Tips for managing debt in your small business

September 15, 2020

Running a small business requires taking some risks. Debt is one of those risks, but it is also a positive tool for small business that is usually necessary in order to fund your growth.  However, when circumstances change and your debt levels grow, it can keep you up at night. It is important to act early and put a plan in place to manage it.

 

Here are some useful tips from Xero to help you take control of your debts.


Understand your situation and take action

If you’re facing increasing debt, take action instead of hoping for the best. Stay sharp and aware of your situation. Use good quality accounting software (like Xero!) to keep a close eye on your outstanding debt and monthly payments. This information should be at your fingertips at all times. After that, your priorities will depend on the type of business you run and how flexible your suppliers are willing to be. The following payment priorities are suggestions, but the actual order is for you to decide:

  • Payroll
    If you don’t pay your employees' wages on time you may be penalised for this. You may be able to renegotiate contracts with some staff, but that's likely to affect their morale.
  • Suppliers and business partners
    Avoid losing valuable goodwill with your most loyal suppliers and business partners.
  • Aged payables (60 days or more)
    If you don’t pay, your credit score will be impacted, which will affect your ability to borrow money in the future.
  • Bills
    Outgoing costs such as rent and utility bills need to be paid to keep the lights on! And again, not paying these could affect your credit rating.
  • Secured debts
    If you run your business as a sole proprietor or partnership, you might be held personally liable for debts, and creditors could try to take your assets. This is one good reason to form a corporation or limited liability company.
  • Insurance
    Especially professional indemnity and public liability cover.
  • Credit cards
    Avoid penalties or interest charges as these can pile up quickly.


Renegotiate bank loan terms

You may be able to renegotiate your bank loan so it's spread over a longer term, to reduce the interest payments and also the monthly repayment cost. The bank may want to charge a higher rate due to the perceived increased risk of default, so you won't save as much money as you might like. Even so, this can give you some breathing space.


Discuss more favorable payment terms

Talk to all your creditors. Explain the situation and make it clear you have a comprehensive plan for resolving it. Stay positive – tell them you want to pay in full but need to renegotiate terms for that to happen. They should understand that it's in their interest to accommodate your request. After all, if your business fails they'll get nothing back. Be proactive here. If you approach your creditors before they start chasing you for missed payments, they're more likely to take you seriously and agree to your terms.


Increase your revenue

Easier said than done, of course, but there are ways you can boost short-term revenue. By taking action, you could reduce your debt payments enough to get you back on track.

  • Offer your customers mark-downs or reduced prices
    Discounts for fast payment can help     improve your cash flow.
  • Get to know your customers better
    Get their feedback on your business so you can tailor what you sell to meet their needs better – and maybe charge a mark-up for doing so.
  • Meet with your accountant, financial planner or banker
    Share your business plans and see if they can introduce you to some of their other clients, perhaps in exchange for a small finder’s fee.


Reduce business costs: 5 tips to consider

Think about where you can cut costs. Use accounting software to list your largest outgoings and see where you can make reductions. For example:

  1. Reduce the amount of space you rent or lease, especially if you're not using it all.
  2. Consider making some employees redundant, but be careful about hiring too many short-term consultants instead – as that can work out to be more expensive.
  3. Can you combine your business loans into one payment that will reduce monthly costs and not adversely affect your credit score? Talk to debt consolidation companies about this, but read the small print carefully.
  4. Consider refinancing, if your credit record will allow it.
  5. Negotiate with suppliers. Don’t be shy about asking for discounts, especially if you buy in bulk or place regular large orders and have a good payment history.


Be intelligent about where you cut costs

You might feel like you need to cut costs to the bone when debt looms over you, but sometimes it can be counter-productive. Don't assume cutting costs will automatically save you money. It's where and how you cut costs that matters.


For example, if you slash your marketing budget you might save a lot of money in the short term, but you will lose potential new clients. Cut your shop floor space and you'll save rent, but reduce the range of stock you can display to customers. Make some of your staff redundant, and you won't be able to handle any larger contracts that come your way.


Cut when you need to, but do it sensibly. Before you start, use accounting software to forecast the financial impacts of different cost-cutting options. Trim the fat out of your business, not the muscle.


Raise funds to pay your debts

This will be difficult. A new business that's free from debt is a better investment proposition than one that's having financial problems. Still, you have choices:

  • Borrow from friends or family
    This can be awkward and could strain your relationships, but you may get favorable rates.
  • Liquidate assets
    Creditors are likely to accept this because they'll want to be paid at least something, and this way they'll get a better deal than if you went bankrupt. Their only other option might be litigation, and that's timely and expensive.
  • Look for new investors
    Be aware that any new money will be expensive for you. Investors who might have wanted 5% of your new business in exchange for their money might want 30% now you're in difficulties.


Be realistic about your options

More than a third of business owners are less than comfortable about their levels of debt, so you're not alone. Do everything you can to keep your business running, and talk to local business advisors to see what help they can offer.


With luck and perseverance, you'll be able to turn your business around. But if things don't improve, you may have to consider closing your business and declaring bankruptcy. That would hurt, of course, but it doesn't have to be the end of your dreams.


Many entrepreneurs fail in business at least once before finding a successful strategy. And as long as you learn from the experience, you may be able to bounce back stronger next time. 


All Accounted For can help you assess the situation and create a repayment plan. This will include your business priorities and your obligations such as payroll, suppliers, tax, insurance and other bills.


So, if you're in debt, come and talk to us about your options.


Original article link: https://www.xero.com/nz/resources/small-business-guides/business-management/manage-debt/

Understanding Your Profit and Loss Statement

By Ben Duflou • October 28, 2026
Your profit and loss statement (P&L) helps you understand your business performance and profitability over time. It’s sometimes called an Income statement and its main purpose is to list income and expenditure. Whereas a balance sheet is a snapshot in time, the P&L shows transactions over a specific period of time. This can be a month, quarter, financial year or any other period, and it can be a stand-alone report or a comparative period report. Together with the balance sheet, these two reports provide a comprehensive understanding of the financial position and performance of a business. The profit and loss statement has two main sections: income and expenses These may be further subdivided depending on the complexity of the business and reporting requirements. Income or Revenue Income primarily includes main business activities such as sale of goods or services. Other income such as interest received, capital gains or income from secondary business activities is also reported. Expenses Expenses are usually divided into two sections: direct costs, or cost of goods sold, and expenses. Cost of goods are those that are directly linked to the provision of services or sale of goods. For example, if you buy widgets from a wholesaler and sell them at a marked-up value, the cost of the widgets is a direct cost, not an overhead expense. Other types of direct costs might be importing and freight costs, contractor costs or certain equipment. Some direct costs are fixed, that is, they are the same from month to month, or they could be a fixed percentage of sales; others vary in value but are still related to the income producing activities. Overhead expenses are all the other expenses required to run the business, regardless of the level of income: for example, rent, utilities, bank fees, bookkeeping fees, professional development costs, vehicle costs and staff costs. Many of these costs form the basis of working out your break-even point, or how much it costs just to open the doors for business. There are some expenses which may be reported as a direct cost in one business but an indirect cost in another type of business, for example, merchant fees or contractor costs. The Bottom Line Total income minus total expenses results in the net profit (or loss), is often called ‘the bottom line’. Often business owners are just interested in looking at the bottom line, but a true financial picture requires an understanding of several reports and an ability to see the big picture that the reports are illustrating. The P&L is a vital tool to analyse for trends over time What does your P&L tell you about relationships and ratios between sales and expenses, seasonal changes and annual trends? Have all your direct costs been allocated correctly? Have you recouped all billable expenses from customers? Financial statements help you understand the big picture for your business. With deeper understanding of your business operations and performance you can make informed decisions about your business finances. Book a session today to examine your financial reports with our experienced business advisors.

Xero Tip of the Month: Use Reference Fields Consistently for Easier Searching

By Ben Duflou • October 23, 2026
A simple but highly effective habit in Xero is consistently using the Reference field when entering invoices, bills or bank transactions. While it's often overlooked, it can make a big difference when it comes to finding and identifying transactions later on. For businesses managing multiple customers, suppliers, projects or recurring expenses, using consistent references makes transactions much easier to track and search. How to use the Reference field in Xero: 1. When creating an invoice or bill, locate the Reference field 2. Enter a clear and consistent description, such as: “Website Hosting - August 2026” “Office Supplies - July 2026” “Project - Smith Renovation” “Vehicle Registration - ABC123” 3. Save or approve the transaction as normal 4. Use the search bar later in Xero to find transactions by reference Using consistent references makes it much easier to locate specific transactions quickly, especially when reviewing reports, answering customer or supplier queries, or checking previous purchases. It also helps keep your records organised and can save valuable time as your business grows.

The General Ledger - October 2026

By Ben Duflou • October 23, 2026
View our October 2026 General Ledger: - What’s Taking More Time Than It Should in Your Business? - Important Notices - Buying a Business Asset? Here’s What We Need - Xero Tip of the Month: Use Reference Fields Consistently for Easier Searching - Tax Question of the Month: When Should the Insurance Payout be Recognised as Taxable - IRD Upcoming Tax Payment Dates https://public2.bomamarketing.com/email/aqXb

Xero Tip of the Month: Accessing the History and Notes Feature

By Ben Duflou • October 7, 2026
Did you know every invoice, bill, and transaction in Xero includes a built-in audit trail? It's a feature some users might overlook, but the History & Notes feature lets you easily see who made changes, what was updated, and when - helping you and your finance team stay connected and organised. To view the history for any transaction: Open the transaction (invoice, bill, or payment) you want to check. Scroll down to the History & Notes section at the bottom of the page. Click History & Notes to view a detailed timeline of changes. This feature ensures everyone is on the same page and provides invaluable context for financial reviews – especially crucial during audits or when delegating tasks.

The General Ledger - August & September 2026

By Ben Duflou • September 15, 2026
View our August & September 2026 General Ledger: - Five Areas to Review Before the End of the Year - Important Notices - Charities & Not-For-Profits: Tax Changes Are Coming - Xero Pricing Increase - 1 October 2026 - Xero Tip of the Month: Accessing the History and Notes Feature - Tax Question of the Month: Deductibility of Dual-Use Home Office and Vehicle Expenses - IRD Upcoming Tax Payment Dates https://public2.bomamarketing.com/email/dbXj

Cutting costs or increasing your prices? We can help

By Ben Duflou • July 3, 2026
With many businesses expecting a lower profit this financial year, the more prepared you can be for the unexpected, the better. Managing expenses is a good idea at any stage in your business, and reviewing your pricing can also help improve your margins and support long-term sustainability. The challenge is knowing where to start. Before making significant changes, it pays to take a closer look at how your business is operating, where money is being spent, and whether your pricing still reflects the value you provide. Small adjustments can often make a meaningful difference to your bottom line. Smart ways to get your costs under control Cashflow has been a big issue for thousands of businesses this year, and when the money's not rolling in, it can help to rethink your costs. To do it effectively involves more than just keeping an eye on outgoings. It's about looking at all the moving parts of your business to see if your systems (or lack of them) are costing you unnecessarily. Here's how: Muck in - Do a cost control audit to work out where your biggest cost centres are and review the systems you have in place to manage them. Be aware - Don't just slash expenses without considering the impact. Track costs carefully and look for opportunities to streamline spending or achieve the same result in a more cost-effective way. Unite your team - Bring everyone together to monitor and analyse inputs and expenses. If you're reviewing or developing systems, seek feedback from the people using them every day. Look to your peers - How do your costs compare to others? If a business of a similar size is performing well while spending less, explore what they're doing differently. Seek advice - Whether you've identified some problem areas or you're unsure where to begin, talking with your advisors (that's us!) can help you determine the best next steps. How can I put my prices up without losing customers? If you need to change your pricing to make ends meet, be honest and up-front with your customers at all communication points. Make it clear on your website and social media that prices have changed and explain why. Send an email to let your customers and suppliers know about any changes in advance. If you're meeting customers face-to-face, ensure they're aware of any price increases before they're invoiced. No one likes an unexpected surprise. Support your team with clear information so they can confidently explain any changes and continue delivering a great customer experience. If you're concerned about customer reaction, consider introducing increases gradually across products or services over time. Get in touch if you'd like us to help analyse your margins, review your expenses, and identify opportunities to strengthen your business performance.

Xero Tip of the Month: The Refreshed Xero Accounting App Navigation

By Ben Duflou • July 3, 2026
Keeping on top of your finances while you’re out and about just got easier! Xero has refreshed the Accounting App experience to make it simpler for you to access key features and complete everyday tasks from your mobile device. The updated layout improves how you move between core areas, helping you find what you need faster and stay on top of activity wherever you are. What’s Changed - The key improvements include: A simplified bottom navigation to help you move between key areas more easily Home as the main dashboard view for a clearer overview experience Key functions such as invoices, bills, bank accounts, and contacts accessed through a streamlined Menu for easier navigation This makes it easier for you to quickly locate what you need, whether you’re processing invoices, reviewing transactions, or checking account activity. How to Use the Refreshed App Navigation: Open the Xero Accounting App on your mobile device Use the simplified bottom navigation to move between key areas Tap Home to view your account overview Access core functions such as invoices, bills, bank accounts, and contacts via the Menu Navigate directly through the Menu rather than switching between multiple screens or tabs Next time you’re using the Xero mobile app, take a moment to explore the updated layout, it’s designed to help you move through tasks more efficiently, wherever you’re working from.

The General Ledger - June & July 2026

By Ben Duflou • July 3, 2026
View our June & July 2026 General Ledger: - 2026 Budget Announcement - Cutting costs or increasing your prices? We can help - Xero Tip of the Month: The Refreshed Xero Accounting App Navigation - Welcome to the Team: Lavina - Tax Question of the Month: Case Study - The Incorrect Tax Code - IRD Upcoming Tax Payment Dates https://public2.bomamarketing.com/email/pdLw

Are Your Business Expenses Telling You the Full Story?

By Ben Duflou • June 19, 2026
Ever feel like your business expenses are adding up, but it’s hard to see exactly where your money is going? When you have a clear picture of your spending, it becomes much easier to manage cashflow and make confident business decisions. Small improvements in how you track and review expenses can lead to better visibility, fewer surprises, and stronger financial control over time. If you’re finding it difficult to stay on top of your business expenses or want more clarity in your reporting, we can help. We can support you with: Streamlining expense tracking Improving cashflow visibility Turning your numbers into clearer business decisions If you’d like to chat about improving your financial processes, feel free to get in touch with our team on 04 970 1182.
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