Small businesses have two priorities: keep money coming in, and limit money going out.
Profit is all about finding new business – it is the lifeblood of keeping profits flowing in. Losses on the other hand, are inevitable. From staff wages to supplier costs, you must spend to keep your business afloat. However, being strategic with the losses is just as important as seeking new business.
For small business owners and operators, being so familiar with your business can make it hard to be innovative with cost cutting measures.
So, consider this a refresh to your cost-cutting strategy!
We’ve put together five easy ways to start saving money, that you can start to introduce to your business, today.
Take a modern approach to your staffing situation. In 2017 there are far more options for how you hire and retain staff than there once was.
Many of us are still under the impression that a staff member must be either full-time, part-time, or casual. All are expensive options, with rigid constructs of shifts, trials, or employment termination – a lack of flexibility which, for a small business, is not ideal.
So, look into the alternatives. Ask yourself if hiring for a full time role could be outsourced to a consultant or freelance. Or, look to offshore agencies who can process administrative or accounting tasks at a far lower price than local employees. There are plenty of new methods to save your business from footing the hefty bill of full-time employees.
This also means you have greater control on what kind of work output you expect from your staff for the pay they receive.
As a small business owner, the workload can feel overwhelming. Often, it can seem easier to ‘stick with what you know’, rather than question your existing processes and procedures.
This applies especially with suppliers. Whether you’re buying soft drinks, electricity, casual labour, or toilet paper for your business; it pays to be attentive with how much you are paying.
Take the time each quarter to review your spending, and finding alternatives to high-priced suppliers. With existing suppliers, work at negotiating discounts and better payment terms that align with your business’ budget.
As mentioned above, the intensity of a workload for a small business can sometimes lead to complacency for even the most simple of financial situations.
When was the last time you checked invoices or extra fees for overcharging? It is far more common than you might expect.
In a 2015-16 report into corporate insolvencies by the Australian Securities and Investments Commission, it was noted that 46 per cent of small businesses suffered poor strategic management. This includes failure to set up procedures to catch overspending.
Work with your team to set up a safety net of invoice payments that requires carefully checking supplier invoices for overcharging. Be mindful to check for double billing, incorrect charges and missing discounts.
Time is money, folks – and it’s true! Wasting precious management (or paid staff!) time on outdated or slow procedures is literally taking money away from potential work or sales.
One way to streamline processes is by adopting modern technology to speed up everything from point of sale, to scheduling rosters, to staff communications.
Ask yourself what is currently taking up the most time in your day-to-day activities, and speak with a business consultant about what online programs or apps could be adopted into your business.
Here are some great places to get started:
- Online rostering program – Zen Shifts
- Tax receipt storage – ATO smart phone app.
- Project management – Asana
- Employee expense reporting – Expensify.
In an article with the Sydney Morning Herald, the executive general manager of credit reference agency Veda, Moses Samaha, said the biggest risk for young businesses is securing their cash flow.
“The key problems are cash flow, trying to secure new leads and pay off debts,” he said. “If you can make it get through the first four years, your chances of survival increase.”
Whilst it can feel like a relief to pay off all your debts straight away, it can also significantly damage your cash flow. In the same report from ASIC, they noted that 46 per cent of small businesses fell victim to inadequate cash flow or high cash use.
Find out the maximum payment terms for your suppliers, and work within a strict payment schedule. Stick to it, and you will never have your back against the wall with bills piling up, and no money to pay.
There’s no one rulebook when it comes to running a small business. But if you continue to chase new business all the time, and moderate your spending wherever you can, you have a great chance at success.