How to Reign in the Expenses When Running an SME
Just like with personal finance for individuals, it is important that the people behind the operations of a small to medium size enterprise manage the business’ finances with the same zeal for cost cutting. There are many more steps that can be taken by enterprising staff looking for ways to manage expenses better inside the business.
Companies often only look to reduce expenses after they begin running into difficulties, but the best time to do it is as a standard practice to avoid overspending during every operational year. This way, the business is already run in a lean fashion, which allows it to weather a storm better than its peers and expand when others are barely hanging on.
Here are a few ways to be smarter with the business to save money.
Reduce Electricity Usage
There are some smart ways to reduce overall usage of electricity in the business. Lights tend to get left on everywhere. This isn’t always needed as long as it’s safe to turn off the lights, then do so when the last person leaves the premises (never sacrifice safety).
Switching out original lighting for LED lighting is also an option. The changeover is initially a little expensive, but the brighter illumination level has been shown to improve staff productivity and the lower cost of energy-efficient light bulbs gets the costs down over time.
Computers that are not needed should be powered down. The same goes for network and personal printers and copiers. A PC put into standby mode is still consuming power, albeit at a lower level. Keep the servers and communication equipment powered up that’s required for the business, but the PCs used by workers aren’t needed overnight or over the weekend in most companies.
Look at the total cost of software and consider alternatives. It’s not always necessary for every employee to have a licensed version of Microsoft Office or the latest version that includes all the main applications including Excel, Word, PowerPoint, and Access. There are online versions of Office compatible software, such as Google Docs and Office Online which are perfectly usable.
Take advantage of a situation where a staff member chooses to change employers by seeing whether task responsibilities can be reorganized to cover the work with the existing personnel. If necessary, meet with a motivated staff member to see whether they believe they can cover the extra responsibilities with an agreed pay rise. The training costs and pay bump won’t match the cost of replacing the previous staff member, making both a cost saving and a growth opportunity.
Look at the roles that the staff cover and the tasks they perform. Consider what will be needed in the future and how existing staff can be retained or multi-skilled to reduce the overall headcount. Avoiding expanding staff costs while improving productivity is an excellent way to control costs while the company grows.
Limited Issuance of Company Cars
The use of a company car as a perk is an expensive one for companies. Only personnel who spend a considerable amount of time on the road should be considered for a vehicle provided by the company. In other cases, it’s possible to provide some reimbursement for gas money used on occasional trips rather than fund the cost of short-term vehicle lease agreements or outright vehicle purchases.
The move towards an entirely paperless office is a great way to save on costs. Making copies and maintaining filing systems (let alone the employment of a filing clerk) should be removed other than for the most essential documents. Digital backups and off-site backup solutions are inexpensive solutions that save floor space, personnel and time.
Reducing the Cost of Financing
With a business that has an overdraft facility, an ongoing line of credit, which is drawn down periodically, or a term loan, look at ways to reduce the amount borrowed and the rate being paid. Shop around for better options to see whether the borrowed money can be refinanced at a lower ongoing cost.
Keep Outstanding Receivables Low
The number of outstanding receivables that the accounting team have been yet unable to collect from clients restricts the available cash in the business. Slowing down the cash flowing through the business increases the strain on funding and the need to borrow more. Look at ways to incentivize customers to pay sooner like automatic payment options or discounts for early payment.
Be especially careful with potential bad debts. With smaller companies, consider outsourcing the bad debt accounts to specialists who can chase the debts for a lower cost than can be done in-house and usually with a higher success rate too.
There are many different approaches to take when looking at cutting the cost of running a business. From the one-off expenses to the regular ones and the sources of business funding, these are all a factor in the total economic picture of the company. Also, consider incentivizing your staff where they get paid for making actionable cost-saving suggestions.