By Bill Vergantino, President and CEO of ExpenseWatch
Any time you can reduce spending to lower operational costs or speed up how quickly your customers pay, you can create value for your company and free up money that can be used to help your organization grow. For this article, we’ve partnered with Dr. Deborah Osgood, president and CEO of Knowledge Institute for Small Business Development, to offer these ten opportunities or areas your company can explore for operational savings and faster payments from customers.
Let’s dive in:
Cash in Hand Is King
If you can get your customers to pay you sooner, you can put your cash to work for you more quickly. One way to encourage faster payments is to offer quick pay discounts, such as 2%10N30. This means that if your customers pay you within ten days of an invoice date, you’ll give them a two percent discount. If the customer doesn’t want to take advantage of the discount, then the invoice is due in full in 30 days.
Suppliers Are Your Friends
Engage your suppliers to be a part of your growth strategy and help them to get to know your business more personally. Invite them to see how your success can be their success as well. Negotiate for competitive pricing, such as discounts on costs of goods to help your company grow more quickly. You can ask about quick-pay discounts as noted above as one option. Alternatively, you could ask for extended payment terms to improve your cash flow. Decide what might be right for your company, keeping in mind that different alternatives may work better for different suppliers.
Strength in Numbers – Looking Outside Your Business
Join business associations that make sense for your organization. These can include your local Chamber of Commerce, the National Association of Women Business Owners (NAWBO) if you qualify, the National Association of the Self Employed (NASE) for smaller organizations and many others. These organizations often negotiate rates based upon the entire membership for such things as office supplies, health benefits, different kinds of insurance, and more. The savings are passed on to members who take advantage of the larger buying power of the association.
Just the Right Numbers – Looking at Optimal Staffing Inside Your Business
If you are like most organizations, your workforce is one of your top, if not the biggest cost center. Take a close look at employee staffing, examining who does what, and what is the best use of your payroll money. Do you have the right talent for the right reason? Is that new staff position the result of a temporary spike in business or a more permanent one? Going with a project-based, temporary worker strategy may lead to significant savings under the right conditions. You can then transition the temporary position into a permanent one if the business needs keep expanding.
Negotiate Rent/Lease Terms
The recent global recession resulted in many vacant commercial real estate spaces. If your region is still feeling the pinch, renegotiate how much you pay and for how long. Landlords prefer having paying tenants at market rates versus no tenants at all.
Business Credit – Which Program is Right for Me?
There are many different kinds of business credit card programs that offer discounts, rewards, and business perks. Understand what is most important for your business and find the program that supports your needs. For example, travel discounts may be more important than cash rewards. The right business credit card program can lead to sizable discounts for office supplies, travel and other routine business expenses. Be sure to manage your business credit as well. A high credit score can mean lower insurance premiums and other savings. On that note, insurance is another area to look for cost savings. Once a year take a look at the various insurance plans you have. Online aggregators make it easy to get quotes and you may find a variety of options at lower prices than what you paid previously.
With the advent and popularity of cloud-based software applications, it is now extremely cost-effective for your organization to automate as much as you can. It will save you both time and money, and in many instances can enable you to grow without adding additional staff. What’s more, you can eliminate slow, manual paper processes that bog a company down. Areas for consideration include payroll; HR recruiting, onboarding and management; marketing; customer relationship management; organizational spending processes, such as expense reports, purchase requests and payable invoices; accounts receivable/customer invoicing processes, and more.
Buy, Lease or Outsource
Before making any business purchase, understand your options. Ask yourself does the business really need it, why and what’s the best way to get it? A phone system is a good example. Do you need to buy all that hardware and software, or does a company who can convert your cell phone into a business phone, make sense? Do you need to buy a delivery van or is there a regional, cost-effective delivery service available? Using a service means you don’t take on the ongoing maintenance, staffing, insurance and related costs. No matter which option is the best choice for your organization, get at least three quotes before deciding on a vendor. You’ll learn a great deal about the various options for that item as you go along and can make a much more informed decision when you are ready to make a final choice.
Don’t Go It Alone
There’s a huge local network of no-cost business counseling sources that can help you with just about any cost-control objective. This includes SCORE Counselors to America’s Small Businesses, Small Business Development Centers and virtual-only counseling sources. These individuals can also refer you to potential funding sources available through Regional Development Corporations and the U.S. Department of Agriculture Rural Development, where there are programs tailored to supporting local businesses that represent new jobs and other local economic benefits. There are workforce development programs, such as OJT (On the Job Training) and RTW (Return to Work) that offer subsidies for hiring and training new employees. In fact, Knowledge Institute offers a breadth of information to discover free help for business development at www.buzgate.org.
Know Your Numbers
You may find it surprising, but many businesses don’t stay on top of spending month-to-month or monitor spending against the budgets set for a given month. Routinely compare company projected P&L performance against your actual numbers to understand where costs may be getting out of hand or where revenues are trickling off. A solution to help your organization manage and control spending makes this process a lot easier. You’ll have visibility into what has already been spent, and you can see what spending is coming before it occurs giving you the ability to stop or delay it if the situation warrants.
These are just a few areas your organization can evaluate to ensure your organization’s money is being used as efficiently and effectively as possible. For more information about maximizing your organization’s money, fill in the form on the right and one of our experts will reach out to your shortly.
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