Looking to reduce expenses and grow the profitability of your business? Here are five tactics to cut short- and long-term costs that many small business owners overlook.
1. Automate employee expense controls and reporting.
Business credit cards can be equipped with automated authorization and spending limits applied to specific spending categories—like travel, entertainment, fuel, and office supplies—or vendors. Cards can also be equipped with automated reporting. That information, along with other key metrics—like significant sales, upcoming major purchases, and cash flow—can give you better visibility into the financial health of your business.
2. Match payment terms with your cash cycle.
Your cash cycle—the amount of time between paying for the goods and labor to produce your product and receiving payment from your customers—often determines your ability to generate cash.
Be strategic when setting payment terms for your customers. Examine the schedule to see where you can improve the utilization of your cash flow. Some businesses offer customers different forms of payment—like credit cards, ACH, or Zelle® Go to Truist Small Business Merchant Services. Others turn to self-pay options for customers and automated payment reminder messages.
When it comes to paying your vendors, schedule electronic payments to be sent out on the due date (not earlier) and consider negotiating extended terms with your vendors.
3. Renegotiate contracts with suppliers.
It’s easy to fall into a routine with your regular suppliers. But it’s important to regularly assess the deals you’re being offered.
Benchmark your costs using data from industry publications on industry cost standards. If benchmarks aren’t available, simply ask for bids from multiple companies in your market. That may prompt your current suppliers to negotiate new terms or compromise on prices to keep your business.
4. Reduce overhead by looking at automatic charge.
Look through all automatic or routine monthly and annual expenses on a regular basis. Do you still want to maintain maintenance contracts on your production equipment? Are you actually using the software and media subscriptions that are on automatic renewal?
5. Consider telecommuting.
As technology continues to improve, many small business owners find that some employees can work just as efficiently at home as in the office. If that’s an option for your business, you can save money on resources and office space.
Learn other ways to save
Don’t take your current budget for granted or let cost-cutting lose priority over other business objectives. You may be able to uncover significant savings and boost the profitability of your business. Contact your local Truist banker for more information on how we can help you reach your business goals.