Tips for Reducing Financial Waste in Your Business

As owners of small businesses, we are aware of the need to control and monitor expenses. Not doing so can have negative consequences at the best of times. The Covid-19 pandemic has significantly affected the global and national economy and the need for financial prudence and care is greater than ever and will be for some time to come. 

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Tips for Reducing Financial Waste in Your Business
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Many small business owners have concerns about surviving this unprecedented and difficult period. Additional or unexpected costs, or delays in generating or receiving income, could be the difference between survival and going out of business. Consulting experts will help save you money and avoid problems in the long run. For instance, you can protect yourself from costly liability and associated and other losses.

However, there are things you can do now: examine your business, look at where money is spent and identify how and where you can remove unnecessary expenditure and risk.

EMPLOYEES

If you are a one-person business, there is not much you can do here other than reduce your remuneration which you may already have done. If you have staff this can be a difficult area to look at, but you need to. Make a list of your employees and then ask yourself questions:

• Do your employees work overtime? If they do, is it necessary or could overtime be stopped or limited?

• Are you considering employing additional staff? If so:

• Is it necessary, or could you freeze posts for now?

• Could you outsource work as necessary instead of appointing staff?

• Reassess your staff in terms of their skills, experience, and functions in the company. Are their individuals who could be better and more productively utilised?

• Are there staff who could be placed on reduced hours, swing shifts, unpaid leave or – hardest of all – retrenched? 

While the first three are good exercises to do to improve productivity and reduce financial waste, the final option is usually only necessary during times like these of unusual business and economic hardship.

OVERHEADS

Some overheads can’t be avoided or even reduced, but some savings may be possible:

• Are your business premises the size you need, or could you have smaller, more affordable ones?

• Can you reduce your costs by assessing the types and levels of cover you need? Invest time in comparing insurance options.

• Are you storing and / or producing more stock than you need? If you are, can you stop production and / or sell some perhaps at ‘special’ rates?

• If you were planning expansion or development, put them on hold until the economy and business are doing better if you can.

ADVERTISING AND MARKETING

It seems counterintuitive in a discussion on reducing costs to suggest perhaps spending more. However, to boost your company’s health you can balance reduced expenditure with increased income. The way to achieve this may be through a revisited marketing plan.

• Is your advertising effectively reaching your target market, and are you using optimal marketing channels?

• If your campaign is on target, can you negotiate better rates?

• Should you consult an expert? It would cost you money in the short-term, but the increase in sales and income should cover it and boost your bottom line.

RUNNING COSTS

There are day-to-day costs in our businesses that we need to re-examine by asking whether they are necessary or nice-to-have items. Consider:

• Staff perks: Could you suspend the provision of staff lunches? Can you reduce the range of drinks on offer for the time being? Do you offer other benefits such as gym memberships that could be put on hold?

• Outsourcing: Do you have staff who could carry out functions as part of their roles that you currently pay freelancers or agencies to do?

• Technology: Do you have leased equipment that you don’t need such as printers and copiers? If so, are you able to end the leases? Are you paying costly software licenses when there are suitable, free alternatives available?

CASHFLOW

Cashflow can become an especially difficult to manage at times when the national and global economy are in crisis or experiencing major downturns. If your business is under strain, it’s fair to assume many of your clients are battling too. As a result, they may find paying you a challenge. You can take steps to reduce the risk and impact, though:

• Ensure your invoicing system is effective, accurate, and prompt.

• Set clear payment terms, especially in terms of due dates or deadlines. It can also be useful to offer quick payment discounts.

• Follow-up on outstanding invoices and be firm with your debtors. Don’t let things slide and be firm about requesting payments.

• If full payment is not an option, negotiate some form of payment scheme you can both cope with.

• Take legal action against those who have long outstanding invoices.

It can be hard to get tough with clients with who you have established relationships, especially when you empathise with their difficulties. However, if you can’t collect outstanding money then use someone who can do so for you.

If you feel you are too involved, too stressed, or unable to be objective about some or all aspects of your business take a step back to regain perspective. Alternatively, call in an expert to help you. Yes, a consultant is an expense, but not making your business operate better by streamlining and trimming it could be far worse or even cost you the business itself.

Either way, don’t delay and take the necessary steps to reduce financial waste and protect your small business today.

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