Effective Cost-Cutting Ideas For Small Businesses.

Do not save what is left after spending but spend what is left after saving - Warren Buffet.

Almost half of new businesses fail within the?first five years, and most of it is due to poor financial planning.

If you run a small business, you might be facing a hard time recovering from the financial hit caused due to the coronavirus pandemic and now the war and price inflation.?

Although, times are tough, this is also an excellent opportunity to step back, analyse your finances and figure out strategic ways to reduce your business expenses.

You can ensure your business stays afloat by implementing these simple yet effective cost-cutting techniques for small businesses.

1. Create a Financial Budget

Creating some financial boundaries for your business can help you keep your expenses in check. Analyse your expenses, build a sales forecast based on your expense patterns, and set a budget accordingly.

Allocate time every month to review your finances. That will help you check whether you are on track with the budget you set for the business at the beginning of the year. Regular reviews are the only way to monitor if you are making any progress.

2. Track every single expense

To manage your expenses, you need to know precisely where every bit of your money is going. If you track your expenses currently, that’s great. If you haven’t started yet, it’s not too late to start now.

Having a virtual bookkeeping assistant will be a great help to your business. They are more affordable and will help you?manage your expenses?down to the last cent so that you know where all your money is going.

Many companies incur everyday expenses that they don’t keep track of, such as casual Friday breakfasts or birthday cakes. Though these might seem like small expenses, they tend to pile up over the months. It’s essential to know how much money is going towards these unpredictable, additional expenses to find ways to reduce them.

3. Eliminate Unnecessary Expenses

Unknowingly, companies go through expenses that are not required in the first place. For example, a small marketing firm in the UK found out that they were spending a considerable amount every month for a magazine subscriptions that they didn’t even use. Over time, this amount resulted in a substantial but unnecessary expense for the company.

Introduce an expense policy builder, to ensure that every cent you spend goes towards something beneficial for your business.

4. Be Persistent with Payment Follow-Ups

Sometimes, businesses offer products to clients who promise to make the payments later. However, some clients make getting your payment back more complicated than it needs to. After a point, business owners don’t bother following up with these customers.

Make sure you persistently follow up with clients who don’t make payments on time until you receive your due money. Additionally, as much as possible, try to avoid giving credit; take payments in advance, or send partial shipments.

5. Collaborate with Other Brands for Events

Promoting your business is an investment, not an expense, we know that hosting an event to promote your business, launching a new product or just getting press coverage while immensely beneficial, can be pretty expensive to host.

One way to reduce expenses while conducting events is to collaborate with other brands as sponsors or event partners. The money saved, will help you put out an event of better quality, which is always?good for your business.

6. Outsource Your Workload

If we have to pick out one positive outcome from the coronavirus pandemic, it is the fact that it created many remote workforce opportunities. That is beneficial for both employees and business owners.

Business owners can outsource work to freelancers and agencies for a fraction of the cost of a regular full-time employee without compromising on the quality of work. There are countless online tools that help with managing?remote teams?these days which make a manager's life easy.

Virtual assistants?are a great asset in helping businesses, and are pretty affordable too. Some of the areas where hiring remote employees and virtual assistants can support your business are -?administrative tasks, bookkeeping,?social media,?content writing, and data entry.

7. Prioritise Hiring and?Up-skilling

There are certain positions in your business that you need and want as part of your team. A business is nothing without a solid team to help it grow. Yet, business owners often tend to hire people who agree for the lowest pay and later wonder why the output does not match their expectations.

Quality employees don’t come cheap, but they are always worth the extra money. In addition, if an employee feels happy in the workplace, they are less likely to leave, and you then don’t have to incur extra expenses of hiring new people.

Similarly, instead of constantly hiring new people for various tasks, invest in upskilling existing employees. Regularly introduce new courses and workshops to help them become better at their jobs. That will help them improve their skills and qualifications and improve the quality of their work.

8. Consider Co-Working Spaces

If you have a small team, consider using a co-working space instead of letting an office. Since most employees want to work remotely and only get together for important meetings, these can be hosted at a co-working space.

If you need permanent office space, another great option to consider is sharing the office with another company.

You don’t need to wait to hit rock bottom before thinking about cutting costs in your small business.

While every business is different, we hope that you find something useful in these ideas, and they will help you reduce unnecessary expenses while running your business.

If you need tools to manage your expenses or track your cashflow, get in contact. We are here to help.