If you've ever looked at methods to cut business expenses, you probably realized that it's harder than it looks. However, there are solid ways business owners can save money without feeling too much pain. Additionally, some money saving moves can help increase profits and improve efficiency. In an uncertain economy, cost cutting is a good strategy.
To address your cash flow issues and avoid business disruption, it’s important to take a hard look at your finances. Here are some top tips to help business owners in any stage of growth stretch cash so you can have adequate working capital available for business operations.
1. Review all expenses, big and small
Perform an overall analysis to understand all of your small business expenses. If a cost isn’t providing a return on investment, cut back to the bare minimum or completely eliminate that expense. Do you eat out frequently or travel? Explore ways to reduce those costs as well. You might be surprised how much you can cut back without affecting day-to-day operations or the ability to meet long-term goals.
This post from the SmartBiz® Small Business blog outlines
How to Keep Track of Business Expenses - When you set up an organized system, it will be easier to identify costs to cut or eliminate. Tracking expenses also help to build financial reports, measure business growth, and simplify tax time.
2. Shop around for utilities
Whether it’s your energy bills, water supply, trash pickup, electricity, and even internet costs. Reliable wifi can cost anywhere from $20.00 per month to $650.00 per month, depending on what your business needs are.
It makes sense to shop around, compare prices, and take advantage of special deals for businesses.
3. Reduce energy usage
Your first step should be an energy audit to determine the energy efficiency of your space. With this information, you can identify and correct any issues to cut electricity costs.Your state or local government energy or weatherization office may help you identify a local company or organization that performs audits. Ways to cut energy costs include:
- Purchase energy-efficient office equipment
- Reduce Peak Demand
- Program your thermostats
- Turn off lights when not in use
- Use energy-efficient light bulbs
- Take advantage of natural sunlight
According to cnet.com®, utility companies are increasingly offering time-of-use plans, which charge more for electricity during peak hours but offer cheaper service during off-peak times.
4. Assess insurance policy costs
Running an operation on location - an office building, store front, or manufacturing facility - comes with significant insurance costs. But carrying the proper insurance policies can protect your business and even your personal assets.
Umbrella policies are relatively inexpensive so they are worth the investment if you have significant assets you're looking to protect from costly liability claims.
Note that even home-based operations need a variety of insurance so check with a business insurance specialist to make sure you’re covered. Learn more on the SmartBiz Small Business Blog: What Home-Based Business Owners Need to Know About Insurance.
5. Embrace remote/flexible working
Renting a space or paying a mortgage and associated taxes is a huge cost for business owners. If you pivoted to remote operations during the pandemic, determine if you can ditch the office altogether.
If 100% remote isn’t an option, you can downsize your office space by not having all your employees in at the same time. The SmartBiz Blog covers remote working extensively: Here’s 6 Tips on How to Adjust Your Company for Remote Work. Our strategies can help current employees and help to onboard new remote employees.
6. Pay down debt
A 0% credit card balance transfer can save you a significant amount of money. For example, if you had a $5k balance on a card with a 17% APR and transferred the balance to a credit card with 0% intro APR for 15 months, you would save $862 in interest alone.
Keep in mind that special offer cards have a limited time – usually less than a year – where you can benefit from 0% interest.
7. Consolidate debt
At SmartBiz Loans, debt refinance is one of the leading use proceeds from an SBA loan because long terms (10 years) can lower your monthly payments dramatically. Check out what you need to know about SBA loans here.
8. Use an SBA loan to buy equipment
Does your small business need new computers, desks, machinery, or a vehicle? You’ll want to make the most cost effective purchasing decisions. Unfortunately, many options to fund an equipment purchase - like a line of credit or a business credit card - are expensive with high rates and short terms.
One option to consider is using an SBA loan for equipment purchases. SBA loans, facilitated by SmartBiz, allow you to pay off your equipment over 10 years.
If you’re buying a $100,000 piece of equipment, for example, and use an SBA loan from a bank in our network, your monthly payments will only be about $1100 per month. See the SmartBiz SBA loan slider for other amounts.
9. Avoid bank fees
Banks are increasingly looking to squeeze more revenue out of fees. Banking fees can eat away hundreds, if not thousands, of dollars from your bottom line each year. Do everything possible to avoid fees from ATM use, bounced checks, or debit card costs.
If you can cut substantial costs by switching to another bank then it may be just what you need to do to save money this year.
10. Review credit card processing fees
The fees may not seem like a lot by themselves, but small percentages processors take for every transaction can quickly add up. Combine transaction fees with assessment fees, authorization costs, and monthly fees, your monthly credit card processing bill can impact your bottom line. These days, credit card processing fees are often negotiable.
The bottom line
Not every entrepreneur has advanced financial knowledge about running a small business. As you shore up your bottom line, consider working with a financial professional to help you establish and grow your business. An accountant can help set up financial systems and processes, analyze data and help with tax planning and filing. They can also help you find ways to save on expenses so you can put that money back into growing your business. If you’re in need of an accountant, review our post:
WHAT YOU NEED TO KNOW: The SmartBiz® Small Business Blog and other related communications from SmartBiz Loans® are intended to provide general information on relevant topics for managing small businesses. Be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed. Please consult legal and financial processionals for further information.