Now is the Time for Innovative Cost Savings in Your Business
I am a bookkeeper. I see the inside, behind the scenes, nitty gritty numbers of so many types of small businesses (private practices, legal offices, real estate professionals, etsy shops, virtual and brick and mortar businesses). There are some key differences between the ones who are thriving and those who are struggling, even dying out during challenging times. Because let’s face it, a recession will come. It may not be if, but when and you want a business that comes out stronger.
The businesses that THRIVE do the following:
Don’t react, they respond. When the economy shifts, many businesses have a knee jerk reaction. They stop paying staff, they cut so many expenses and they take on all the burdens of the business. Cut, cut, cut is the initial response. Your bookkeeping can help you make better and more nuanced decisions that truly make a difference in how your business grows. Slow down and look at your numbers.
Leverage strongest income sources. Take a look at your revenue streams on your income statement. When we understand our greatest revenue streams we can also strategize around ways to protect them. Instead of creating all new products and services, look for opportunities to strengthen what is already working, serving your most loyal customers and clients. For example, one of our clients provides education courses in business to their clients. Instead of creating an additional service, they have improved the course and added in bonuses that later they can sell individually if they need to pivot to other pricing structures for services should there be a change in the buying power of their favorite customers. Same audience, same needs, just different ways to generate income serving those needs.
Have a budget. Small business owners can tend to focus on a budget that covers hard operational costs and staffing costs. They often neglect a plan to pay themselves - payroll or shareholder distributions. Always pay yourself and have a budget for each category of expenses. Your bookkeeper can help you determine your percentage of expenses and set goals with you for areas that need reduction.
Choose expenses intentionally. Go through the expenses in your P&L statements and ask yourself, “how does this expense give me a return on my investment?” Oftentimes business owners do not know if there is a correlation on return. For us, return is defined by it saving money, creating more income, or freeing up more time. Don’t wait for a recession to evaluate your expenses. Do it now. Do it regularly. Another one of our bookkeeping clients discovered they often bought the latest course in their industry, only to never really finish or integrate what they were taught. It made them feel better but it did nothing for their business. Thousands of dollars were saved by an honest look at what was really worth their investment of time, money and energy.
Review their numbers regularly. Budgets don’t sit on shelves. They get reviewed at minimum monthly. Small off handed decisions in spending can add up. Before you charge the card, look at what you have already spent in that category to determine if you have the funds in your plan, not just in your account. Small business owners may look at their overall checking account and see the money is there. But with a budget, that money may be allocated for other expenses.
Avoid and eliminate debt. Recessions and other life challenges can make debt a crushing force in your business. Stop overspending now. Make it your habit, recession or not to follow the budget, practice self restraint and manage your money while you develop a cash flow plan to pay off any remaining debt that you have.
Have emergency savings. We recommend small business owners have at minimum 3 months expenses, including payroll and distributions. After that then they can work towards a goal of 6 months. The reserve in funds will allow you to make calm, level headed decisions in your business and to give you time to pivot in your marketing and business strategies as you adjust to what is changing around you.
As a bookkeeper, I keep the numbers organized and make sure you understand them so you can make better decisions. You do not have to be a small business owner who struggles through changes. Be the one that thrives.