According to a study by U.S. Bank, 82% of businesses in the United States fail due to inefficient cash flow management. This can include poor practices in accounts payable or accounts receivable as well as expense issues in other areas of the business. While managing cash flow is a multivariable problem, keeping your recurring cost in check can go a long way to help keep your balance sheet positive. If you’re currently struggling to keep recurring costs down, this article from Corporate Training Hub will provide you with numerous useful solutions.
Create a Budget
The first step toward maintaining cash flow is to create a budget that includes entries off all incoming and outgoing cash. Using a cash budget can allow you to estimate the money coming into and going out of your organization over a given period of time. If your business is new and you’re struggling to set a reliable monthly budget, opt to follow a daily working budget, which you can adjust depending on your business performance.
If your planned budget includes loans from lending institutions, it’s a good idea to check your credit report first. The terms of your loan will largely be determined by your credit history, so it’s prudent to be aware of and try to correct any mistakes on your credit report before applying for any loans.
Cut Down on Excessive Expenses
In every area of a business, there are opportunities to save money by reducing expenses. Here are some effective methods to reduce costs in all areas of your business:
Adopt a Paperless Approach
Record Nations notes that going paperless will instantly save you thousands of dollars which you’d spend on buying paper, ink, postage, mailing supplies, and other office stationery. Paperwork can be one of the largest overhead expenses in many businesses, so having a way to reduce or eliminate that expense is a great way to claw back cash that can be better spent in other areas of the business. Additionally, it’ll allow you to send invoices faster resulting in quicker payments.
Utilize Free Applications
There are hundreds of free applications online that you can use to manage marketing activities, create invoices, handle internal communication, project management, and more. If one or more of these applications results in increased productivity, you can choose to subscribe to paid ones for additional features.
For example, an invoice maker can save the day. This enables you to make great-looking invoices that represent your business well. You can lay out all the relevant billing information you want to communicate as well as your business’s logo and contact information.
Use Smart Marketing Methods
Spending thousands of dollars each month on paid advertisements is no longer the best way to promote your business. This is especially true in digital advertising spaces. Traditional digital advertisements have an incredibly small conversion rate, effectively making them a waste of money for most businesses. The budget typically allocated for traditional ad spending can be repurposed for better use. For maximizing reach and creating a loyal community focus on the following:
- Share content regularly on all your social handles. Your volume should depend on the platform. Some may be best with as little as three posts per week, while others can demand up to five posts per day.
- Publish blogs based on high-ranking keywords used by customers. These are keywords that are highly relevant to your specific business or product. Search engines like Google will help direct traffic to your blog posts that feature them.
- Convert loyal customers into brand ambassadors and incentivize them to share positive reviews and provide referrals. Referrals from existing customers are one of the best ways to attract new customers.
Reduce Risk of Unplanned Costs
Even with excellent planning and care, there is no way to eradicate the risk of unforeseen circumstances. While you should appropriate steps to mitigate the risk of foreseeable or predictable problems, there is no way to account for every negative circumstance that can befall a business. To prevent such a situation from putting financial strain on your business, follow these steps:
- Buy Business Insurance: Insurance will cover costs arising from lawsuits and worker’s compensation claims, and it safeguards your small business from damages related to theft or other unlawful activities. Failing to properly insure your business is practically invites financial disaster.
- Establish an LLC: This will establish your company as a separate legal entity, safeguarding personal assets from lawsuits and reducing your tax burden. Though it can be a bit more complicated to establish on the front end, the structural liability insulation and lower taxes make it well worth it.
By implementing these steps, you’re bound to experience a noticeable reduction in recurring costs and a healthier cash flow.