A great business is led by smart decisions and the best teams. However, it’s powered by the power of cold, hard cash. The profitability of a business isn’t all about how well it can market and sell a business. It’s also about how it can use the money earned to the best effect and how good it is at holding on to more of its cash. It’s possible, sometimes essential, to be able to run a business frugally yet successfully.
Understand the flow
Every business has a certain rhythm that they need to start to learn as soon as possible. It might not look like it means all that much in the first year, your spikes and dips. After that, however, you’ll start to see the rhythm play out again. You’ll find your seasonal spikes and your seasonal lulls. These will become the pillar of your cash flow analysis and will give you a better ability to plan with future finances. Knowing your high points will help you capitalise on them when you can and put aside a cash pillow to help you get through the leaner periods of that cycle.
Track as you go along
When you better understand your cash flow forecast, it’s a lot easier to see how smart your business is being with the money. But you have to fully understand where exactly you’re spending your money. Without tracking expenditures in real time, it’s easy to lose sight of your overall finances. That’s why you should consider bookkeeping software that makes it easier to manage all those finances, as well as expense tracking apps that every employer can use to more easily note down their expenses to feed into that real-time tracking. That’s what you can compare to the cash flow forecast to see how off the mark your spending might be making you get.
Make sure the essentials are taken care of first
Priority is an essential skill to learn if you want to make the best use of the cash in the business. It all begins with where you absolutely have to spend some money. If you let spending get from under you and leave yourself unable to deal with essentials, you can get in trouble both financially and legally. For instance, you should consider the legal essentials like payroll and mandatory tax contributions, using payroll recruitment agencies to get someone in charge of them. Otherwise, it’s a little too easy to spend to the point where you don’t have enough to pay your own staff, which will be more than a headache for everyone involved.
Know where to spend your money
Once you have the essentials taken care of and you’re done keeping the workplace up to supply, then you might want to look at investing some back into the business. That’s a great idea, but it could also use a bit more priority behind the process. Know where you should and shouldn’t invest first. A lavish office upgrade might be good for motivating the team, but it’s not the most cost-effective way to do it. Instead, think about how putting the money to training could have a bigger impact. Similarly, if you want to invest in marketing, the longer-lived inbound marketing and building the presence of your business can be more cost-effective than spending a lot on sending advertisements out into the world. When it comes to handling more tasks, then outsourcing some parts might be more cost-effective than trying to bring them into the business.
Be sweet with supply
Your relationship with your suppliers is important, but it’s not something that’s static. As your business perpetually uses the same supplier, they’ll start to see more value in keeping you as a customer. At that point, it might be smart to renegotiate the deal. It’s also a good idea to keep an eye out for any middlemen. Whether they get between you and the supplier or you and the customer. They add costs for both side so if you’re able to get rid of them, you should. This might mean finding your supplier’s supplier to do business with them directly.
Keep finding the little savings
Rethinking your supply chain is just one of the ways to save a bit of money on the essentials of running the business. For instance, when it comes to employee costs, you should think about how many resources you need yourself to spend. Do they need office space and an office computer? Or could they use their own devices to work remotely from home? Do you need such an extensive filing system or could you go paperless and save tons of energy and printing costs all at once? There are a lot of little savings to be made in business. Take the time occasionally to look over how you do everything and see if you can’t get more efficient. Never accept the status quo.
Keep an eye on where to find some cash
At some point in future, your business is going to need a cash injection. It might be to deal with a lull in business, it might be to get the right funds in to prepare it to grow to the next stage and scale to future success. The fact is that you need to start looking at where you might acquire that funding when you need it. Could a sponsor at an event help you broadcast your message at less cost? Do you have room for some investors? Can a loan help you cross the bridge of scaling? You need to always know your options of where you can find some extra cash.
Without a proper system to prioritise how you spend your cash and a keen eye on how you can cut down where you’re spending too much, it’s all too easy to really lose control of your finances. Without a proper grip on them, a business will be too easily rocked by a crisis. Keep the tips above in mind to stabilise the business and better deal with any bumps in the road.