Healthy cash flow is a two way street. There are several things you can do to increase the amount of money flowing into your business, but you should also consider ways you can decrease outgoing cash.
Here are 7 ways small businesses can reduce costs to improve their cash flow.
Start by taking an audit of all your expenses from production and purchasing equipment to marketing, sales and administration. Identify areas where you can save. For example, are you paying for software or a subscription that you don’t use?
Take a close look at your biggest expenses – are they providing a good return on investment or do the costs outweigh the value they offer? Now might be the time to look for alternatives or scale back in these areas.
Lost time is lost money. By making your business processes more efficient you can win back time – time that you can spend on growing the profitability of your business.
This could involve using automatic accounting software to handle parts of your invoicing and accounting processes. Or it may involve restructuring your business and workflows to better reflect your goals.
Consider if you are overpaying suppliers and try to negotiate better prices where possible. If it makes sense for your business, you may be able to secure a discount for buying inventory in bulk.
You could also ask for an extension on your payment terms to avoid short term bottlenecks in your cash flow. If you cannot negotiate better prices from your current suppliers, take time to research alternative options.
Marketing is crucial for increasing cash flowing into your business. Unfortunately many small businesses end up spending a lot on marketing while getting a poor return on their investment.
Closely monitor your marketing efforts, cut out the tactics that aren’t working and focus on what is getting you good results.
If buying equipment outright presents an issue for your cash flow, consider leasing equipment instead. The equipment won’t be a fixed business asset, but paying smaller regular payments to lease it may help with budgeting and forecasting.
Outsourcing non-critical business tasks could be cheaper than employing someone in-house to do the job. It can also free up your team to focus on other aspects of your business.
For example, hiring a marketing agency might be more cost effective than keeping your own marketing department. Outsourcing something like production can save you from expensive equipment costs and training costs.
As the past year has proven, remote work is a viable option for many businesses. While it might not be right for everyone, choosing to have a full or partial remote workforce could lead to significant savings.
With employees working from home, you might be able to reduce your office size and associated overhead costs.
Chat with the team at Lawrence Group for tailored advice about reducing costs and improving cash flow for your business.