How SMEs can navigate debt challenges for sustainable growth

economictimes.indiatimes.com:

debt management remains a major issue for these organisations' growth and viability. B2B debt is common in SMEs due to credit sales, late payments, and long credit terms with clients and suppliers.

Loan agreements can boost growth and provide a company an edge, but they can also cause cash flow concerns that hurt operations and finances.

Delays in business-to-business (B2B) payments can cause a domino effect that hurts SMEs. It strains their financial reserves, makes it harder to pay suppliers, cover operational costs, and invest in growth.

Additionally, seeking past-due payments may divert resources from critical activities. SMEs should establish a B2B debt reduction plan that includes:

• Putting in place tight credit management procedures, such as conducting credit checks and establishing explicit lending terms, can help reduce the likelihood of adverse outcomes. It is essential to conduct regular assessments of credit policies in order to adapt to shifting market conditions and the actions of customers.
• Establishing solid relationships with both customers and vendors can make the process of negotiating more amicable and expedite the resolution of payment concerns. It makes the process of negotiation more friendly and to speed up the resolution of payment difficulties when there is a strong business relationships with both customers and vendors. It is an absolute necessity to have communication that is not only open but also honest regarding issues and expectations around payments.
• The utilisation of tools and software for the purpose of financial management can provide real-time insights into cash flow, debtor days, and outstanding invoices, which can be of assistance in the process of making educated judgments. In