For any new entrepreneur, it’s natural to be optimistic. But then the harsh reality of the business world tends to settle in fast. Case in point: Nearly 50 percent of businesses and 90 percent of start-ups eventually fail within their first five years, according to Forbes. And in 2020 alone, 70 percent of businesses were drowning in debt. Among the many reasons for these business failures, improper cash flow management takes the top spot, with 82 percent of small businesses falling because of it and another 29 percent of businesses run out of cash, according to Business Insider. Indeed, these statistics only reaffirm the importance of mindful money management.
Low profits and overpaying for services and utilities can also tank cash flow. And, with a lot on their plate, business owners may not take the time to research and understand the complexities of contracts, consequently overlooking the high cost of partnering with IT service vendors or fintech suppliers.
The truth is, when it comes to monthly utility costs, businesses can find savings — if only they found cheaper deals and made more informed decisions. Indeed, smart decision-making is imperative to help reduce costs and manage money efficiently.
Knowing this, here are several ways to save costs and improve money management for your business.
Negotiate with Suppliers and Agree on Terms
Negotiating isn’t just about finding a middle ground related to costs but also includes facets like contract length, payment terms, details of services, confidentiality, laws applicable in case of disputes and more. Contracts can be complex to understand. However, it’s important to set terms and conditions, as they will clearly outline the responsibilities and expectations of all parties to help work in your favor.
Cut Overhead Expenses and Utilities
When it comes to overhead expenses such as rent, utilities and office supplies, a lot of companies tend to overspend in these key areas. This is mainly due to business owners overlooking them in favor of expenses that occupy more of the bottom line, such as labor and business services. Overhead expense reductions — like passive energy-saving measures, low usage of heavy appliances and machinery to cut electrical costs, telecommuting for employees and downsizing office space — can significantly increase productivity and effectively cut costs.
Use the Right Technology and Modern Marketing Strategies
Cloud computing, payment automation, CRMs and virtual technology all eliminate the need for physical space and can help minimize travel expenses. Additionally, they all help to ease the workload for employees and deliver vital information in real-time to remote locations. To cut advertising costs, there are cheaper, modern marketing strategies that can be implemented that work equally well. For example, networking, in-house marketing, social media marketing and content marketing are a few useful modern strategies.
Create Financial Reports to Track Cash Flow
Failing to track your income and spending will lead to misuse of funds and major overspending. In that vein, it’s important to have a detailed record of your income and expenses to manage money efficiently. Reports such as profit and loss, balance sheets and income statements provide insight into the overall financial health of a business, allowing key decision-makers to create effective buying, selling and collecting strategies.
When It Comes to Money Management, be Proactive and Hands-On
A business might be about creating great products and services. But if you can’t pay your bills, you could be closing your doors for good sooner than you think. While these tips will get you started, nothing replaces being proactive and hands-on when it comes to managing your money, no matter how big or small the financial challenge.