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Almost every small business fails within two years of being launched. The reason for this is almost always running out of money (rarely poor ideas) and this can often be explained by the company failing to manage its finances efficiently.
In this article, we’ve highlighted three things small businesses can do to control costs.
Use cash flow management to keep on top of your costs
Cash flow management is fairly self-explanatory. It’s managing the flow of money in and out of your business, so you always have enough capital to pay your creditors, staff and yourself. It keeps the lights on and allows your business to survive.
There are many ways you can use cash flow management to ensure your small business uses expenditure efficiency to control its finances:
Become an Insider
- Shorter payments terms for your clients (15 days instead of 30)
- Leasing the equipment you don’t use (idle desks, office space, etc.)
- Performance-related contracts (for both your staff and your customers)
This manages your finances more efficiently by getting payment quicker, getting the most out of your assets, and linking pay to the success of your business.
We’re not suggesting any one of these is better than the other. Each company is different and some examples of cash flow management might not be suitable for yours. Check out the different ways you can manage your cash flow and see which ones you think are most applicable to your business.
Monitor your employees to manage projects & tasks effectively
Employees are often the biggest expenditure for any company. But they’re also the greatest asset for your business, because they put your ideas into practice. This is why they’re the financial aspect of your business that requires the most careful and efficient management.
You can manage your employees more effectively by using time-tracking software to review the projects they’re working on and the tasks they complete. This improves how you control your finances in the following ways:
- Allows you to put the right people on the right tasks and projects
- Lets you highlight any training gaps that need to be filled
- Gives you the data to spot opportunities for internal promotions
This helps you to keep on top of your finances by ensuring you get the most out of the people you employ, so you get max value from your greatest expenditure/asset.
Of course, you may have your own methods of monitoring your workers and it may be you just need to tweak them rather than introducing a whole new process. The key is that you have practices in place that ensure your small business gets a good return on the investment it makes into its employees.
Consolidate your software solutions
One way small businesses often hemorrhage cash is by using a raft of separate software solutions to manage daily operations. Not only is this inefficient and often a barrier to productivity, but it typically results in too much unnecessary expenditure. What’s more, certain tools may perform overlapping functions, meaning you’re doubling up for no reason.
Instead, many software providers offer all-in-one solutions that enable businesses to streamline and centralize their operations, increasing efficiency while reducing monthly outgoings. Software consolidation can be beneficial to small businesses in the following ways:
- Enables you to consolidate fees into one predictable, manageable amount
- Prevents you wasting time moving between separate tools, so time can be spent more productively
- Reduces the time and money spent training staff members to use multiple tools
When it comes to hosting your company website, for example, you could opt for a basic hosting package that includes little beyond a domain name and a limited amount of storage, but that likely means you’ll need to source separate solutions for security, performance optimization, and email hosting to name a few — and that’s not a particularly cost-efficient way for a small business to manage its IT infrastructure.
However, with a managed hosting provider such as Cloudways (a popular WordPress hosting solution, the preferred CMS of many small businesses), you get all of that included for a manageable monthly fee — and what’s more, with a cloud-based hosting provider you typically only pay for the resources you use, so there’ll be no wasted expenditure.
Similarly, take something like ClickUp. This all-in-one productivity tool streamlines product management, time tracking, communication, reporting and more into one central place, negating the need for multiple disparate software solutions: instead of deploying one solution for time tracking, another for workplace comms and so on (which can increase costs while hampering productivity), all activities are routed through one system.
Cash flow management, employee monitoring, and software consolidation are three great examples of how your small business can manage its finances more efficiently.
It might be that all of these things are immediately relevant to your company, or it could be that one stands out as being more important than the others.
Review our suggestions, but remember that if you want the best advice on your finances then you’re best off speaking to a professional. Why? Because they’re qualified to make recommendations.
Editorial Disclaimer: The editorial content on this page is not provided by any of the companies mentioned and has not been endorsed by any of these entities. Opinions expressed here are author's alone
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