Always a hot question on everyone's mind. How do I save money?!? Yet have you ever thought of it in a business sense? You might be throwing large amounts of cash away that could be better spent growing your business, or used to achieve your goals.
Our Sarah Eifermann along with Trudi from TCK accountants discuss this in one of their latest FOFU podcasts Saving money, and more money - in business. During this podcast Sarah and Trudi share 6 tips that could help save you money and make your business more streamlined and productive. Let's take a look at six things as covered by them, that you can do to reduce your expenses in business and end up with more cash in your hand.
Tip 1 - Check your direct debits
This is something people don't necessarily do. We all have money coming out of our business regularly for various expenses, so much so we can forget how much we spend on items, like software for example or all those payment subscriptions we forget about!
Taking the time to check and review your Direct Debits allows you to see how much you are actually spending, and to review if you still need these products, or can you find something less expensive? Could you find one software product that does the job of three you are currently paying for?
When doing this it is also a good idea to check if the Direct Debits are annually or monthly. As Sarah mentions 'Sometimes you take a monthly option to try it out, test it and see if you're going to use it and then you just stay on the monthly option and it's usually 25% dearer to stay on the monthly option than if you buy it annually, so if you do have the cash flow available you know that you're going to actually need this piece of equipment, software, whatever it is, maybe look at buying it annually to save cash when doing so.
Tip 2 - Get your tax return done
This tip doesn't work for everyone but a lot of you reading this could have a tax return waiting for you. Yes that's money waiting to come back to you! The sooner you lodge your tax the sooner you can receive that money back into your pocket to use towards your business and expenses. Most businesses also would be paying a quarterly tax instalment which is based on the last tax return so lodging your tax also allows you to plan and prepare for what your instalments may be for the next financial year.
Why is this a great tip that helps with cash flow management? As Trudi conveys - "if you've had a really good year or even a really bad year that is then reflected in your tax instalments for the following year, but it only happens once you've lodged your tax return. So if you haven't launched it yet, your tax instalments are still going to be based on how you performed in 2020 or the year before, 2019, so it could be really out of date in terms of how much your instalments are." You could be paying a much larger instalment amount than required and this can wreak havoc on your cashflow.
Tip 3 - Call your debtors
This is the people that owe you money. The outstanding invoices. Get on that phone, email out those reminders, start speaking to your clients and customers and reminding them, you owe us money, its overdue.
An important tip for any business that Sarah mentions is to set strong boundaries in your Terms and Conditions with your invoices, so to discourage the late payments in the first place. Then, if you do need to chase them, you have a whole structure in place that you can rely on and that the other client or customer was made aware of.
Tip 4 - Review your large expenses
Every business has some large costs. It may be your insurances, purchasing of goods or the components of the products that you make. It is always a good idea to review these large expenses and find out if you could renegotiate amounts charged or possibly you could find a better rate elsewhere and switch suppliers. There might be a better way or another way to reduce these costs for yourself.
Tip 5 - Check out what business grants are available
In this current climate we are probably all aware of grants these days, especially when it comes to the COVID grants floating around. But what's important to note is that grants have always existed and been available for many different reasons for businesses. Take the time to research and investigate what may be available for you and your business to help fund some of your expenses and provide some support. Some examples might be a grant for a product you are wanting to develop (research and development grant), grants for the export market, grants specifically targeted at women or targeted towards certain industries and innovation. Many local councils also offer some good support, even funding for planning your business. It pays to do your research and see what's available. _
Tip 6 - Review your Profit and Loss
_This is where we can find out where you're spending your money and what you're spending it on, which gives you an idea of how your business is performing. Go through each category of your expenses and have a think about whether it makes sense that you're spending that kind of money on that particular line item.
For example, it can allow you to reflect if spending $10,000 on stationery makes sense. If it doesn't look right, you can then dig further and check that they were actually all legitimate business expenses and have been put in the right category, it also gives you a cause to cut back and go, Okay, well, that's just something we can't spend money on right now.
It allows you too clearly see what you can and can't afford and what are necessary and unnecessary expenses for your business.
Another example to review in your Profit and Loss that Trudi recommends is Repairs and Maintenance. 'Your repairs and maintenance on your equipment, if high maybe it makes more sense to go and buy a new fridge rather than constantly repairing the old fridge. So, it allows you to start to make some of these decisions that are going to ultimately end up with more cash in your pocket.
If you are still feeling a bit lost and you find cash is tight you can always speak to your Accountant, give them a call. They will have lots of tips and tricks which can help you save money. Sometimes it's playing the old game of short term pain- getting your hair cut at a cheaper less desirable place where you'd rather not go- but it's a short term temporary thing to keep your business growing and creating a profitable outcome whilst meeting your obligations and ability to pay your bills.
Like Trudi says - "Who wants to be in Business if we're not making any money?"
For more tips and discussion on this topic Click here to listen to the full podcast.
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