The first step in figuring out how to keep your business from avoiding bankruptcy is to learn what it is that brings a business to bankruptcy. It’s not just figuring out what to do if your business is losing money, it’s about avoiding the things that cause bankruptcy to start with.
Too Much Debt
It’ll come as no surprise to anyone that the number one thing that leads to bankruptcy is over-extending your business financially. To grow, you need to invest in marketing, stock, labor, and more. But with all of the investing, a business can quickly find itself on the brink of financial ruin if they don’t carefully weigh out the debt they are taking on.
If you find yourself taking on too much debt as a business, you may want to consider refinancing your loans. However, if you default on a loan, you will want to hire bankruptcy lawyers to help you and your business work through the next steps and the legal implications that come with defaulting.
Not Closely Tracking Spending
The main bad habit that leads to much debt and financial issues for a business is not closely tracking your spending. Without closely tracking where the money is being spent and following a budget, you can quickly dig a deep hole of debt. Even if you’re just spending your money on things that you deem “necessary”, such as office supplies, shipping supplies, or other important items for your business, not tracking the spending will lead to a lot of financial instability. So if you’re asking yourself what to do if your business is losing money, the first thing you need to do is start closely tracking your spending.
Being unrealistically optimistic about your expectations as a business can also lead to financial issues. Regardless of how incredible and novel your business idea is, you need to take careful steps when it comes to spending money. Some businesses start from the money they receive from a family member’s will and make the mistake of not talking with an estate litigation attorney about the details before they start planning for how to use the money. Of course, every new business will have to spend money at the start to get products or to start offering their services, but that shouldn’t mean you end up bankrupt. Be realistic about your expectations from the start. Don’t expect to suddenly take off in the market. Plan for things to be slow at first so that you don’t find yourself overspending and running into financial trouble before you really get going.
Poorly Priced Products Or Services
Many businesses find themselves struggling financially because they don’t have a good price point for the products or services they offer. If you sell for too little, you won’t be able to break even after all of your expenses. If you sell for too much, no one will buy from you. You have to find a good middle ground that works for both you and your customers. So if you find yourself trying to figure out what to do if your business is losing money, you may want to look at changing your price points.
What To Do If Your Business Is Losing Money
Once you’ve realized that your business is struggling financially, it’s time to take some serious steps. It’s a “sink or swim” moment. Don’t let the fear and stress take control. If your business is losing money, you need to take some serious and quick actions to get it going back in a positive direction.
First things first, you need to get organized. If you’re struggling to figure out what to do if your business is losing money, getting organized is key. An unorganized business cannot be successful.
If that has been one of your downfalls, here are some great places to start with organization:
- Create A Clear Business Plan: Most businesses start their business experience by writing a business plan. This helps them to set goals, visualize where they want to be as a business, and plan how to get there. If your business has any federal contracts, you might mention those and their details in your business plan as well. A business plan is also something you can share with employees so they are on the same page as you as far as goals. A business cannot be successful without a clear business plan.
- Create A Budget: You should have created a budget before you started conducting business. However, if you didn’t create a budget or didn’t create a detailed enough budget, better now than never. A budget will make a serious difference for your business financials. A budget isn’t there just to restrict your spending, it’s there to help you spend your money most efficiently. Take the time to create a detailed budget that can help you control your money and be financially stable.
- Eliminate Non-Essential Spending: As you are going through your budget and your financials for your business, you will want to narrow in on the non-essential spending. That is likely the main suspect for the financial issues you’re facing. If you want to get out of your financial hole, you need to cut non-essential spending and fast. This includes things like unnecessary travel expenses, catered lunches, company cars, off-site company events, or aesthetic improvements to the office. If something isn’t necessary to keep your business running, cut it out. That doesn’t mean you can’t even offer catered lunches or have company events. But when your finances are suffering, you need to cut back.
- Create A Debt Repayment Plan: If you’ve found yourself deep in a hole of debt as a business, an important step to take for better organization is to create a debt repayment plan. Debt can be daunting, especially when it’s spread out and in large amounts. The first thing you should do when creating a debt repayment plan is to seek professional help. Whether it’s via a lawyer or a financial advisor, get someone on your side that can help you by suggesting different resources. You’ll need to start cutting unnecessary costs, speak with creditors, consolidate loans, and anything else that helps your specific situation.
- Restructure/Reorganize Your Business: When you realize that your business is losing money, it’s time to restructure some things. Companies have to file for bankruptcy because they are losing more money than they’re receiving, simple as that. If you find yourself in that situation, it’s time to make some changes. You may need to change the focus of your products or services to something that is safer and more guaranteed to bring in money. You may need to cut departments or elements from your business as you try to get back on your feet.
If you’re struggling to bring in enough money to pay off your debts and expenses, it may be time to start liquidating some assets. That may mean selling some of your personal items, such as a boat or large screen TV. If you have a retail business, you may consider a “going out of business” sale or offering large discounts to get product moving out and income flowing in.
Know When To Hire A Bankruptcy Attorney
When you are trying to figure out what to do if your business is losing money, a key step is learning when to hire a bankruptcy attorney. Hire them at the first sign of trouble. It’s important to stay on top of financial issues rather than wait until it’s a serious problem. This will also give your attorney more time to work on your situation and develop a strategy. Working with a bankruptcy attorney earlier can save you from having to file for bankruptcy. Your bankruptcy attorney will also be able to negotiate with your creditors and even bail bondsman if the situation gets that serious.
Stay In Contact With Your Lenders
When you are struggling to pay back debts and loans, it’s important to stay in contact with your lenders. Sometimes a simple phone call to be as transparent as possible about your situation can make all the difference. You shouldn’t expect them to immediately make changes to help you out, but being open and honest can aid in the process of gaining more financial stability. It’s better to be open than to end up dealing with a bailbond because you’re charged for dodging payments.
And it never hurts to ask big. Talk about your options for lower monthly payments or refinancing for a better interest rate. They may even have a recommendation for a payment plan you can take on.
Invest In Your Staff
When you’re trying to figure out what to do if your business is losing money, investing more money into your staff may seem like the wrong step. Here’s why it’s not.
Paying for qualified staff who have the right training to help your business be successful can make all the difference as far as bringing in new customers and a more solid cash flow. You may also want to consider paying for a professional employment agency to assist in finding qualified employees.
Once you have found qualified staff members, continue to invest in them. Don’t let them slip away after you’ve worked hard to find them. Pay for training that benefits both you and them. Organize events for staff to connect in more than a business setting. You can’t run a business by yourself. You need a team. Getting the right team behind you will help you to rise as a successful business.
Focus On Customer Care
Your customers are going to be your main, and possibly your entire, source of income for your business. You can not afford to lose loyal customers, even when you are struggling financially. Many businesses make the mistake of stepping back from customer service and other important elements when they are working with business foreclosure attorneys and trying to figure out how to keep their business from going bankrupt.
That’s the last thing you want to do.
If you’re trying to figure out what to do if your business is losing money, ramp up your customer service. Make them feel special. Referrals and reviews from loyal customers will help to bring in new customers.
Figuring out what to do if your business is losing money is a scary situation. It’s different for each business, but the thing that remains the same is the need to act quickly. As soon as you realize your business has hit a negative trajectory, you need to make changes. The previously mentioned tips and tricks will help you as you keep your business from filing for bankruptcy and start the climb back to success and steady income.
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