Cutting out this cost or that cost may be helpful in the short term, but if you want to see real, long-lasting results, you need a robust cost and expense management strategy.
It might be useful to look at your business practices to identify what drives you to spend more than expected, what is wasteful, and what needs to be reimagined. When all these things are clear, you will find it easier to take pertinent actions aligned with your organisation’s cash flow and financial planning, regardless of your company’s size.
As an entrepreneur, it is essential to control revenue and expenditures because these are the variables that mostly impact corporate profitability. But managing and examining these can be tricky without a proper plan in place. Read on to discover practical cost-reduction strategies that will help in the long run, not drive merely temporary results.
Organise Your Cash Flow
Cash is continually moving into and out of your company – this movement is often referred to as cash flow. For instance, when a retailer buys inventory, cash moves out of your enterprise towards its suppliers. However, cash flow can quickly get out of control when no clear, well-thought financial plan is in place. That is why it is highly recommendable to organise your cash flow in such a manner that allows you to easily track costs and expenses. Some of the main factors to have in mind are:
- Use customised identifies for expenses, revenues, or other items, using distinct colours for every type of item in the spreadsheets, for example.
- Determine a period for the cash flow; it can be monthly, biweekly, or weekly.
- Record accounts receivable and payable so you can assess the provisional and consolidated balances. This practice increases self-trust regarding which financial tactics to employ.
- Decide on recurring expenses and revenues so that you can anticipate revenues and costs for the coming fiscal year.
Understand Your Business Cost-Revenue Structure
You cannot be a proficient cost manager without understanding the cost-revenue structure of your company. Cost of revenue defines the total cost of producing and delivering a service or product to customers. It is intended to shed light on the direct costs related to the services and products your business provides, and important data about it are to be found in your enterprise’s income statement. Nonetheless, not all companies hold precise information on their costs, and this could impact their cost-revenue structure.
So, consider taking it seriously and look for solutions in this regard. Start by determining your revenue sources, including the highest spending consumers and the highest amount of money coming from sales, and then figure out which particular costs are involved in generating the company’s revenue stream. Once these are deciphered, you can identify costs not directly connected with revenue creation and a PR company’s expenses.
Digitise Your Expense Tracking
Since technological advancements define this era, why not make the most of them? There is software that can help you keep track of costs and project expenses, as well as bill your customers faster. You are no longer forced to depend on traditional spreadsheets to monitor project activities and ensure top-rate time tracking since there is software designed to help you thoroughly analyse projects and departments and monitor employee roles, business operations, and time tracking. You can easily track costs and expenses without getting lost in data and numbers. With software such as Timesheet Portal – Project Edition, all these aspects and many more features are at your fingertips. It helps managers organise and constantly monitor payments, invoices, and other financial data in one place.
Have a Time Strategy in Place
More often than not, wasted time means wasted money, especially in business. That is why it is advisable to have an efficient time strategy in place to optimise corporate productivity. Remember – when productivity is increased, costs are cut.
Some essential aspects to have in mind when working on a time strategy include:
- Use software that monitors employee utilisation, time spent on tasks and projects, and billable hours.
- Reduce distractions to help labourers concentrate and stay on task.
- Schedule everything from meetings to daily business activities to have a clearer idea of what is to be done first and the time allocated to each activity.
- Set expectations for the various activities and projects and the time required to carry out related tasks.
Involve and Skill Your Employees
You may wonder what this has to do with cost and expense management. Well, a lot. When there are skilful, competent people working for a company, corporate productivity is undoubtedly maximised. Nonetheless, when employees are not able to make pertinent decisions, solve problems, and manage their costs, this aspect needs to be reimagined. Generally, the most useful way to educate your labourers on a particular matter is to enrol them in training. Therefore, consider involving your workers in cost management by teaching them appropriate financial strategies.
To reap the benefits of a workforce that acts for the good of your enterprise, ensure you give each employee responsibilities and positions that suit their competencies. Do not put “numbers” people, for example, in design functions, as they will most probably not bring positive results.
Cut Costs with Virtual Technology
Technology can be your best friend if you know how to use it. Corporate travel, for example, can lead to unimaginable (and pointless) expenses, so companies worldwide have started to explore the online environment and schedule virtual meetings. Holding virtual meetings on Google Meet, Zoom, or other video apps can save time and money and are just as effective as face-to-face meetings. Technologies like Microsoft Teams and Microsoft SharePoint can, in the same manner, cut costs associated with paper documents and facilitate communication between departments.
The Many Types of Business Expenses
- wages and benefits
- PPE (personal protective equipment)
- mortgage or rent
- security costs
- supplies and utilities
- repairs and maintenance
- advertising and marketing
- tax preparation