Running a profitable business isn’t just about selling as much as you can, it’s also about keeping your operation costs low and saving on business expenses.
As inflation rises, some businesses may not have ever navigated an economic climate like this before. Below are the top methods new and small businesses can use in order to keep on top of their business expenses.
Check-in frequently with your cash flow
You may have a monthly finance routine, but now may be a good time to switch it to a weekly routine instead. The rate you pay for certain services may change more frequently due to the rates of inflation, so it’s a good idea to keep a closer and more frequent eye on your expenses.
The more you check in with your finances, the more likely they are to be at the forefront of your mind. You are also much more likely to remember the previous week’s cash flow compared to the previous month.
Reduce your outsourcing
Outsourcing comes at a cost, and when budgets get tight, this should be one of the first things you cut if possible.
Depending on the sector you work in, you may be able to find some staff members who can dedicate some time to do tasks that were previously outsourced. For example, if you have an external body running your social media account, you could ask a staff member to take over this role. Just ensure they have the time to produce the work in order to maintain a certain standard.
Work from home
If possible, working from home is a great solution to reducing overhead costs. Since the pandemic, there has been an increase in businesses encouraging their staff to work remotely, even if it is just part time.
Working from home can limit things such as office costs, as well as the associated costs of travelling and buying food.
However, just keep in mind some staff prefer working in an office environment, so it may be more appropriate to allow staff to work from home for half the week and be in the office for the rest.
Work out your monthly overhead
If all your revenue was to dry up, consider how many weeks or months your business could survive based on the cash you have in the bank.
You won’t know this until you figure out your monthly overheads. This includes staff costs, rent costs, office costs and any professional tools or services you may be using. To establish your monthly run rate, work out the total cost per month of all your overheads combined and then divide it by the amount of money you have in the bank.
If you worry that your costs are getting too high, now is the time to cut back on some of these overheads. It doesn’t have to be permanent, just during periods in which you may be struggling financially.
You can save money by downgrading, or cancelling certain services.
Have cash reserves
Ideally, you should have some cash reserves somewhere as a back up if needed. This way you know if the income does start to dry up, you can have somewhat of an emergency fund sitting somewhere.
If an unexpected cost was to arise, like broken equipment, at least you will know you have the reserves available to cover these costs.
Be realistic with your financial situation
If you know your cash flow is slowly starting to drop and your business is facing liquidation, it’s a good idea to be realistic with your finances. There are plenty of liquidation guides online you can read, or alternatively you could contact an Insolvency Practitioner who will be able to assist you and discuss your financial situation.
Sometimes it is best for businesses to enter liquidation and start over, however, there are times when your business can be saved. You may just need the assistance of professionals to determine what your cash flow issues are caused by.
Look after your team
This one may seem obvious, but one of the best ways you can keep on top of your costs is by ensuring your staff are cared for.
Recruiting people can be expensive, and if your business has a high staff turnover, you may be wasting your money on recruiting new staff.
Give your team things they value, whether that’s flexible working, or things that don’t cost such as feedback and praise.
No matter what aspect of your business finances you are struggling with, it’s always best to seek the help of professionals who will be able to help you through difficult times.
If you think your business is beginning to reach some financial difficulties, seek assistance from an Insolvency Practitioner or financial advisor who will take the time to understand your unique financial situation.