Most small business owners are well aware of their cash flow situation at any given time. Whether you are just starting out with your small business or have been in business for many years, you’ll want to make sure that cost reduction, including operating cost reduction, is one of your core business priorities.
When talking about small business costs we are generally talking about two specific types of costs – production costs, and financial costs. Production costs, which are also known as product costs, are incurred by a business when it manufactures a product or provides a service. These costs include a variety of expenses.
On the other hand, financial costs (also known as financing costs or borrowing costs) are defined as the interest and other costs incurred by a business while borrowing funds.
With that in mind, here are six top tips for helping you to minimise spending and make the most of your business funds while still keeping some funds in reserve to invest in growing and improving your business.
1. Avoid pay full price
Regardless of what type of business or industry you are in, you’ll continually need to spend money on goods and services for your business. These expenses can vary and range from office supplies through to machinery, equipment, furniture, computer hardware, IT infrastructure and systems, coffee machines, and tools of your trade.
You may benefit from spending some time researching classified ads and auction sites to find a real bargain. From second-hand equipment that is no longer needed by another business, through to new stock and equipment being sold as part of a liquidation, or an oversupply of inventory – savings can be easily found if you know where to look for them.
2. Outsourcing
When you start your own small business you are typically required to be the proverbial jack-of-all-trades. However, as your business grows you are going to need additional support. This may not necessarily mean employing staff and adding payroll costs to your bottom line. Instead, you may think about outsourcing some business functions.
There are a number of areas you can look to outsource, from virtual assistants who can help with administration tasks and other day-to-day tasks, through to bookkeepers who can help keep your books in order. Having an extra pair of hands (virtual or otherwise) will free up some of your valuable time so you can focus on your working on your business, not just in your business. Doing so can help ease any pressure you may be feeling regarding your bottom line.
3. Cost-effective website design
In today’s world, having an online presence for your business isn’t a nice to have; it’s a must-have. An enticing, compelling, and convincing company website can be one of the most effective marketing assets of all for your small business.
If you are looking to save on the costs of designing and creating your new company website you can choose to use one of many standard website template designs available online. While template website designs typically won’t offer you the full customisation options and functionality options in terms of design and functionality, they can still deliver an appealing website for your small business.
4. Shop around for your financial services
As a small business, you can benefit from ensuring that your finances are stable and in good health, and that means having access to the financial services your business requires.
Many of us are creatures of habit and will often keep going back to the same financial services provider whenever we need to get a new loan, a business credit card, a new business bank account, or business insurance.
It may be that the current provider of your personal finance accounts does not necessarily offer the best features and benefits for your business banking. As such, it may be in your interest to periodically compare the financial services provider you are currently using with others in the market to ensure that your existing provider is offering the best value to your business. A great way to do that can be to use comparison websites, which let you compare key product features and benefits against pricing.
5. Narrow your focus
Small business owners may benefit from narrowing their focus and concentrating on the core products or services they offer, which invariably are the products and services that clients most commonly request. This can be one of the most effective strategies for cutting costs in your small business, because when you rationalise the number of products and services you offer your business can improve its productivity – and often also produce higher-quality work.
6. Consider launching an e-commerce store
While it simply isn’t possible for every single type of business, eCommerce can be a great model for reducing costs for small business owners. eCommerce small businesses save costs by reducing labour costs and other business costs associated with document preparation, reconciliation, mail preparation, telephone calling, and manual data entry. The use of email and electronic invoicing offer tremendous savings over the traditional business methods.
Avoid the potential pitfalls of reducing costs
While it may sound a little counter-intuitive on paper, reducing costs in your business can actually have a negative consequence for your business. Here are some examples of how reducing costs in your business can have a negative effect on your business:
- Over-dependence on any one supplier may put your business at risk if that one supplier that you’ve hitched your wagon to happens to fail, or if they accept a better offer from one of your competitors.
- Marketing can often be one of the first business functions to be dropped when the going gets tough. But reducing or pausing your marketing activities to reduce your costs will only reduce your chances of new business enquiries.
- Exercising tighter control over your finances may leave you with very little safety margin if your cash flow unexpectedly slows.
- Cutting short-term investment in your business – such as staff training, advertising, new equipment, or new product development – may lead to fewer returns for your business.
So before you make wholesale moves to reduce costs in your business, or take other drastic steps (i.e., cut household costs) you may benefit from double-checking that your planned cost-cutting measures won’t compromise your standards or drastically impact the products or services that your business offers.
BizCover helps small business owners from Adelaide to Annandale and everywhere in between to reduce their risk via business insurance. So whether you require business insurance in South Australia or business insurance in Western Australia or in any other Australian state, you can get it faster online with BizCover while also comparing competitive quotes from Australia’s leading business insurance providers.
Compare competitive business insurance quotes, get covered in only 10 minutes, avoid paperwork, and get back to what you do best. If you prefer to speak with us, you’ll reach our friendly team on 1300 920 874.
This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.
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