As a small business owner, you know that finding ways to save money should be a top priority. Financial issues are often the result of a small but steady build-up of unchecked expenses. Pinching pennies when and wherever possible is a smart strategy for managing your budget and preparing for the unexpected, even when business is on the upswing.
Tomorrow is National Brown Bag It Day, so Summit Financial Resources is focusing on frugality and sharing a few easy-to-implement strategies for small business owners intent on controlling or reducing their spending.
Making your business more environmentally friendly can improve your finances over the long term, and it doesn’t have to be complicated or expensive. Use energy efficient lighting, recycle and reuse products, or go paperless to reduce costs and streamline your operations.
Remind employees to power down equipment when it is not in use. This includes everything from coffee makers to printers to computers, which drain power even when they are in sleep or stand-by mode. Leaving your computer on overnight can add $200+ a year in unnecessary energy consumption. Depending on how many computers your small business has, shutting them off completely presents a significant savings opportunity.
Buy Used or Lease Equipment
If purchasing new office equipment or furniture is putting a significant crimp in your small business budget, consider buying all or some of it used. You can find everything from computer monitors and copiers to desk chairs at a fraction of full price at used equipment stores, as well as auctions, online classifieds, and social media sites.
Leasing what you need instead of buying it is another option for freeing up working capital for day-to-day operations. Leasing also gives you an opportunity to upgrade equipment at a lower cost, a smart strategy for keeping pace with rapid changes in technology.
Hire Independent Contractors
Whether you are just getting started or looking for someone to handle a specific responsibility, you want to staff your business with motivated and loyal employees. However, there will be occasions when it makes more sense to choose an independent contractor instead of a full-time employee.
The cost of a full-time employee doesn’t end with his or her annual salary. Even though most employers pay contractors more per hour than they would pay employees to do the same work, you can expect to save 20 to 30 percent annually with a freelancer or contractor. In addition, independent contractors bring considerable expertise to the job and are usually productive immediately, eliminating the time and cost of training.
Manage Your Business Credit Card
Small business credit cards are a good option for covering a variety of expenses and managing cash flow. However, mismanaging your credit card can end up hurting your business more than helping it. For example, running a credit card balance may be a normal practice for many small business owners, but failing to pay the full amount each month can lead to excessive fees and a higher interest rate.
Making late payments on your business credit card can have serious consequences. In addition to having to pay a penalty, some card issuers will increase your interest rate or take away any rewards earned if your payments are late. When applying for your card, make sure you are aware of any fees or penalties for making a late payment or not paying the bill in full each month. Put processes in place to ensure that you pay the balance owed on time and in full.
Uncover Hidden Expenses
Small expenditures can add up over time, so it pays to review your expenses regularly with an eye for saving money. Eliminate what you no longer need, such as media subscriptions or organization memberships. Investigate a less expensive phone plan or negotiate with vendors who may be willing to lower payments on their products or services. Office supplies represent a serious financial investment, so look into economical practices such as buying in bulk. Something as simple as storing your supplies in one central location will help you keep better track of inventory levels and avoid over-ordering or making emergency purchases at retail prices.
Focus on Cash Flow
Tracking the movement of cash in and out of your business may not be a priority except when it’s time to close out the month or during tax season. However, it’s tough to avoid potentially costly situations if you are not staying on top of your company’s finances. Monitoring what you are owed and what you need to pay can help you spot problems before they happen and take steps to ensure you have enough cash to cover ongoing expenses.
Even the most vigilant entrepreneur can experience a cash flow crunch. Whether you need to meet payroll, keep the utilities running, or pay your lease or mortgage, working capital financing helps reduce the pressure when your business hits a rough patch.
Summit Financial Resources offers working capital loans for small to medium-sized businesses that involve using your accounts receivable and other assets as collateral. We can mix and match from a variety of product options to suit your needs, including invoice factoring, asset-based lending, inventory lending, and equipment financing.
Strengthen Your Collections Strategy
Debt collection plays an integral part in any small business money management strategy. Outstanding payments can put a serious crimp in your cash flow, so it is essential to get paid by your customers as quickly as possible. Issue invoices immediately, and examine your policies and terms to find ways to speed up the payment process. For instance, when extending credit to customers, you may need to tighten the payment timeframe from 30 days to 15 days.
Establish a debt collections process with set guidelines for following up with delinquent customers. For example, at 30 days you’ll send a written reminder, at 60 days a junior staff person calls the customer, and at 90 to 120 days the owner makes the call. You may have requested payment from the customer numerous times without results, but a call from the top executive is likely to be taken more seriously. You can also use small business accounting or invoicing software solutions to send invoice payment reminders and help track delinquent accounts.
Engage Your Employees
Make it a point to educate your employees about the impact of expenses on your business’s success. Ask them for ideas on how to cut costs, or consider creating incentives that will inspire them to reduce unnecessary spending. Reinvest the results of cost-cutting efforts into your staff and your business.
Maintaining the financial health of your small business is critical to your survival. Focusing on just one or two of these money-saving strategies can help you pinpoint unnecessary expenditures and know when and where to cut costs in the short term to improve profitability over the long haul.
Working Capital Financing is a few clicks away.
Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.