Maintaining tight control over fixed and variable expenses is an essential part of maximising cash flow and profits in your small business. There are a number of techniques you can employ to manage expenses and prepare for unforeseen costs over the year. Below are some suggestions to better control expenses.
1. Make a plan
You need to evaluate where your business is now and where you want to take it in the future. A well-thought-out road map is essential to forecast expenses and provide for contingencies properly. For example, if you intend to pursue a new market next year, you have to build the related costs into your forecast.
2. Track expenses diligently
You have to understand your historic costs before planning for the future. It requires gathering data effectively and efficiently. Tracking your costs shouldn’t be an afterthought. It needs to be an integral part of your ongoing operations.
3. Benchmark against your industry
Establish metrics that are meaningful to your business and comparable to those used by other companies in your industry. If you see you’re spending more in specific categories, then drill down, investigate why and take appropriate action to reduce those costs to industry norms.
4. Manage variable costs
You should look into your company’s past variable expenses and calculate what percentage of sales they represent. Historic percentages provide both a good indicator of potential future costs and a benchmark to use in keeping those costs in line with selling activity.
5. Get tough on fixed costs
Fixed costs could make or break your business because they reflect the efficiency of your business. If you are not careful about them, you could accumulate the fixed costs without knowing it. Wages and burdens are a good place to start if you have more than 10 staff.
6. Invest in technology
Explore new technologies that may help your business improve efficiency, increase productivity and reduce costs. For example, many businesses are now using cloud computing systems instead of in-house hardware that can be relatively expensive to buy and maintain.
7. Offer incentives to staff
Make people accountable for costs and establish appropriate rewards for employees who find ways to reduce expenses. This helps to create a zero-waste culture within your organisation. It also helps motivate staff members charged with implementing expense-reduction initiatives to stay on task and be creative.
Managing cost is a life blood of your business. You cannot be complacent in cost tracking and monitoring.
Apivut @ SiB
“At Strategy in Bytes, we help small business owners with minimum marketing resources to save money by creating a differentiation strategy to drive business growth and increase profitability.”