5 Quick Steps for Controlling Your Business Costs
How you control your business costs may say more about you as a person than it does about your business. If you’re the type who likes to spend, spend, spend when it comes to your private life, it’s likely you’re not the best cost-cutter when it comes to your business either. Contrary to what you might expect, many of the UK’s richest and most successful businessmen lead very frugal lives, preferring to reinvest their money in their businesses rather than waste it on unnecessary luxuries.
However, excessive penny-pinching can be a false economy too, as sometimes you need to spend first in order to save later. With this in mind, let’s consider how financial common sense can help you control your business costs.
1/ Keep a Close Eye on the Money
If you don’t know where your money is going, you’re likely wasting a good part of it. Controlling costs starts with knowing exactly how much is going out, when and to whom. Set a regular time for going over your accounts and stay up to date with all your business expenditure. Only then can you begin to look for ways to save.
2/ Big Spending Can Reveal Big Savings
Look at what your business is spending a lot of money on and consider the necessity of that outlay. Does the business require so much office space, or is the number of customers justifying the high-rent location you chose? Maybe you have more staff on the books than your business currently requires. Examine your largest business costs first as they’re likely to provide a bigger margin for savings.
3/ Invest in the Best
There are times when you’ll need to spend a lot on your business in order to make savings in the long-run. This is particularly true for investment in good business equipment and machinery, but it can also apply to paying higher salaries to attract better staff, or avoiding strategic shortcuts that may cost you dear later on. Always consider the long-term picture, and spend whatever you can reasonably afford to add real value to your business.
4/ Don’t Run Out of Money
Without a healthy cashflow, your business is at risk of failure, however prudent your other financial decisions. You should have a detailed record of your current cashflow status, as well as a 12-month forecast to ensure you don’t run out during the inevitable lean periods. Having too many late or non-payers on the books is one common way businesses run out of cash so chase up those overdue invoices!
5/ Save During the Bumper Months
It’s tempting to spend a lot when business is booming but you should also hold some back for when times are tight. Even if you have high profit margins, you should keep your costs as low as practicable without sacrificing business quality.
Reining in expenses and controlling costs may be unglamorous, but it’s the key to business longevity.