One of the biggest hurdles small businesses face is cash flow issues. You may not be able to control rent increases and other fixed costs, but there are many areas where you can trim unnecessary spending and keep your company on a trajectory for profit.
Experts predict an enhanced economy moving forward, but whether it struggles or thrives, you should still look at areas you can trim the fat. The more streamlined your budget, the more profit you’ll make.
How do I stop unnecessary spending? Here are some key areas where small businesses spend unnecessarily and what you can do to save money.
The cost to heat, cool and light up a business adds up. You might also have to chip in for trash collection and pay a water bill. Fortunately, there are numerous ways to reduce your bottom line going out and also improve your carbon footprint.
Start by installing smart lights in the bathrooms. Lights should be off unless someone is in the room. Automate the process with lights that turn on when sensing motion and off after so many minutes.
Use smart thermostats and program them to be comfortable when workers are present and adjust the temps up and down when the office is empty. Install LED lights, automatic water faucets and replace old appliances with newer, energy-efficient models as they give out.
Debt is like an albatross about the neck of any small business. The interest rates alone eat up much of your cash flow. In addition, the worry of making the payment every month may eat at you, causing undue stress.
RefiJet recommends paying off the highest interest rate debt first because you’ll pay less money in the long run. They call this the “debt avalanche” strategy, which allows you to save money on interest fees and still pay your debt off early.
Throw any extra you can on the debt, thinking about all the money freed up each month that was going to a costly debt payment.
The COVID-19 pandemic changed the way the world does business. You may find you have mostly remote workers or a hybrid schedule where you have people working at home on alternating days of the week to keep the number of staff in the office at one time to a minimum.
Do you still need the same office space you once had? Are any of your workers interested in going full-time remote? Making more positions work from home might allow you to scale back even further. Less space also means lower utility bills, less office furniture and fewer people commuting to and from work.
Look for ways to scale back. If you own the building, you can sell and buy a smaller space or rent out your unused areas to bring in additional funds.
According to the Society for Human Resource Management (SHRM), it costs six to nine months’ salary to replace an employee due to spending on recruiting and training. You’ll also lose momentum.
Yet, some small businesses treat their workers as expendable, not giving them raises or instituting rules that make it difficult to enjoy their workday. For example, some companies don’t allow bathroom breaks or require the worker to clock in before the shift begins. Sick days are treated as occurrences, even when not abused.
A well-trained and loyal employee helps build your business. They may tell others why they love working there and encourage family and friends to frequent your establishment. Focus on what you can offer the big corporations can’t. Give your workers perks to keep them happy and working for you, so you save on the costs of replacing them.
Whether you run a tech startup and need new IT equipment or you have a restaurant and must purchase a stove when yours goes out, there are numerous ways to save on any big equipment you must buy.
Look for the best deal possible. If one brand has similar reviews but is hundreds of dollars cheaper, go with the less expensive model. Perhaps you can buy gently used and still get the type of equipment you need without spending as much money.
Consider all aspects of the purchase. If spending a slight bit more now saves you money in repairs and replacement down the road, then it might be wiser to invest in the higher quality model.
One place a lot of small business owners make unnecessary spending is on promotional efforts. It’s difficult to wear multiple hats. As soon as you can afford it, invest in a marketing manager to utilize your budget to the best of your ability. They know where to get results and what efforts work and don’t work.
If you always take out a full-page ad in the Sunday paper, but you get minimal results from it, stop taking out the ad. Throw that money into a social media campaign or direct mail. Try different tactics until you find the ones giving you the best results.
7. Keep Funds Separate
Mixing personal and business funds is never a good idea. It can be a nightmare to sort through everything if the IRS audits you. Plus, it’s too easy to overspend if you don’t have a handle on where your money is.
The cost of having a business account can add up, though. Some banks charge fees that may cost you hundreds of dollars a year. Fortunately, there are business checking accounts that have low fees—some with digital capabilities.
Make sure whatever account you choose has enough free transactions per month to cover your needs. Ask how you can scale up with the same financial institution as your business expands.
8. Keep a Budget
In personal spending and business spending, it’s easy to lose track of the little bits of money going out. For example, you stop and get coffee every morning when you could have some out of your home kitchen. Businesses often do things such as buy too much paper or not ask for discounts from vendors.
Write out even the little expenses, so you know what each item costs. Ask if your business really needs the item. If the thing is a necessity, can you save money on it or use less? Saving pennies here and there may not seem very beneficial, but all the little costs add up over the course of a year.
Getting a handle on your budget now also keeps things in check if you grow rapidly and need to flow more cash.
9. Talk to Vendors
How much are you spending on deliveries and inventory? Although it is time consumer, picking up the phone and calling your vendors can save quite a bit of money. Explain you’re trying to streamline your budget and ask if they offer a discount for cash on delivery or faster payment from you.
Inquire about ways to save on shipping or other discounts. You might be surprised how much you can save by simply asking for a discount and working with your vendors. If someone refuses to budget at all on price, don’t feel tied to that company. Seek out other vendors in the same category and see what they charge.
10. Use Cash, Not Cards
It seems easy to just put all your business expenses on a card and pay the bill at the end of each month. However, many businesses run into trouble because they charge more than they can pay off. You’ll then incur high rate credit card interest fees on your balances, which add even more to your unnecessary spending.
Some places won’t take cash or will be far away. One thing you can do is pay with your credit card, but get in the habit of going online immediately and paying off the balance. Doing so on a weekly or daily basis keeps spending from getting out of control.
Say Goodbye to Unnecessary Spending
Every business has areas where they spend money they shouldn’t. Analyze your spending at least twice a year. Use the 80/20 rule of keeping the 20% of the things bringing you 80% of the results. If something costs more than you think it should, find creative ways to reduce the expense and cut out unnecessary spending.
About The Author
Eleanor Hecks is the Editor-in-Chief of Designerly Magazine, an online publication dedicated to providing in-depth content from the design and marketing industries. When she's not designing or writing code, you can find her re-reading the Harry Potter series, burning calories at a local Zumba class, or hanging out with her dogs, Bear and Lucy.