Cutting business costs, improving business finances
Business owners of every size are now finding that they must take control and manage their business expenses, in these challenging economic times. Managing expenses has increasingly become a priority, for the long term survival of any business. For profitability it is crucial that you must be able to keep costs down. Just like consumers who are trying to decide what to live without, businesses must cut unneeded or low priority, items from their budget. Financial experts advise however, that before managers simply run rampant through their budgets with a red pen they must be clear on where they can cut costs, without damaging the business. It is important to understand that you must cut with precision. This is because if you do not cut enough it will not help and cutting to deeply could bring on the end of your business.
It can be overwhelming for an inexperienced business owner to be confronted with the need to cut costs. If you are unsure as to where to begin do not hesitate to ask for help. You can contact your banker or accountant. If you are confident to begin, then the first step is to determine by reviewing your finances, if are you incurring losses, breaking even, or just barely making a profit. If you are losing money, you will need to trim enough costs, in order to counterbalance those losses. Keep in mind however, if you are breaking even or making a profit, your cuts will have to be more strategic. Remember that you should not hesitate to cut items that are not directly contributing to your bottom line. Here is a more in-depth look at several key areas where costs may need to be trimmed.
- Inventory/Stock-You should begin by closely review your inventory, since this is often one of the largest expenses, for most businesses. You will need to determine which items are not selling as well, as other products. You will need discount products with slow turnover, and only place orders, for products with committed orders.
- Workforce-While every business needs employees there are ways to cut the costs of staff. If an employee leaves your company, you should take the time to consider if you can keep the position unfilled. You should also consider whether you can split the duties among other staff members, or enlist the help of part-time, temporary, or consulting services.
- Physical Space-Office, warehouse or production space is anther huge costs for most businesses. One of the best ways to cut costs is to simplify and consolidate your operations. Other options include: leasing, or subleasing unused office space, moving to a more affordable location, or renegotiating lease terms.
- Office supplies-Many business owners overlook this area, assuming that these costs are insignificant. Many business owners are surprised to find out how much of their revenue is going, for office supplies. One of the easiest ways to cut costs is to cancel unnecessary subscriptions and services. In addition, when you are re-ordering supplies, you should look for discounts, and consider items that do the job in the most cost efficient way.
- Suppliers-There are many different ways that you can cut costs with your suppliers. One of the first things to do is to contact small-business partners or associates, and ask if they would like to share the expense of certain products, to obtain quantity discounts. You should also speak to your longtime suppliers, and ask whether you can negotiate payment terms and/or get a discount. If you've had a good relationship with suppliers, you should be sure to remind them, that you've been consistently committed to prompt payment.