Debt Management And Control

EFFECTIVE DEBT MANAGEMENT AND CONTROL

 

      Debt Management is a plan, it can be a legal and verbal agreement or a negotiation strategy or personal management scheme to control, reduce or clear debt within a given period of time in order to demonstrate good business participation. An effective debt management and control can help a business or individual to grow a good harmonious relationship, mutual trust between creditor and debtor can be developed but without proper debt management participation a business and individual cannot gain the trust but competition, enemies and threat in their business are likely to achieve. It is easy to say but in order to eliminate these things from happening organizations and individual must think of ways to achieve a good credit standing within their means or never ask for loan at all if they cannot pay. Debt does not just put a person or company in deep burden but it can also destroy their reputation in the eyes of their customers.

      So how does and effective debt management can be an advantage? If you don’t have any idea how it can be done you may try seeking the help of professionals who are expert in this field there are also relatives, friends and business partner who have already experience such issues in order to keep the cost low learn with them but the final decision is still up to you. Let us take for example a small family business running a computer shop, they have taken their first step to make a bank loan of about 00 US dollar in order to expand their business they have also ask for 0 US dollar from their friends and another 0 US dollar from their relatives. All in all the family has a 00 dollars in debt. The bank requires them to pay monthly interest while their friends want the money back within 3 months and their relatives does not make any conditions. They also have debt in their monthly rentals and mortgage of their new PC.

      This condition can usually occur from business start-up. The first thing they need to do is to evaluate their payment priority which in this case is the bank who usually carries a legal contract between them and they are oblige to pay the monthly interest legally. The second priority would be the mortgage of their PC which also carry a legal contract and formal records of their payment. The third priority is the miscellaneous expenses that cannot be avoided these are the bills from electricity, salary of employees etc. Lastly their friends and family should not be limited in payment but they can be considered to be the last priority of payment since verbal settlement is easy with them. Expenses like these should be prioritized in order to gain confidence of the people who has been a part of your business. The cash left after the payment of expenses will also be the basis if your business is succeeding, break even or failing.

      There may also be instances that non timely payment of debt may occur if the business is low, in this case you may need to plan a deeper understanding in order to control your debt and still gain good reputation from your creditors. In order to make the best decision you may consider the following;

      1. Repair your credit – Banks can settle conditions and discretions of their customers debt through financial analysis and investigations they may even offer solution for good creditors including petty cash, terms of payment scheme or additional precautionary measures according to their law.

      2. Debt settlement – this can be done by offering legal settlement such as debt consolidation that can lower the interest rate but given a longer term of payment, mortgage payment or offering collateral. This can be done in order achieve mutual interest in performing your obligation. 

      3. Credit for Payment – This is probably one of the most risky options, but this can also be helpful if debtors can have an opportunity to ask for another loan from sources who would trust them such as another bank, angel investors, new business partners etc. this can be a good opportunity for them to pay their debt and probably start a better operation. If the business person is wise enough, they can rekindle their business and be able to establish a new approach in order to regain their customer’s confidence. The negative impact of this strategy can be deep burden and more debt risk but they have to take it if this is the only option that is left.  

      4. Declaring a Bankruptcy – this can be the last resort but not recommended. Some companies can do this as a part of debt management and control but the truth is this is not and effective means to get away with your obligations, in most countries bankrupt companies still need to perform their obligations to their creditors and customers. But if it is really the situation as the needs arise and you are ready for lawsuit and grievances of customers, you may do so but mostly companies who do this could not continue their business in the later time since they cannot gain the creditors and customers support. They will need to divert or start a new business venture all over again.         

      Never doubt and never delay to pay your debt on time this may seem so simple but this is the most effective ways to gain good control over your business.

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