The Five Ways To Save Your Small Business Expenses
Don’t we all agree that managing our home business and especially the monetary part is too frustrating? If we revise the stats, 50% of the small businesses operate from home. Around 84% of small businesses fail because of financial mismanagement. This clearly states if you want to have a look at where your small business is failing, do check at your expenses.
Here are some points to help you manage your business expenses-
Monitor all that you spend
The first step towards managing your financial status is to monitor what you spend. Do you keep a county of every penny you spend in a day, a month, a week or a year? If you don’t you really are in trouble. Not monitoring your expenses is a crucial contributing factor to your mismanaged business. If you have multiple accounts i.e savings account, credit card or checking account, make sure that you know how much you spend from the account or how much you add to the account. Overspending or misusing funds could be a huge concern for your business in future.
It is also important to keep an eye on the uncashed checks. In case you grant a check, be sure that you monitor the spending as you could end up with an overdrawn account or overdraft limit.
For business persons, it is easy to spend via credit cards. For example- buying a coffee every hour or paying a little extra to the other staff but at the end it all sums up to be an amount that creates a hole in the pocket. So, spend wisely and more than that, keep a check on every money your pocket loses.
Divide personal funds and business funds
Not dividing your personal and business expenses might lead to overspending or manipulated cash flow. If you don’t have a separate account for business, create one now as it is easy to manage a business account rather than submerging into different accounts. Since the business bank statements are useful for tracking profitability, monitoring spending or reconciling account books, it is necessary to have a separate business account.
If you don’t have a separate account, it will be further complicated to track the overall withdrawn account, know the deposited funds, or combine funds that actually makes the monitoring of expenses difficult. There might be chances that you mix your personal funds into a business account or vice versa, that’s why dividing business and personal funds is important.
Having too much goods and collecting it without usage is not a good idea, neither a shrinking inventory is helpful as you have to see off your customers sooner. This is why you need to have a balance in your inventory, neither too much nor too less.
It’s important to record every inventory purchase and sales in your account books as each product counts. Do monitor the total sum you have and what have you saved for emergencies. To start, you can have a cash reserve account that will save for you in case you have a lesser amount left in your business account. It is always profitable to have an alternative account.
Cutting costs will help in long run
There are several steps to save expenses but the two most important are to cut costs and to decrease expenses thereby increasing income. In case you’re having a difficult time to manage your expenses, check if you can cut costs and increase revenue.
To cut costs, the simple way is to first analyze your expenses and then cut the expenses and amounts, do cut the unnecessary expenses, check if there could be savings from the already spent amount. To decrease expenses try finding a new vendor. Similarly to increase revenue, provide discounts to your customers, do better social media advertisement, build loyalty programs for businesses and make email marketing a part of your business. These simple little tricks can help a lot in your business.
Have a budget
If you don’t have a budget, every previous step has no value. As small businesses continue to flourish, creating a budget becomes the essential need. Budget decides how much money you will spend, what you can afford to spend and where you should spend your money.
When you have a budget, you know how much money you exactly have which helps in managing the money wisely and saving some for the future. The budget also decides how much money your business will receive back and what’s the best way to safe keep that money.
At times when your revenue is lower than the defined budget, you need to cut expenses and increase income or vice versa.