Small businesses are usually lean on capital and funding. As per data from Small Business Administration, around 50 percent businesses bite the dust in their 1st year of operation only. Ineffective cost management is one of the crucial reasons behind the alarming rate of startup failure. However, such disasters could be easily tackled if SME owners are slightly more careful about business expense & cost management.
The post below shares insights on how SMEs can reduce business expenses.
Proceed with a strategic budget plan
Your business plan must include a distinct section for operational budget. You can consult a financial advisor to help you in drafting the budget. Otherwise, there are scores of free resources online on small business budget plans. A budget plan extends a strategic guideline to follow while you allocate the business funds. It will keep your expenses aligned to your goal and eliminate risks of unnecessary splurges along the way. You must review your plan every month to check how much the actual expenses have deviated from the main estimate. It will further alert you to locate the areas of overspending and find out solutions to control them before it’s too late.
Outsource some jobs
Outsource some of your jobs instead of struggling with an extensive line of salaried employees. You would definitely need in-house staff for your core team but there are some tasks that you can easily outsource. Some probable jobs to outsource are customer care, HR, virtual assistance etc. Outsourcing saves you from the burden of salaries, perks and benefits that are common for salaried employees every month. When you outsource a certain job, you just have to pay for the job. There is no question of perks or benefits here.
Hire talented interns & freelancers
This is another potential way to lower business operational expenses.
Look for talented interns & freelancers instead of seasoned and salaried employees. Smart interns would charge less than experienced professionals which would be a real cost saver for you. Moreover, dynamic freshers are usually yearning to prove their mettle and they would give their best to your business. On the other hand, if you hire freelancers you would only need to pay when there is work. It will save you from shelling out salaries even during lean months.
Pay invoices early
Do you know you can receive discounts from suppliers when you pay early? Yes, some suppliers offer a handy 2% rebate if you pay the invoice in full in 10 days. So, if possible, try to clear out the pending invoices early. Suppliers often need huge amount of cash to procure raw materials. But as their end-users generally prefer a delayed payment, the vendors often struggle with cash issues. Thus, they offer discounts on invoice to encourage early payments.
Opt for shared workspaces
If you haven’t got your office space yet, try out shared office spaces. The shared option will have you sharing office space with other startups. Thus, it’s always a cheaper option compared to dedicated office spaces. Traditional commercial leases offer huge space but will often bind you in lengthy expensive lease terms. A startup commences its journey with limited number of staff and won’t need larger spaces. There is no point in wasting your capital in high rental rates when you can do with a smaller space initially. A shared office with limited floor space and lesser rental fee would be the ideal solution here. With shared office, there are short-term lease contracts that you can upgrade over time when you will have more employees. Experts have predicted every office would be a co-working space in near future.
Count on energy saver appliances
If you have control over the resources of your office space, zero on energy saver appliances and equipments. Some great examples are – double pane windows, smart thermostats, solar-powered appliances and energy-efficient bulbs.
Cut down on travel expenses
One of the best ways to cut down on business travel expenses is to build a clear & strategic travel policy. Your policy will vividly define what kind of expenses are to be shouldered by the company. Most importantly, you should also set parameters on the level of permissible expenses. It will prevent the risks of unnecessary splurges by employees at company’s expense.
Then, try to book the trips early to enjoy early bird discounts on flight, accommodation and car rental. Look for hotels that are willing to offer special loyalty discounts to SMEs. If your business demands frequent trips, these loyalty discounts would be a strong cost-saver.
Reduction in business expenses is no rocket science. Also, there is no need to compromise on your mission-critical tasks to check the costs. A planned move, strategic steps and regular monitoring of expenses will be enough to prevent the unnecessary splurges.