For you to maximise on profits and cash flow in your business, it is essential that you strive to maintain a tight control over your fixed and variable expenses. This calls for the application of a variety of tactics to help you prepare for any unforeseen business costs and rein in expenses. This preparation is vital because how you manage your business expenditure is one of the critical steps towards achieving long-term business success.
Most business owners understand the importance of managing costs at infancy stages of the business, but as the business progresses, it becomes increasingly challenging to keep a close eye on the business expenditure. Here are some 5 tips to help you have more control over your business expenditure.
1. Re-engineer your business process
In order for you to achieve a business that is leaner and tighter, you will have to consider improving automation and at the same time simplifying your processes to enable you free up more resources. This includes losing any reports you find unnecessary like weekly emails then endeavour to make a one-off long-term investment in a system that is well-run with no extra clutter. You can also take advantage of cheap parcel delivery services to help you cut down on costs.
2. Cut down on staffing costs
If you discover that there are some periods that your business is slow, consider reducing on staffing costs. Take some time to discuss with your employees if they would be comfortable taking unpaid time off. You would be surprised that there could be one or two who might agree. This will see you cut down on business costs in the long term.
3. Regularly review your vendors
As your business progresses, draw out a review period, either semi-annually or annually to review your key vendors and at the same time flag any contracts that are self-renewing to come up for review just before they automatically renew themselves so that you can rebid before renewal. Be keen on contracts that call for automatic renewal and include the option for renewal with no obligation to give more control.
4. Develop a better understanding of your business’ cost-revenue structure
This is a significant part of cost management in any business. This will need you to first figure such aspects as sources of revenue and the highest spending customers and working out the specific costs that are implicated in the production of their revenue streams. Understanding such structures will go a long way in understanding your business costs and how best to minimise on them.
5. Benchmark yourself
Look for one or two similar businesses and benchmark your business as a way of your business expenditure overhaul. You will gain deeper insights on their average expenditure in different but similar areas of operation and discover how costs compare. This means that you will have a better understanding of how to cut down on your expenditure by reviewing what youare doing and how exactly you are doing it.