Cash flow is essential for business growth — you have to spend money to make money! A successful business owner is always looking to boost profits so they can attract new customers, offer new services and improve their work.
For many cash-strapped business owners, however, profits may not be the problem. Quite often, a handful of extraneous expenses end up costing them serious money and bogging down their progress. Without that money, they have a lot less room when it comes to growth, innovating in the market and making necessary equipment upgrades.
Fortunately, it’s easy to reduce or eliminate many business expenses if you know what’s costing you money to begin with.
1. Review All Your Expenses
The best place to start when saving money is with a thorough budget review that covers every expense — even the smallest line items. You may be surprised by what you find.
For example, your company likely spends money on a few of the same costs every month or every week. These expenses may be subscriptions to software, transportation or consulting services.
A quick review of these outlays often reveals some expenses that can be cut out. You may no longer need certain software, or maybe there’s a free alternative you could substitute. Transportation costs are sometimes unnecessary as well and could be cut out entirely. Vendors or consultants may have been a necessary asset in the past but aren’t as useful now.
2. Reevaluate Your Marketing Spend
Whether business is good or bad, you should always be marketing. Otherwise, you can’t attract new customers, strengthen existing customer relationships and solidify your brand. However, you may be able to save some money and make your marketing more effective with a quick review of your marketing spend.
Across your marketing efforts, you can calculate the return on your advertising spending. When you do, you may find that only a few recent ad campaigns, or ads in certain marketing channels, were really successful. With this information, you can cut down on less-effective marketing and commit some of that saved money to the advertising methods that worked.
You can also adapt low-cost marketing strategies, like social media marketing, which can be effective even with minimal spending.
3. Encourage Prompt Payment
Waiting on payments can be a killer for businesses of any size — especially if you’re a B2B company and depend on a handful of high-paying clients. Waiting can cost you money. You’ve spent time and money to finish a project, but can’t use the money you thought you’d receive to grow your business or cover necessary expenses. While you’re waiting for your client to pay that invoice, you’ve effectively done work for free.
To start, you can implement strategies that encourage your clients to pay on time and in full. Regular follow-ups, getting in touch with the department that processes the invoice, or simplifying invoice structure can all help.
You can also restructure how you ask for payment. Many companies ask for some money upfront, giving them a bit of extra breathing room if the full payment doesn’t arrive right after project completion. Other companies offer incentives to businesses that pay fast, such as discounts.
If a certain client continues to pay way after deadline, it might be worth cutting them off and looking elsewhere. It hurts to lose a customer, but you’re often better off working with clients who respect your business and are invested in the relationship between your companies.
4. Energy-Efficient Buildings
Unless you work in a building that is certified green, you’re probably losing money on energy-efficient building systems. Poorly insulated walls make it harder to regulate building temperature, meaning more spending on heating and cooling. The wrong type of building lighting can also cost you money over time.
Energy-efficient wall panels made from precast concrete, for example, can help prevent heat loss in your building — which can often help you conserve energy and save money.
Even small changes can make a big difference. LED lights, for example, consume at least 75% less energy than comparable fluorescent and incandescent bulbs to light the same amount of space. Less energy spent means more money saved.
Smart office systems can also help. IoT thermostats paired with motion detectors can automatically shut off heating and cooling if no one is in the building, or according to a preprogrammed schedule. Smart lighting systems can do much the same thing by turning off lights in different parts of the office or store if they’re not in use.
5. Reconsider Your Credit Card Processor
If you accept credit as a form of payment, that means you’re sending some of every transaction to a third party. Sometimes, you may be using one of the more expensive processors available — which can significantly cut into your business’s profits.
How banks structure credit card processing services, however, can make it somewhat difficult to compare prices directly. It’s not always clear how a flat-price model, for example, will stack up against interchange-plus pricing.
Fortunately, with enough research, you can figure out how much each of these services will cost you in practice, which can save you some serious cash. If you have industry contacts who are also vendors, you can ask around for advice. You may find that someone has already done the legwork for you and figured out the best processor for your particular niche or situation.
6. Review Your Office Supply Spending
Many businesses spend a decent amount of money on office supplies — anything from paper to staples and computer equipment to food for the company kitchen.
If you aren’t already doing so, tracking office supply use can give you a good idea of what your employees are actually using. You may find that while you’re investing a lot of cash in a certain kind of office supplies — like printer ink cartridges or cleaning supplies — your employees aren’t using them enough to justify the frequency or size of purchases.
With this info, you can quickly cut back on unnecessary supply costs, saving your business some money.
Cutting Back on Unnecessary Costs
These simple strategies can help you reduce costs and save money. The most important strategy here, however, is to regularly review what your business is spending money on. Keeping track of your finances can often go a long way in helping you catch extraneous business expenses.