Whilst many business owners will focus on income and the generating of sales to propel their business forward, focusing on expenditure shouldn’t be an afterthought. When business is great and cash flow coming in is covering all expenses, it can be easy to take an eye off how much your business expenditure really is. However, when income slows, you will want to ensure expenses are as low as possible. Here are 5 of the most effective ways to reduce business expenses and help your income go much further.
- Regularly Review Expenditure
The only way to effectively reduce expenses is to know what they are exactly. Reviewing business expenditure regularly will help to discover where reductions can be made, adjusting against cash flow and forecasted earnings. The same should be done for your own personal finances as these are important to maintain alongside the business. During times that personal cash flow may be low, especially during quieter business periods, unexpected bills can still arise. If you do not have the available savings to cover it, lending products such as payday loans can be an ideal option to help resolve them quickly. Keeping your personal and business finances in check through regular reviews will ensure you do not miss anything important.
- Streamline Processes
If you have multiple outlets you are using or processes that cost more individually, it may be time to review these expenses. You may be able to streamline certain aspects of your expenses, for example, if you use multiple vendors instead of one that can provide more for your money. This can also lead to streamlining aspects of your business such as bringing in automation to reduce costs on staff hiring and training. Once you start to look at ways to streamline throughout your business, such as working alongside an agency to group everything from marketing to recruitment, you could be surprised how much your expenses can be reduced.
- Find Cheaper Vendors
Alongside streamlining, you will want to look at the cost of the resources you use to support your business. If you have been using a certain supplier since the start of your business, are they still the best option you have and can you find a cheaper alternative? Good financial management will involve looking at ways to reduce production costs whilst still maintaining quality. To some extent, you do indeed get what you pay for, but this does not mean you have to pay over the odds for a service. Spend some time looking at competing vendors offering similar services and see if you can negotiate a better deal.
- Avoid Expensive One-Offs
During the early stages of your business, you may find you have a heavier amount of investment going into one-off expenditure. Whether it is office furniture, production systems, computers etc, anything you purchase for the business that is not on credit and is not an ongoing expense should be classed as a one-off. However, whilst many are essential, continuous large one-off payments need to be reduced where possible. Using a large amount of your income in one go regularly will drastically reduce cash flow and the ability to invest in more essential needs to help your business grow.
- Find Investors
An effective way to reduce costs on items your business needs is to find further financial backing. With an investor, rather than borrowing money that you have to start paying back immediately such as with a lender, they are investing into your business growth and will not expect a return until later down the line. Finding suitable investors that understand it is a long game and ROI will take time is key, rather than those investors looking for quick wins. Crowdfunding is another way to do this on a larger scale, potentially receiving small amounts of investment from many sources. It will allow you to control what you can offer for their investment, such as a share of the company or a free gift, but only once you have reached your target investment.