by Sulaiman Halima
0 comment
avoid debts in business

Nothing halts the free flow of a business in Nigeria as much as debts do.  Debt can have a detrimental impact on a business, imposing its survival at crucial risk. No one aims to get into debt. It is only one of those things that arises without you being aware or may actually feel as if it’s out of your power. Business debt is often accompanied with a feeling of paralysis and is capable of holding you back from growing your company.

Developing your business is always essential for its survival and its financial well-being in the business realm. When growing a business in Nigeria, you need extensive access to working capital but holding up debt is a problem that can lead to the rapid setback of many companies.

Nevertheless, It is still very much possible to avoid debts in business. Follow these techniques in order to prevent plunging into the pit of debt in your business.

How to Avoid Debts in Business

  1. Don’t merge your business and personal finances

Avoid debts in business by separating your business finances from your personal finances. Various small business owners are tempted to combine personal and business expenditures while operating the business. During the startup phase, various small business owners may not even be receiving a stabilized salary, so everything sort of overlaps.

 As soon as your business thrives on, retaining a string between business and personal finances becomes even more difficult and placing your business at higher risk of audit. So, it is often reasonable to separate your  business and personal accounts right from the start. This will make it easier for you to review your bank statements for investments that qualify as tariffs and organize your financial statements. 

  1. Don’t rely on regular discounting

The fact that every company and their respectful loyal customers consider that discounts can help them get whatever they want can not be disputed. Although, this is not totally true. Products and services may be sustainable for your business in the short term while offering discounts on them, it won’t help in reaching your long term goals.

Finally, you could erode your product’s value while offering discounts to attract new customers. This method might be good in the growing period of your business but it can absolutely be overused and can degrade your products or services.

  1. Don’t rely on casual contract

As a business owner or an aspiring entrepreneur willing to avoid debts in business, don’t rely on any informal agreements for your business. Strive to put all the contracts of your business in writing, whether it is in email or on paper. During the course of growing the company, you can not rely on vocal agreements. Keeping the written agreements for your company ensures the business purpose, partner contributions and voting rights. More importantly, you should create written agreements when working with lenders, investors, business partners and other businesses in order to stay away from legal matters. 

  1. Build a cash flow account

As an entrepreneur or business owner who wants to avoid debt in business, creating a cash flow budget will boost your knowledge of how your business is doing. How your money is going, where it is coming from and how vastly you will have to disburse for future operational expenditures.

  1. Cut back on expenses

Constantly survey your budget to detect where you are spending money unnecessarily and to spot costs you potentially lower.  Aside from establishing and embracing a strict budget, cutting back on business expenses is one of the most productive ways to avoid debts in business; remember, cutting too much in a short time can also have detrimental outcomes on your company’s overall performance in the long run.

Read also: 5 Effective Ways to raise Capital for Business in Nigeria.

  1. Consolidate your debt

Most times, debt becomes burdensome due to high-interest rates. By consolidating business debt, you will be able to pay interest rates and what you pay in interest will help you to avoid debts in business.

  1. Sift your customers

Not all clients are good for your business. If your motive is to create strong and long-lasting bonds with your customers, you have to formulate a measure to determine who you  wish to work with. In order to avoid debt in business, create a profile of customers you want to target, ask interested customers to complete a credit application and assess the credit worthiness of a customer by surveying their credit tab.

Consider these to specify if it’s safe to qualify a customer for a credit plan.

  1. Set acceptable credit limits

Form reasonable credit limits for recent clients based on their credit worthiness. It is necessary to be cautious at first until you can assert their trustworthiness. Once they give you the assurance of being promising customers, then you begin to expand their limits.

Read also: Top 6 Analytics Tools to Track your Business Growth.

  1. Require up-front payments

Having a policy of requiring customers to pay up-front is one of the essential ways to avoid debts in business. Because by doing so, you are assured of getting your money from them before giving them the product or service.

Expecting customers to pay in cash lowers your chance of incurring bad debts. Its only downside though, is that it may push away customers who prefers to purchase using credit cards.

Join our Whatsapp community and get access to tools, tips, and support to grow your online business.

  1. Boost your revenue

This is another great way to avoid debts in business. Increasing your pricing, promoting value add-ons and adding upgrades to your products or services.  

  1. Seek alternative financing options

If you need to increase your cash flow, consider invoice factoring. This allows you access to working capital by selling your invoices.

  1. Improve your accounting

Employing an accountant helps you regulate and boost your accounting operations with vast knowledge about how business accounts function, an accountant can provide you with insightful reports on your current financial status and important strategies to promote it; and of course will also avoid debts in business.

avoid debt in business

Read also: 8 Guides to start a Business in Nigeria. 

  1. Provide precise payment duration and sanctions

Simply stating in your terms of trade agreement the requirements and penalties for overdue payments will automatically avoid debts in business. Make sure your customers realize what it means in order to avoid any kind of miscommunication. Let them understand the penalties they may receive as a result of late payment. Most importantly, ensure that they agree with your terms through a signed document or a confirmation on your website.

  1. Enforce strict collection protocols

Let your customers understand how serious you are when it gets to collection. This way, they will prioritize you over other creditors.

Mailing them follow-ups before, during and after their payment schedules through appropriate channels, offering incentives to outstanding payers to encourage them to pay on time; giving out a small discount or cashback and sending accurate invoices as soon as possible are a few of the things you can do to guarantee that your customers place you above and avoid debts in business.


There you have it, 14  tips to avoid debts in business. These will guide your path through every step of business. Hence, put the aforementioned tips to work and watch your business thrive.

Subscribe to our Newsletter and YouTube Channel for more latest and insightful content.

About Author

Sulaiman Halima
Sulaiman Halima
Sulaiman Halima is a microbiology graduate and a tech enthusiast. She is a UIUX designer and a writer who is passionate about creating engaging content.

Writing is not just a hobby for her, she learns more through writing and has found it to be a great way to express her thoughts and share her feelings with others.

You may also like

Leave a Comment

× Say hi
Update Required Flash plugin