Running a business is expensive. For a small start-up, it can feel like any step forward can send your finances through the roof. Managing your income and outgoings is absolutely crucial to the healthy functioning of your business.
You will learn how to be frugal as you go with your company, but at first it can seem like a medley of costs, people asking you for money and due dates. While some people prefer to stick their head in the sand, it’s important not to give into that temptation!
We have ten ways to keep on top of and minimise your spending when it comes to your start-up.
- Systemic Cost-Control
First thing’s first; sit down and take stock of your financial situation. Begin by identifying your major costs such as production, marketing and administration. Then go through your statements from the last 6 months and rank each expense from highest to lowest. Once you have your numbered list, go through and identify areas that might be reduced and how you can save.
- Return to your Budget
Remember that plan you made back at the start? You know the one where you allocated your costs for each department of your business? How is that going; still sitting soundly?
The reason we create a budget is to ensure we are effectively using our finances. Go back to your budget and compare your actual costs with the amount you originally allocated for each department. The larger the discrepancy, the more room you have to save.
- Order Wisely
When it comes to ordering from suppliers, there are lots of ways to ensure you are being the most cost-effective. Avoid making frequent small orders which can add up more than buying in bulk. It is also wise to purchase through the least amount of suppliers as possible. When you build a loyal relationship you will find they will treat you well and might provide you with discounted prices.
- What Are They Charging You?
Make sure you consistently read each invoice you receive. You might be surprised how often suppliers over-charge. Check for incorrect charges, double billings and any discounts that you were meant to receive.
- Outsource Where You Can
If possible, outsource work such as graphic design, content creation, website coding if it is not integral to your business structure. It is far more cost-effective to hire somebody for a specific project, rather than on a permanent basis. Look on sites such as Freelancer and Elance where professionals upload their portfolios for freelance work.
- Pay Your Bills
Yes, it’s a given that you should pay your bills. But it when it comes to late fees, the cost will only accumulate the longer you leave it. Some utility companies offer a discount on the amount charged should you pay on or before the due date as well so it really can pay to deal with your bills on time!
- Understand ROI
When it comes to marketing, knowing your ROI (Return On Investment) for each campaign is very important. ROI is essentially profitability as a result of investment in a specific campaign or business activity. For example, if you put money into Facebook ads, how much profit (in terms of lead generation or actual dollar value) is it going to generate you as a result? Is it worth it in the long run? Will it end up costing you more than it promises to make?
- Have a Financial Advisor
Professionals, such as your accountant, can quickly help you identify where most of your money is going and can advise you how to cut down on these costs. A good relationship with your financial advisor can set your business on a healthy financial path.
- Profits not Sales
It is easy to misconstrue lots of sales to mean lots of profit. Your focus should be trading for profit, not just sales. When you consider the cost of production, utilities and employees just to provide a single sale, you might come to realise that it costs more to provide the service than what you are paid in return. Instead, focus on how much profit you need to make to reach your quota, rather than the number of sales.
- One Person Control
When dealing with cost-control, it can be most effective to assign the task to one person rather than multiple people. This ensures there is no room for miscommunication and a thorough plan can be made and implemented. Having said that, it’s also important for open communication amongst all of your team members so that everyone understands the need for any proposed cuts and the benefits it promises the company. You don’t want to leave your employees scared, unsure or angry.