One of the greatest challenges to anyone attempting to run a profitable business is the unknown drains on business profit. When the economic conditions restrain sales, every dollar must be stretched further than ever before. Cash flow is the key to guiding a business through the rough economic waters that most people are facing today. With some time and effort, most small-business owners can lower their overhead costs and free up some extra cash, which is vital to success.
Adhere to the budget
Developing an annual budget is the first step to gaining control over the finances. Throughout the fiscal year, expenses must be monitored very closely to determine if the budget is accurate and the business can function. Cost overruns in one category can drain an entire month of profit. A well-written budget plan can guide the business through any economic situation because the business owner can see what is happening.
Negotiate supplier contracts
Suppliers need customers just like everyone else, and one way to reduce the cost of goods sold is to choose two or three suppliers and negotiate lower prices. Payment terms and minimum order sizes can be renegotiated to address cash flow constraints. On-time payments will earn favor with suppliers.
Perform annual insurance reviews
As businesses evolve, insurance needs will change and different categories of insurance become available. Any major business change will require a close evaluation of the existing insurance policies. Every category of insurance must be scrutinized to remove unnecessary coverage.
Embrace the usefulness of the Internet
Software upgrades are very expensive since businesses must keep up with the requirements of various entities, such as the accountant and the governing authorities. Useful software applications can be found from websites that offer accounting software and other useful tools free or for a low monthly fee. Security protocols will prevent breaches that might be a cause of concern. Automated backup routines on the website of choice will reduce the risk of loss for the business.
Utilize appropriate professionals
Accountants are great coaches for business owners who are just setting out, but their bill can add up quickly when they are used as a bookkeeper, consultant and financial advisor. Some pro bono services can reduce the costs of acquiring professional guidance, but close evaluation of the needed services are an important prerequisite.
Lock supply cabinets
In offices, one of the creeping expenses is the simple office supplies that are required to perform basic tasks. Studies have shown that the cost of office supplies will drop by 30 percent if everyone has to ask someone for paper, pens and labels. Most of the supplies in business settings do not leave the premises, but instead people are hoarding supplies to save time later.
Eliminate unused assets
Equipment that has been replaced should be sold to another entity. The extra cash is one reason to do this, but obsolete equipment can consume valuable space and inflate insurance costs. Donating these assets to a charity can provide a tax break for the business. If you can get rid of stuff you don’t use and make some money while you’re at it, you will be helping your business more than you expect.
Focused effort is required to guard the profits of the business long enough to survive economic downturns and seize growth opportunities. When the overhead costs are evaluated on a monthly basis, the budget will become an effective tool instead of a useless exercise. Adjustments to the budget can be made at any point during the year if actual expenses are appearing in different areas that originally projected
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