How can you manage debt in the best way?

Effective debt management requires a comprehensive approach combining strategic planning, disciplined execution and regular monitoring. The foundation of good debt management lies in understanding your complete debt portfolio and aligning repayment strategies with business cash flows.

Create a detailed debt inventory listing all obligations including principal amounts, interest rates, repayment terms and penalty clauses. Prioritise debts by interest rates and payment urgency, focusing on high-cost debt elimination whilst maintaining essential credit relationships.

Best practices include:

• Maintain detailed debt registers with payment schedules
• Automate payments to avoid late fees and penalties
• Negotiate better terms during renewal periods
• Consolidate high-interest debts when beneficial

Align debt repayment with business cash generation cycles. For seasonal businesses, structure repayments during high-revenue periods whilst maintaining minimal obligations during slower seasons. Use business forecasting to anticipate repayment capacity and avoid over-commitment.

Maintain emergency funds equivalent to 3-6 months of debt obligations to handle unexpected situations without defaulting. This buffer provides flexibility during temporary cash flow challenges whilst preserving credit relationships.

Regular debt review helps recognise refinancing opportunities and optimal prepayment strategies. Monitor interest rate trends and evaluate switching lenders for better terms. Maintain relationships with multiple lenders to ensure competitive options.

Consider debt consolidation when managing multiple obligations becomes complex or expensive. Single facilities often provide better rates and simplified management compared to multiple smaller debts.