The cost-cutting mode

Rising costs, stagnant sales, and past-due invoices can land a lot of small business owners between a rock and a hard place. If you are like many small business owners, you are in charge of your books and it's your responsibility to make sure the company stays in the green. One way to get into the cost-cutting mode is to avoid being too ambitious. It is easy to have a lot of success with a certain marketing campaign, so you try it again only to lose money this time. When you get into the cost-cutting mode, lay-offs should be on the bottom of the list, unless you have un-productive employees.

The cost-cutting mode means you need to make a list of all the expenses for your business. Now go through each expense to see which ones you can eliminate or reduce. Moderate reductions can easily save your company thousands of dollars. Fast-food restaurants learned this by asking customers if they want condiments like ketchup instead of just putting them in the bag with each order. If a customer asked for condiments, the employee would only put 3-4 packets in the bag and do it in front of the customer so they could see that they were getting the condiments. This simple strategy saves fast-food restaurants over $2,000 a year in condiment costs and over $15,000 a year in employee time.

Another way to get into the cost-cutting mode is to stop borrowing. If you are constantly borrowing money to pay for new things, you are going to wind-up in a lot of trouble. Start paying down your debt and make due with what you already have. One way to cut back on your rent expenses is to look for a new office or consider running your business from your home. The nice part about moving the office to your home is you can deduct this from your personal taxes.

If you have people that leave the company, don't fill the position unless you absolutely have to. This is why it is beneficial to train all your employees with multiple skills so they can cover the vacant position until you are ready to fill it. One area you should always cover is to hire a good accountant. Even if the accountant isn't a full-time employee, a contract accountant can review your books and give you some predictions for the future. You need to compare your gross profit ratio to the industry averages to figure out if you are charging too much or too little for your products. Running multiple reports will also tell you if individual transactions are profitable, especially considering how much money you spend in advertising.

One area you need to look at is your past-due invoices, how much money do you have that is just sitting out there? If you're current efforts to persuade your customers are not working; its time to contact a factoring firm to take care of it for you. A factoring company will purchase all of your past-due invoices and collect the money that is owed, normally you will get around 50-80 percent of the money from the customer and the rest of the money will go to the factoring company. One way to avoid getting too much money sitting in the "past due" column on your spreadsheet is to ask for a down payment to start with and then start adding interest onto the bill and send weekly invoices to the customer once they pass 60 days.

It is important to control your spending if you want to stay in business. Cost-cutting is one of the best ways to re-gain control of your spending and to take a look at the future for your company. Avoid running-up your debts and start looking for ways to make profits instead of accumulating more debt.