Every pound saved that goes straight to your bottom line, and, unlike a sale worth the same amount, incurs no additional costs.
So if you’re looking to grow cost cutting is actually one area where you can make a big impact, quickly, and here are some tips to help get you started.
1. Get back to basics
All too often it can be tempting to jump in and start cutting costs. But let’s start with revisiting your business plan. What are your business goals? What key business functions do you need to maintain to achieve them? Is your cash flow healthy? Do you know where your profits come from and which your most important supply chains are?
2. Know your costs and contracts
You should always know how much you have going out, as well as coming in. Assess your costs and identify where you can make savings. If you don’t know where to start, there are specialists who can do this for you.
3. Look for efficiency savings
Once you know where you’re spending most of your resources, pay close attention to these areas. Are they essential purchases and activities or somewhere you’re wasting time and money? Are you getting good return on investment? Do you have a lot of wastage?
4. Shop around for the best deals
There are good deals to be had out there, if you know where to look. Knowing your contract renewal dates is key, as this may dictate when you can switch supplier. Save yourself time and get increased buying power by joining a buying group and use brokers to help you get the best deal.
5. Stress test your business
Costs rise every year so you need to plan for what you’ll do when prices rise again. For example, new pensions regulations will see the cost of employment increase in the next few years and a rise in interest rates will see the cost of borrowing go up from next year. Take advice and plan early.
6. Tighten up your credit control procedures
Cash is king in any business, so making sure you’re paid on time is key to success.
7. Explore alternative sources of finance
Confidence in banks to lend to small firms may be at an all time low, but there are alternatives out there to get the funding you need to grow. From invoice finance, peer-to-peer lending and angel investment, there is a type of finance for every stage of business.
Don’t forget that business organisations such as the Forum are also a great source of advice and information on how to cut costs and keep cash flowing.
