As a small business owner, you understand the importance of drumming up new sales and growing your company.
But as the adage goes, ‘a penny saved is a penny earned’. Thus, one of the ways to grow your bottom-line is to find ways to cut costs, in turn, generating money you can save for a rainy day or invest in growing your business.
“A constant focus on identifying and cutting unnecessary costs and driving efficiency should be part of every South African business owner’s list of priorities,” says Siphethe Dumeko, CFO at Business Partners.
He suggests the following tips for minimising costs:
■ Negotiate with suppliers
Remember that suppliers are often willing to negotiate for mutually beneficial price structures. Suppliers may offer discounts on bulk orders, and if the business uses certain goods regularly, buying wholesale may be the answer. If the quantity (at better wholesale rates) is too large, explore opportunities to partner with neighbouring businesses who are willing to buy and split bulk orders together,” Dumeko suggests.
As part of this process, Dumeko says business owners should also renegotiate their equipment leases and maintenance and service contracts. It may be better to pay for repairs on an ad hoc basis.”
■ Look for and apply new tech
Almost every day new technology emerges that can make business processes cheaper. Cheap data calls are now possible in most urban settings, telematics gives you unprecedented control over the movement of your vehicles, route optimisation software shaves thousands of kilometres off delivery rounds, office paper printing and filing is giving way to scanning and electronic documents, more energy efficient machines are constantly being produced and there is a fair amount of online software applications that are available freely nowadays.
■ Reduce incidentals
Once the easily identifiable potential cost saving measures have been analysed, it’s time to look for invisible costs, says Dumeko. “These are the incidental expenses that may not be worth their cost to company. Common examples of these invisible costs are magazine subscriptions, excessive catering for meetings, as well as expensive packaging. Look at ways to reduce waste. Industrial operations can also benefit from ways to reduce material usage, eliminate duplication and/or bottlenecks as well as reducing manufacturing errors. Finding alternative uses for the waste and by-products produced by the business can also be of benefit.”
Pieter Bensch from Sage Africa & Middle East also offers 5 ways to cut costs in your small business:
Become a bargain hunter
Run your small business the way that the head of a frugal household might manage the home finances.
Buy consumables such as toilet paper, coffee, and stationery in bulk and keep your eyes open for discounted offers when you need to stock up. (Note: This will only pay off if you keep the goods under lock and key to make sure colleagues don’t use more of them than they should).
Buying generic (‘no-name’) goods rather than well-known brands when they’re functionally identical can be a real cost-saver. And rather than purchasing vehicles, office furniture, and other big-ticket items new, look out for gently used second-hand goods that can be much cheaper. Another alternative for big purchases like vehicles and office equipment is to look at leasing rather than buying to preserve your capital.
Check the recurring payments coming off your bank accounts
If you have a lot of smallish transactions going through your banking account, you can miss recurring payments you’re making for services that you no longer need but forgot to cancel. For example, you may still be paying one Internet Service Provider (ISP) when you moved your business to another provider six months ago. Or perhaps you have a contract for a data SIM you never use. Check and stop any services you no longer require.
Move to the cloud to automate processes
Perhaps you are using Excel to manage your money, invoice clients, run the payroll, and other financial tasks. Consider purchasing a cloud-based (online) accounting and payroll solution to automate these processes and save yourself a lot of effort. After all, time is money. A cloud solution is paid for by the month – no upfront capital investment.
By moving to a cloud solution, you can redirect those hours you spent on manual data capture and cross-checking towards growing your business or doing billable work.
Scrutinise costs for essential services
Look at what you’re paying for banking, fibre, mobile data and telephone, insurance and other essential services. Consider whether you’re on the right package or plan for your needs – for example, do you use all the voice minutes in your cellphone contract or should you downgrade?
Get quotes from competitive providers and let your suppliers and service providers know you may move for a better deal. It’s time-consuming, but doing your homework can save you a small fortune each month.
Consider allowing people to work remotely
If there are people on your team who could do their work from home or who spend most of their time on the road, offer them the option to work remotely. If you get enough takers, you can avoid moving into a bigger and more expensive premises when the business is growing, or perhaps even downsize to a smaller office. Another tip is to encourage people to meet via the phone, or videoconferencing tools such as Microsoft Teams or Skype when possible, instead of racking up road and air miles.
Save and invest
Once you are saving money, be sure to put it in an interest-bearing account so that it makes more money for you. If you run a limited company, bank it in a business money market account. If you are a sole proprietor, look at opening tax-free savings account, which lets you earn interest tax-free – a win-win for your business.