Finding ways to cut costs and tighten your belt is no easy feat particularly in these cash-strapped times.
If you’re struggling to claw back the dollars, Mark Wardell, business consulting firm president and founder of Wardell Professional Development, has 10 tips to help SMEs eliminate unnecessary expense.
1. Reduce Overtime: Overtime is expensive, but a little preplanning of your work schedules will go a long way here. The feast or famine cycle that many businesses go through can drive costs up without a corresponding increase in sales. The trick is to keep a steady pace with your work. Otherwise, you find yourself needing to pay overtime simply to keep from missing your deadlines.
2. Create a budget: If you don’t have one, make one. It may seem like a time-consuming project but if your money is important to you, then the results will be more than worth the effort. Simply put, a budget is your most effective tool for setting and reaching your financial targets.
3. Nurture a cost saving culture: Everyone can and should take fiscal responsibility for their work. One way to do this is to involve everyone in the budget. A budget isn’t just a tool for management. Make all your employees accountable for the line items that affect them. For example, an office administrator may be accountable for keeping your office supplies on target with your budget.
4. Play the “savings game”: Get together a small team of employees and go through your income statement line by line. Your goal is to come up with three ideas for saving money for each line item. Make it an open brainstorming session and tell your people that no idea is a bad idea.
5. Negotiate and renegotiate everything: You may be surprised at the results. Nearly everything is negotiable. The trick is to see the transaction from your supplier’s perspective. Basically, you’re guaranteeing your business in return for a discount.
6. Decrease your waste: Every company has waste – wasted materials, wasted time, wasted efforts, wasted money, wasted employees and so forth. Make waste the enemy. Everyone in your business must learn to identify it and take steps to eliminate it.
7. Decrease your inventory: Doing this may require the streamlining of some of your business systems, but if you carry excess inventory simply because you may need it as some point, your savings will be more than worth the effort.
8. Go green: You can reduce your utility expenses by becoming a “power smart” business. Turn off the lights when they’re not needed; automatic switches will help with this. Use energy efficient lighting. Turn the heat and a/c off on weekends and/or evenings. Don’t use the photocopier unless you have to. Give your local power company a call for more ideas.
9. Save money through partnering: There are many ways to partner with another company for mutual benefit. One way is to share marketing costs by creating a joint campaign with a complimentary business.
10. Reduce your receivables: Your first step is to standardise your approach. It’s easy to develop an effective collections system. What’s hard is sticking to it. That’s because we don’t want to risk offending our customers. But you can ask for money without being rude, and besides, if you’ve fulfilled your part of the bargain it’s only fair that your customers fulfil their part.