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Guide to cutting costs for small businesses

By Edited Jan 3, 2016 0 0

Manage your expenditure efficiently, and you'll find a balance between your short-term and long-term perspectives. You can’t have a clear understanding of where you're going, unless you know where you coming from. Financial statements, therefore, hold crucial information about the health of your business. When managing costs, you need to have proper financial information to make informed decisions. Always prepare financial accounts, which should include an income and cash flow statement.  

These are aimed at analysing the business’ income and expenses. Armed with this information, you need to start getting creative and do some homework. Find out whether there are cheaper alternatives for what you are spending money on. If you’re not doing so already, develop and use management accounts, specifically budgets. This will give you an idea of how much you have to work with. Whenever you want to spend money, ask yourself:  

* ls it essential?  
* Have you budgeted for it?  
* Can your business afford it right now? This will help you not to spend beyond your means.  

Short-term realities of a business usually focus on managing current cash flow. As a business owner, you need to make sure that there is enough cash to run immediate operations, while securing long-term deals.  

* Use part-time staff instead of full-time staff. This will allow you to better manage your cash flow and also limit long-term spending.  
* A number of business owners have given up their leases to move back into their garages and home offices to reduce costs.  
* Alternatively, some share the costs of premises and resources with other business owners in a similar field who are not direct competitors.  

Use free software instead of licensed software that comes with a cost. There are a number of good options that have a similar look and feel to the traditional licensed options. Free internet platforms are also available for communication gateways. Skype, for example, provides a means of communicating at the cost of your broad-band connection as opposed to traditional cell phone and landline costs, which are higher. It's also much cheaper than flying from city to city for meetings.  

Free networks such as Facebook, Linkedln, Twitter, Google+ and Ning (to name but a few) make it possible to market your goods and services to a broad and selective market, either for free or at a very low cost. Use students as much as possible as interns or volunteers. Don't limit yourself to high schools, approach colleges and  universities. Students, even Masters and PhD candidates, need experience.

But be prepared to spend time building their skills. Sometimes entrepreneurs can be so busy trying to stay afloat that they are not scanning the market enough to measure what else is coming, see who is doing things differently and what improvements they can and should be making in the business.  

Research and development is not just for big business; it’s the competitive edge of  A significant amount of time and money goes into running a business. A lot of it is unavoidable and necessary. So it’s important to understand your business well enough to distinguish between  essential and non-essential  expenditure. Cutting costs may not always be the answer to your business troubles so understand what is core to your business and what isn't.  

Small or big - to do things by the book, you invoice, the sooner you'll get paid. Earn interest on your money with an interest bearing cheque account and make daily deposits. Even if the interest is low - like two or  three per cent - it's still better than earning no interest at all.

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