Managing cash flow can be the single most challenging aspect to managing a small business, particularly in times of steadily increasing costs. To make matters worse, many small business owners believe “it costs what it costs,” which is simply erroneous. Here are 10 tips for small businesses to reduce operating costs and increase cash flow:
1. Leverage consumable spending. It may seem that purchasing paper towels or hand soap periodically is not a significant investment. However, if you consolidate this spending with fewer suppliers, you’re more likely to obtain volume discounts. Consolidating purchases of janitorial supplies with packaging materials, for example, can result in an attractive piece of business for many suppliers who offer a one-stop shopping experience and can reduce your costs in the long run.
2. Online ordering. Purchasing from online stores can free up significant time and help you obtain volume discounts. For example, many office supply companies tier discount programs using data consolidated from online order volumes.
3. Negotiate cell phone plans. The market for cellular service continues to heat up, and by following these three simple rules your costs can be dramatically reduced. First: investigate online offers against in-store offers, as there are often differences in pricing and features. Second: If you’re looking for improved features or pricing, call the provider’s customer service desk and ask to speak with the customer loyalty department to stress your concerns. These people are paid to retain customers and their power far surpasses that of a typical hotline attendant. Third: If you have made the decision to change carriers, request the competing carrier include your cancellation costs as part of the incentive to move your business. Many of the larger carriers will offer discounts which cover up to 90 per cent of the cancellation penalty charge.
4. Switch your telephone service to VOIP. The increasing speed of internet connectivity is making VOIP an increasingly popular option, and there are a growing number of companies offering VOIP telephone service at a fraction of the cost of a typical telephone land line.
5. Need a chair? Buy someone else’s. Upgrading or adding office furniture can be an expensive proposition. Fortunately there are several businesses that sell high quality used furniture at a fraction of the cost. Because many of these dealers tend to be small businesses themselves, customer service levels are generally high and limited warranties are often available.
6. One person’s junk is another person’s treasure. There’s an enormous market for used equipment in North America and abroad. The greatest challenge is locating reputable used equipment dealers. To overcome this challenge, contact those who sell new equipment. If you clearly identify that you are not interested in new equipment, but have a budget to support used equipment, they will often be able to provide you with some reputable dealers, or in fact may sell used equipment themselves. Keep in mind that margins on used equipment are typically high, so make sure to negotiate the final price and don’t be afraid to walk away.
7. Spend time on valuable tasks, and outsource the rest. Time is our most precious resource, and is at a premium when operating a small business. Be conscious of those activities that absorb unnecessary time and do not provide direct value to your customer, then search for opportunities to outsource. You likely are already using a lawyer, an accountant, a banker, and possibly a realtor, but are there other areas which absorb your time and provide no value in growing the business? Increasingly, more businesses are taking advantage of virtual assistants to provide real-time virtual help with office tasks, reporting, and even marketing efforts.
8. Negotiate terms. It’s not uncommon to negotiate the price of a car, a piece of equipment, or even a lease payment, but very few take the time to read and negotiate the terms of agreements which accompany these purchases. Terms associated with a lease, employee benefits, or insurance, for example, can include hidden costs and risk which often appear at the most inopportune time. Read the terms and negotiate with your best interests in mind. The effort will net you reduced risk and improved concessions at least 75 per cent of the time.
9. Not everything needs overnight service. We have become a society that believes everything is time sensitive. Couriers have capitalized on this belief, and continue to grow in both popularity and numbers. If you don’t believe me, just try to understand the confusing pricing structure applied to your courier account. Take time to identify which shipments are time sensitive and which are not. Find more economical, or local couriers or use standard ground delivery services to reduce courier costs.
10. Develop successful habits. Managing operational costs is an ongoing venture; however, doing so can provide significant returns in the form of increased cash flow. Developing a few simple cost management habits is the most effective means to free up cash for further investment into the business: obtain more than one quote; rely on your suppliers to support you as a partner in your success; seek partners who understand your current business position and who will support your growth; treat everything as negotiable, but manage your investment of time appropriately; and seek professionals to manage those tasks that do not add value to the business.