Lack of cash flow can cripple a small business whether it is due to a client’s refusal to pay or mismanagement of funds. For the most part a lack of cash flow is due to lack of accurate forecasting as well as spending money in areas that do not have a high ROI. The best thing that a company can do when it comes to finances is to list out all monthly expenditures. There will be certain costs that might need to be paid monthly but rather quarterly or biannually. Expenses like these also need to be considered as forgetting to list these can lead to a company taking out high interest loans to stock inventory needed to continue business as a healthy rate.
Reduce Shipping Costs
Shipping can be a large expense depending on the amount of products being shipped monthly. Being able to save money on an expense daily will add up immensely as well as increase profit margins. BluePostal, a shipping company in the Bahamas notes “Many U.S. online retailers and auction site sellers do not ship purchases overseas, charge too much for international shipping, or do not accept international credit cards.” This can alienate an entire demographic of customers as shipping costs can cost more than the product depending on where you are located. With this being said, try out a new shipping company with a small order as the last thing you want is to have orders arrive late for customers that have been loyal for years.
Allow Certain Employees To Work Remotely
A monthly expense that can be quite high is rent for a large office space if you do not own your office building. With technology continually improving the ability to connect with people all over the globe it opens up quite a few avenues to save money. Allowing certain employees to work from home will reduce the amount of space needed to conduct business. Being able to save a few extra thousand monthly will add up over the lifetime of the business. Outsourcing certain departments or roles is also recommended as long as you find a professional that does high quality work at a reasonable price. Staffing too many departments can also impact cash flow so instead of having a high priced accounting department, use an accounting company to slash costs while still receiving the same quality of work.
Attend Industry Events To Garner Large Clients
Certain industries have conferences where large percentages of companies attend for educational and sales purposes. The high concentration of people can make it easy to get lost in the shuffle so it is important to stand out. The right pitch or business card can do wonders but the importance of meeting a potential client face to face is irreplaceable. Often times these conferences can be attended at a reasonable price and have a much higher ROI than advertising or marketing campaigns. Larger companies are going to want to meet with a potential contractor or business partner in person so this can allow a company to pitch multiple in a day. The other option would be to travel to each client’s location so this is a budget friendly tactic as well.
Internship To Hire Programs Can Improve Company Hiring Processes
One aspect of business that devastates cash flow is high employee turnover. It can take thousands of dollars and weeks of training to turn someone into a competent employee. With this investment there still is no guarantee the employee will work out or stay with the company long enough for the business to recoup the investment. Internship to hire programs can increase the quality of hire and also foster employee loyalty. Attracting top talents from universities will be easier than ever as every student dreams of having a job waiting for them after they graduate. This also allows the company to see if the intern is a culture fit and can work without constant supervision.
Track Data On All Expenses
Tracking the ROI on expenses needs to be done as it is possible that something like the marketing spend is not yielding results like that of advertising spend. Being able to turn the data on expenses into an actionable plan of saving money and maximizing returns will take time. A company would much rather make a decision on data than a hunch or an emotional response. Numbers do not lie so the translation of the data is what needs to be correct as well as the strategy that is formed from the data. There are a variety of tools that can help with this in nearly every aspect of business.
Being able to reduce expenses will take a proactive approach but it can increase profits nearly immediately. Do not waste money that could be going back into the company or rewarding employees. Understand where the money is going and how to improve processes to begin saving money.
I hope you enjoyed this blog post about how to improve cash flow and to cut costs at your small business to boost profit margins.
Interested in more about bootstrapped businesses on a budget?
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