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.
Letitia Booty is a special projects journalist for Business Advice. She has a BA in English Literature from the University of East Anglia, and since graduating she has written for a variety of trade titles. Most recently, she was a reporter at SME magazine.