Small businesses play an important role in a country’s economy. In the US alone, enterprises with less than 500 employees already contribute more than 40% of the total GDP, and account for almost 50% of jobs nationwide. Thus, these closures have impacted many people’s lives in several ways.
Unfortunately, many entrepreneurs tend to become too focused on sales and revenue generation and sometimes fail to pay close attention to their regular expenditures. This can have a big impact on their profitability and can hinder their future growth.
With the current pandemic negatively affecting consumer spending, supply chain, and traditional operations, it has become even more crucial for businesses to keep a close eye on the way their money is spent. In a survey of 5,800 small businesses across different industries in the US, researchers have found that almost 50% have been forced to shut down or temporarily halt operations during this period. Majority of these small business had problems with their cash flow and did not have enough budget to cover even two weeks of their usual expenses.
This highlights a need for small enterprises to improve their chances of survival by streamlining operations and finding better ways of balancing their income and expenditures. Entrepreneurs should start thinking of strategies to improve their cash flow without negatively impacting the efficiency of their business operations.
If you own a small business or are involved in managing one, take the time to look at the way you have been doing things and consider if there is a need to reinvent yourself. Look at your cash flow and think of creative solutions to meet your business needs. Take a look at this list to help you get started:
Table of Contents
1. Review Salary Structures
When running a small business, you need to pay close attention to the compensation packages being offered to your employees because a big chunk of your budget will be allocated for this expense. Offering attractive salaries can help you pull in talented workers, but this is not the only way to do it.
Highly skilled workers are often more open to unconventional offers because they are confident in their own output and can afford to take risks. Look for these types of talents and try to offer them performance based incentives, variable bonuses, or stock options in lieu of a high but fixed salary. Not only will you be able to lower your payroll costs, but you will also be able to make them personally invested in the company’s overall performance and profitability.
2. Make Use Of Business Tools
Instead of hiring several people to perform certain functions, make use of available business tools and applications to improve efficiency. There are many options available for commonly used business processes like payroll management, vendor relations, customer data management, and supply chain administration.
Many of these tools would also allow you to go paperless, thus saving you a significant amount in office supplies and postage charges while making file keeping easier as everything is now digital. If you have already started your operations in the traditional way, you can simply convert your current files into digital copies by scanning them and storing them on your computer or shared drives.
3. Avoid Unnecessary Expenses
The way business is done has changed drastically in the past couple of years, and many of the things you previously thought to be necessary for your business operations may no longer be relevant in this new age. After trying out other options to cope with the pandemic, people have surprisingly found these new ways to be equally, if not more, efficient in conducting business.
For example, meetings are not expected to be done face to face all the time, thus saving you time and money that were used to be spent for transportation. Likewise, it may not be as important for your company to have a physical office space if everyone can work remotely. Instead, you can look for a virtual office space for rent that can support your administrative needs while enabling you to save on operating costs like utilities, insurance, as well as phone and internet bills.
4. Maximize Outsourcing
While it is beneficial for businesses to have skilled and experienced employees in the team, these workers do not necessarily have to be employed full time especially if there are not enough tasks to maximize their time. Have a discussion with your department managers and identify which roles truly call for dedicated manpower, and which ones would function equally well with part-time or freelance staff.
Some key functions can even be outsourced to specialized service providers, such as human resources, accounting, legal, IT support, and customer support. This would enable you to lower your expenses on salaries, statutory benefits, and office equipment while providing your company with the expertise that you need for these specific functions.
5. Negotiate With Suppliers
Review your contract terms with suppliers and check if they offer rebates or discounts upon meeting certain conditions like early payment or wholesale purchases. Even if they currently do not offer any of these in their standard contracts, try to inquire with your account manager and negotiate special terms.
Most suppliers would at least consider giving you some kind of benefit, especially if you are a long-term client and have a good credit standing with them. You could also try to approach other suppliers and see if they would be able to present a better offer without sacrificing on quality.
6. Manage Your Financial Activities
Many banking activities come with corresponding fees and charges, but they are ways to avoid them as long as you are aware of the terms and conditions set by the financial institution. Small transaction fees for regular activities like ATM withdrawals and debit card usage can accumulate over time, leading to a significant impact on your total expenditures.
If your company uses credit cards for certain purchases, make sure to pay the balance on time and in full so you can avoid paying late payment fees or any interest charges on the balance amount. Another option is to transfer the remaining balance to another card that offers 0% interest on balance transfers in order to buy you more time to pay off the balance without incurring additional charges.
