Debt is commonplace in the business world. Business capital, working capital, liabilities for business expansion or development to restore the financial stability of a business after a crisis.

There is something to be said about what constitutes a productive religion. After all, you pay your insurance premiums out of the profits each business generates.

However, remember that debt is a financial liability. In all cases, you must pay the full amount, even in today’s difficult economy. Otherwise, your business and property may be at risk.

How easy is it for a small business to pay off debt? Here are tips.

• Create detailed debt lists

If you have more than one debt, make a detailed debt list so you can prioritize your debts. It starts with the type of debt, the amount, the repayment period and the monthly payment.

For example, a supplier has a debt of Rs 1 crore with no interest for 6 months and a FinTech lends Rs 5 crore for 3 months charging 0.4% per day or 12% per month.

Monthly installments of Rs 1,667,000 for Provider and Rs 1,867,000 for Lending Fintech (principal + monthly installments).

• Pay off high interest debt first

If sales are slow, turnover is off target and debt is negligible. In this case, you can make paying off your high-interest debt a top priority.

Especially if the creditor charges a late fee when payment is overdue. The amount of debt due is accumulating. So, referring to the example above, you can prioritize debt repayment on fintech loans. Next, look for more flexible, interest-free resources.

• Save to pay off debt

You need to come up with funds to pay off your debts. Set aside a portion of your business income to meet these obligations. There are no fixed rules for how much of this need you should allocate. You can choose it according to the income and profit you get.

Set aside 10% of every income so you have money immediately when payments are due. Anything above that ratio is better.

For example, your business volume is IDR 1.5 million per day and you are allocated around IDR 150,000. You can collect IDR 4.5 million per month. This amount is enough to pay off debts to fintech companies and payments owed to suppliers.

• Increase sales and reduce costs

To be able to raise money and pay off debt, you need to be bolder with your promotions to increase sales and increase revenue. You can also cut or save a lot of unnecessary business expenses.

For example, saving electricity and water, implementing free promotions and marketing campaigns such as social media, etc. This will allow you to save more money to pay off your debts. In fact, you can pay it off quickly, freeing you from financial burdens and making your business more flexible.

• No new debt

If your business has a high debt-to-income ratio, be careful not to take on new debt. I’m not saying you shouldn’t worry about your income or profits being used to pay off debts.

At the same time, other key requirements such as production costs and employee wages were ignored. So what they owe is not consumption but their urgent nature.

• Don’t be late paying your debts

Anyone who runs a business needs to know the implications of defaulting on a debt. Non-payment of debt by banks and non-bank financial institutions has consequences.

Overdue debt payments can add to your financial burden. Debt will continue to pile up and cripple the business.

Therefore, it’s important to have dedication and self-discipline when it comes to saving money so that you can pay off your debts on time.

Use a direct debit system in your business account so you don’t forget the word as this debt installment will be debited automatically if necessary. This makes debt payments more orderly and avoids late penalties.