One of the key challenges for businesses of any size is that of controlling expenses. It’s also one of the daily challenges in our personal lives!
Sort out your needs from your wants and give the needs priority.
The businesses that are best at controlling expenses are very clear about their business strategy and have excellent financial records and systems in place. Here are a few useful tips that should keep expenses down:
- Have a clear strategy. If you are clear about the direction you want your business to take you will also have a clear idea of where you need to incur costs and what costs can be eliminated. Outsource where you will get a positive financial benefit.
- Get three quotes. Make it a company policy because getting two quotes may only show the disparity between the quality of product or service; three confirms the picture. Make sure quotes are like for like and in writing!! This sounds obvious but it is often overlooked.
- Have clear policies about who can order to what level in the business and require counter signatories if you feel that is necessary.
- Have firm company policies about expenses such as travel: which agencies to use, what class, car hire, hotel ratings, etc.
- Lead by example. As the owner, you set the pace for how your people see spending in the business. It may be your business but how you conduct business spending is noticed by your team!
- Don’t stop spending on marketing when times are tough and sales are down. Spend more in fact and spend less on other things. Just make sure that your marketing expenditure is the most productive and sales-focused it can be; so keep data on the source of business/sales.
- Take note of businesses that run on a low-cost base and imitate them where you can.
- Profitability, not turnover, determines business success. Teach your team to think that way as well.
- Banking. Make sure that you are getting the best bank rates and deals on everything: most service and product costs are open to negotiation, so do deals for quantity.
- Budget. Compare and contrast monthly expenses- actual to budget. This will ensure you aren’t overspending and that your business is sticking to the plan. This will also assist with getting greater accuracy in your cash flow forecast.