If you’re managing a small business, it doesn’t always mean you also have low overhead expenses. Knowing how to track and manage your finances is one way to ensure your business keeps its cash flow and avoids bankruptcy. We listed a few tips on how you can reduce your small business costs and expenses, so you can maximize your profit.
1. Make a budget
Create a feasible and realistic budget. Track down your fixed costs and expenses, such as rental, and payroll. etc. Then, have a good estimate based on the history of your variable running costs, such as shipping and supply costs, storage, etc. It’s also very important to be able to identify your “break-even point” early on. It is where your total revenue just equals your expenses, meaning there is no loss or profit. This number will be the one you want to work as a benchmark if you gaining or losing.
Creating a budget also helps you develop financial discipline, meaning you don’t overspend on things that are not within your business goals. It should also show the areas where you need to cut down on spending.
2. Work on your rental fees
Rental or lease fees are one of the biggest chunks of fixed expenses you need to budget for. Try to work out a better rental fee arrangement or a lower fee with the owner in exchange for something that you have. You can also reduce the space you’re renting to cut costs. If nothing works, explore if you can find a better location.
3. Negotiate with suppliers
Don’t hesitate to ask and negotiate with your suppliers for a better deal or arrangement. As they say, you’ll never know unless you try. If you buy in bulk or place regular large orders and have good payment history, try to ask for bigger discounts or payment terms.
4. Review your subscriptions
Don’t automatically renew your subscriptions and premiums, such as postpaid phone plans, broadband contracts, or others. Once the contract expires, try to ask for a better option or plan. They might have something new and better to offer at a lower price. In terms of loans, try to explore different business loan terms offered by banks.
5. Avoid penalties and fines
Part of your financial budget should include your fixed fees for credit cards or loans. Pay them on time, or better yet, enroll them in an automated payment system. This way, you can avoid unnecessary charges, penalties, and interest.
6. Familiarize yourself with taxes or get a bookkeeper
Keeping a bookkeeper may seem like an added expense, but it can actually help you save on a lot of unnecessary expenses. Even if you run a small business, knowing how much money comes in and goes out is essential. Furthermore, bookkeepers help you accurately file your taxes.
These are just some of our tips to help you manage your expenses and costs to help keep your business afloat. You will pick up more tips and techniques as you run your business.