A failure to control costs can end up causing cash flow problems, and that can end up threatening your company’s survival. Here’s a guide to cutting business costs.
Letting business costs get out of hand is a sure-fire way to run your business into the ground, which is why KPMG Small Business Accounting has put together a guide to help businesses get to grips with expenditure.
“Ideally, you should create monthly budgets for all key cost areas of your business. Before you can do that, you must forecast your likely sales, then you know roughly how much you can afford to spend each month. Your forecasts need to realistic, otherwise you risk setting budgets that are too high,” said Bivek Sharma, head of KPMG Small Business Accounting.
“If your actual sales are less than you forecasted that month, you can reduce your budget for the next month, so you’re not spending at an unsustainable level, which can have disastrous consequences. Budgeting forces you to think carefully about how your business spends money. Budgeting can ensure that you don’t put your business at risk by spending too much.”
Some small businesses have problems right from the start, which often come as a result of poor budgeting. However, it is possible to find ways to cut costs and turn things around.
The very first thing to look at is a proper budget that takes all costs in to account. Spending too much in one area might seem like a minor issue, but if you do that throughout your business it can snowball into a much bigger problem.
Making sure your finances are in order should be a priority from the very start.
Much will depend on your type of business, but there’s nothing wrong with running your business from home until you have the money to rent a working space. If you absolutely need to rent a commercial premises, shop around for the best deal.
Once your business is up and running, always be on the lookout for a bargain.
Could you find a cheaper supplier for your raw materials? Could you outsource certain processes? Don’t blindly stick with suppliers out of loyalty – if there’s someone willing to offer you the same standard of service for a cheaper price, it’s just good business sense to switch.
Lastly, don’t be afraid to spend money where necessary to save money in the long term. For example, could you save money down the line by investing in staff training, or better technology? Weigh up each decision, and don’t make any rash decisions.
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