By Rieva Lesonsky
The economy is taking some twists and turns again, and for small business owners who’ve just lived through one recession, that means reliving some unpleasant times. I thought back to the advice I was giving to entrepreneurs back in 2008 and decided some of it is worth dusting off again.
First, none of us know what the future brings, but to be on the safe side, it’s best to start practicing smart cash management. That means looking out for the little things that can add up to big expenses over time. Recently on the Spike TV reality show Bar Rescue, bar makeover expert Jon Taffer pointed out to one failing bar owner that if bartenders overpoured even a small amount in mixed drinks, that could add up to more than $100,000 in lost sales for the bar every year. Can your small business afford to give $100,000 away? I think not.
You may not own a bar, but no matter what industry you’re in, there are costs you can measure and that you’d better keep track of if you want to keep your cash flow positive. For a restaurant owner, it might be the size of the side dishes your servers scoop out. For an ecommerce site, it might be the amount of packing material you put inside each shipment or the service that you use to ship your products to customers.
Figuring out what matters is the first step. The next step is measuring it. To do that, stay on top of your business’s finances. Weekly (or even daily) you should be running the numbers to see where your business stands at any point in time. Financial software like Quickbooks makes this easy to do. Even if your company has an accountant on staff, you should still be getting your hands dirty by tracking sales, income and outflow on a regular basis—it’s the only way to now where you stand.
When you find that too much is going out and not enough is coming in, look for ways to shave small savings off your costs. Enlist your employees to come up with money-saving ideas (and reward them when they do). A few suggestions to try:
- Talk to your insurance agent annually to review your coverage and make sure you’re not overpaying.
- In fact, review all your vendor accounts once a year. Is there another company that could do what your current suppliers do—better and cheaper?
- Utilities are a big expense for many small businesses. Talk to your energy company about getting a free audit—most will send someone out to observe your business and suggest energy-saving measures.
- Consider outsourcing tasks that don’t need to be done in-house. Often this can save substantially since you’re not paying employee benefits or payroll taxes.
- Cut back on business travel unless it’s essential; use conferencing tools like Skype or GoToMeeting instead.
- Institute e-billing (talk to your bank) to save your clients on postage and speed payments being deposited into your account.
These are just a few ideas to cut costs in your business. Do you have some to share?