Keeping your business in a positive cashflow position is vital. However, you can only do this if your cash inflows (sales revenues and other income) outweigh your cash outflows (overheads, supplier costs and other liabilities like tax costs or loan repayments).
A time-honoured way to re-balance the cashflow scales is to get in better control of your spending. This process of ‘spend management’ is all about reviewing your expenses, negotiating better deals with suppliers and getting a razor-sharp focus on reducing your cash outflows. Here are some proven ways to cut costs in business:
Review your current suppliers
Once you have a reliable supply chain set up, it’s very easy to get into the habit of using the same suppliers over and over again. But the reality is that there’s real value in reviewing the suppliers you’re using from time to time, so you understand the supplier landscape and don’t miss out on better deals.
Prices go up and down in the marketplace, and new suppliers will appear in the market. So it’s worth regularly checking for alternative providers that can offer cheaper rates, better value for money or more beneficial payment terms.
Negotiate better prices with your trusted suppliers
It’s quite possible you’re happy with some of the supplier relationships you have, but still want to cut down on your spending. In this scenario, it’s well worth negotiating. Very few suppliers will want to lose a valued customer, especially if you’re a long-term client who’s bringing in reliable revenue. If the relationship is strong enough, they’ll be open to negotiating a deal that works for both of you.
See if you can push the prices down, get discounts for buying in bulk or negotiate a value-add. And, if possible, see if you can get them to agree to a trade credit agreement, where you can pay for the goods and services over a longer period of time to boost your cashflow.
Find ways to cut business expenses
It may sound obvious, but one of the easiest ways to cut your expenditure is to be a bit more frugal with your overall spending. You can start by looking hard at your spending for stock, raw materials and services. Just buy what you need to stay operational and keep a close eye on when new orders will be needed. A ‘just in time’ approach can help you to avoid using up your available cash.
Where day-to-day spending is concerned, you can make a big difference to your expenditure by making small changes to your outgoings. If you go through your spending with a fine-tooth comb, you’ll soon find costs and expenses that can be cut back or stopped entirely. Other cash-saving options could include putting a limit on staff expense cards or cancelling unnecessary software and magazine subscriptions.
Use a purchase order system
If you don’t currently use a purchase order system, make it a priority because it will help you to avoid unnecessary purchases. In essence, any purchase made by the business needs a purchase order (PO) number assigned to it before an employee can buy anything.
As well as making it just a bit harder to spend money, a PO system allows you to allocate a budget and track spending against a cost centre or project. Having a PO number also makes it easier to track incoming invoices. Suppliers can quote the PO number on their invoice, so you can easily match the bill to the allocated job and budget.
Implement tech to get in control of the numbers
With today’s cloud accounting software, expenses apps and inventory tools, it’s easier than ever to have a real-time transparent view of spending. But before you commit to any app or platform, we recommend you get good advice about what will best suit your business. The ol’ ‘trial and error’ approach isn’t recommended, because it can mess with the integrity of your financial data. Find out about our technology and systems service.
Get an expert to go through the numbers with you
When it comes to cost cutting in business, sometimes you can’t see the wood for the trees. That’s when it helps to consult an expert. Contact us to see if working with a Traktion actionhero is right for you.