Cash is king any day of the week. So, you must remember that businesses don’t burst; they just run out of cash. Therefore, you need to be creative and get tough with your cash flow strategies. So, the following are our 10 business cost-cutting methods to show you how you can do it when the situation arises.
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Work out forecast strategies
Work on improving your capacity to forecast your future business numbers. This will put you in a better position to make difficult decisions based on resourcing levels, marketing, and inventory through the recession and recovery cycles.
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Chase your debtors
Chasing persons for account settlement of long-standing debts is always among tedious tasks. However, failing in recovering your debts in a prompt and timely fashion, you extend your clients an overdraft facility. Commercial banks can offer overdrafts, not you. Thus, get your outstanding debts clear now.
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Review Utility expenses
Gas, Water, and Electricity bills are always among the highest controllable expenses your business need to pay. Make sure to shop around regularly for the cheapest supplier and avert running month to month on forecasted meter readings. Many a time, baby milk powder suppliers find it tough to get rid of their utility expenses.
If you find that a rebate is outstanding on you, immediately become a dog having a bone; no matter what the amount. Don’t forget they will treat you indifferently if the tables get turned.
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Restrict business travel
A sizeable chunk of business travel is an obligation or bore out instead of necessity. Open with your clients and establish the necessity of your attendance in person. Go for suggesting alternatives of communication methods. After the pandemic, virtual conferences have become a new normal; so think about it.
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Cut the Cost of Debt
Oftentimes excessive and expensive debt drags companies into deep trouble. So, get your accounts settled and convert a portion of the cash to pay off some of the debt. Shop around through other banks and examine if they are interested in taking over the loan. Although times are still tough for them lending money is their job; so why try and grab some extra cash.
Repetitive or automation processes.
Decide if your sales transactions can go online. Further, develop some guts in taking some unpopular decisions such as automating some human procedures. It’s tough but doesn’t forget positive cash flow and your business’s health are a priority.
Consider outsourcing
For example, if you are among baby milk and confectionery products suppliers, consider outsourcing part or your whole confectionery portion to another region.
Similarly, If you are operating in the labor markets, consider outsourcing some tasks to China or India. However, you need to beware as outsourcing often demands time-consuming and careful managing while minimizing direct labor costs can enhance your time while regulating the quality of output.
Cut consultancy expense.
Using consultants instead of staff can be afoot in the wrong direction. Keeping a resource that is charged only when required is great; however, when you choose to uphold their services you will pay for it.
Consider if a core member of staff could tackle the same role if given access to appropriate training and support. Alternatively, see if you can negotiate a low consultant rate with an integrated PRP rate.
Take the top-down approach for cost-cutting
Starting cost-cutting strategies with directors is necessary. Remove perks of senior staff. If they have the compulsion to take a client to dine then go somewhere that is offering a two for one offer. You may go for cost-cutting without appearing cheap. These saving steps are tough but the message goes loud and clear to the rest of the organization.
Get staff buy-in
Cost-cutting and staff go hand in hand. However, when reality kicks in, their jobs might depend on it and they will likely play along. Thus, repose trust in your staff and let them be open about situational facts and the significance of everyone’s contribution. Everyone should do their bit even in the form of cash is kind.
Quick Tips for Further Cost Cutting
Cut conventional advertisement in favor of low-cost alternatives
Traditional methods for advertising like TV Ads or newspaper ads or putting up billboards can be expensive during financial crunch days. Explore and rely more on digital tools like Facebook Ads and Google AdWords to showcase your product to your targeted audience.
You can hunt users from specific age-group, cities, countries, and demographics and can easily carve out good ROI on your advertising investment.
Be a good neighbor
Costs for promotions together with split advertising with neighboring businesses can be a good cost-cutting strategy. You can jointly purchase the billboard space or make your advertising alliance by sharing mailing distribution channels, lists, and suppliers with the businesses that offer complementary goods as yours.
Make partnerships for advertising
You may have observed the TV ads where the DTH box comes with a TV. So, you can explore different relevant opportunities to make partnerships with non-competing organizations to save on marketing expenses while promoting your product.
It’s crucial to assure that your partnership is mutually beneficial for both you and your partner; otherwise, both will be far apart from the desired results.
Minimize the number of landline telephone sets
If you are still using landlines then it’s time to rethink and change your strategy for cost-cutting. Indeed we have lived in an era where landline set was a necessity; however, it is no longer the case. Smartphones and mobile sets are cheaper while they offer much more flexibility.
Further, there is a cost-saving technique in the shape of a cloud telephony system. Through the system, you can route calls between mobile numbers.
Use or shift to open source software
Open-source software can save you a substantial amount of money within no time. When procuring new Laptops for your teams, you can opt for the systems that are without Windows OS. Those machines are cheaper and you can run them with open-source OS such as Ubuntu. Further, you can obtain an open-source office suite in place of Microsoft Office and do cost-cutting on licensing costs.
There are loads of open-source software in the market like Document management, Google Docs, CRM, etc. You can get them and they are easy to use as they don’t cost a penny.
Don’t Buy in Bulk
Surprised? But it is fact. Often small businesses buy things such as office supplies in bulk as it costs less. For example, if you purchase a set of 100 pieces of printing paper, the cost per set will be less compared to buying them one at a time.
So, when you are in cost-cutting mode, you need to ask yourself: How you will use 100 sets of printing paper? Probably, you’d lose them or see them torn out before you even use them.
As a business owner, you can massively reduce your expenses by buying what you need today and don’t think about tomorrow. All the focus should be to improve your cash flow.
Wrap Up
Managing business and doing cost-cutting is everyone’s duty and responsibility in your organization. When times get challenging, you need to show your strong economical muscles. Therefore, using the above tips can toughen your organization’s financial muscles and you can rally your troops in preparation for good times.
