Posts Tagged ‘business bankruptcy alternatives’

Alternatives To Business Bankruptcy

There can be several alternatives to business bankruptcy. As per the federal laws applicable in the United States of America, all business whether small or large are allowed to use bankruptcy as a legal remedy to get rid of their debt problems. But it is very important to note that bankruptcy might be a legal option available out there but it is not at all the best way. When a business goes bankrupt either under chapter 7 or chapter 13, they have to face severe consequences in future. The financial recovery process is a very difficult one once a business goes bankrupt. That is the reason why it is always advised to be very careful before choosing to go for this option. Go for it only if the situation is genuinely beyond your control and there is no better alternative to deal with your debt problems. When a business becomes bankrupt, it means they are running in loss and that they are knee deep in debt and have not enough money to pay off the same. Following is a brief rundown on some of the assertive steps that can take to reduce costs and improve cash flow in order regain control of your debt and finances.

Discuss Your Situation With Creditors Without Encouraging Any Conflicts Or Arguments

When it comes to working on alternatives to business bankruptcy, the first thing you have to do is to talk to your creditors. Many businesses when fail to repay the debt start avoiding their creditors. They stop responding to their phone calls, emails, or to the notices sent by them. All such activities are actually very much likely to make things worse for you. Always remember, avoiding a problem can never bring you any solution. Therefore, the best thing you can do is to face the situation. Give them a call before they start giving your debt collection calls. Be open with your vendors and creditors because these are the parties that play a very crucial role in the smooth running of your business. The idea is to negotiate better terms with them. Tell them that you are going through a difficult financial phase, but that you have some good plans to get things right; it is just that you need some more time. You can convince them to make the terms of the debt repayments more favorable (such as by increasing the repayment period and eventually lowering the monthly payments) by giving them a PowerPoint presentation on what specific strategies you are implementing to regain control of the financial situation of your business. If the negotiations work, you can easily put your business on the path of financial recovery, as this way, you will be able to reduce the debt burden significantly without needing to file for bankruptcy.

Improve Cash Flow

While you are working on better alternatives to business bankruptcy, you must also do some serious brainstorming on what really can be done to improve the cash flow. Do a thorough analysis and find out those factors that are actually adversely affecting the cash flow of your business. You must try to find out where actually your heard earned money is going to. Identify the areas of problems and work on to improve the situation. Obviously, the best way to do this is to focus on how you can cut down your expenses and costs. It is very important for you to understand that you do not necessarily need to increase the sale prices of your products or services in order to make more profit; you can increase the profit substantially by just decreasing the costs and expenses. Reduce the expenses and you will see a significant boost in your income. Do a critical scrutiny to every line item, such as insurance, license, taxes, vendors, employees, creditors, and others. This step may require you to take some harsh decisions, such as reducing the number of employees. You also need to analyze thoroughly if you are wasting too much money in just interest payments. This is probably the time to switch to cash payments on delivery. This way, you can save a substantial amount of money that is otherwise going to waste in the form of interest payments.

Find Out Why The Volume Of Sales Has Dropped

When it comes to working on your alternatives to business bankruptcy, you also need to find out the reasons why the volume of sales has dropped. Do a thorough analysis of the customer referrals, advertising, marketing plans, sales people, and other such things. Find out if there is still room for more revenue and business growth. This is a difficult process and may also require you to spend some money just to find out what the root causes are for your business failure. But, once you find out the reasons, you may be able to implement strategies that can actually put your business in the right direction, in the direction of growth, increased sales volume and more profit.

Overall, just because you have lost control of the finances and debts related to your business, it does not at all mean that bankruptcy is the only option available to you. If you look around and do a thorough research with some great determination, you can easily come up with several better alternatives to business bankruptcy.

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