The secret to running any successful business is to spend as little as possible. But, the trouble is many company bosses don’t realise that they spend more money than they need to on their expenses!
As a result, they end up making lower profits because they spend so much on their outgoings! Does that paint a familiar picture with your business? If so, you might be wondering what you should do to turn things around.
The following tips will help you to keep your business expenses to a minimum. How? I’ll give some examples of creative ways to get what you want without paying so much for them! Check them out below:
Don’t pay your bills until you need to
Are you one of those people that pays all your bills well before they are due? Whilst that seems like a noble thought, in reality it’s doing a lot of harm to your company’s cash flow! Anyone that sends you an invoice will give you a date for payment before it becomes overdue.
The standard practice is to pay bills so that they reach the accounts of your creditors on the day before they become overdue. Doing that will ensure you get to keep hold of your money for as long as possible. It’s especially useful if your bank account pays interest on credit balances!
Negotiate longer payment terms
Some people might say that “standard” payment terms are 30 days from the date of invoice. Others might suggest 14 days. One way to keep your money for longer is to negotiate longer payment terms with your suppliers.
Large firms, for instance, will only do business with suppliers if they agree to 60-day or even 120-day terms, believe it or not! If you run a small to medium business, try to aim for 30 to 45 days if possible.
Suppliers will only consider extending your payment terms if you spend a lot of money with them on a regular basis. And they will want to ensure that your company is “good for the money.” After all; the last thing they want to do is sell you lots of stuff and never receive payment for it!
Another way to negotiate your payment terms is to offer immediate, partial payment for goods. For instance, you could pay 25% of the invoice today. Another 25% when all the goods get delivered. And then the remaining 50% in 45 days’ time.
Avoid paying for things upfront
Some vendors might request that you pay for their goods or services before they get delivered. Doing so might ease their cash flow but it won’t do yours any favours. If a supplier asks you to do that, and they refuse to get paid until after the work gets completed, consider using another supplier.
Aside from the inconvenience factor, there’s also fraud prevention to consider. Although rare, it’s not uncommon for some suppliers to “disappear” with their clients’ money. Even if the client and the supplier have worked with each other on previous occasions.
Never pay the full price for anything
The business world is one place where the age-old art of haggling is thriving! Unlike consumers, businesses buy goods and services in large volumes. It’s for that reason that you should make sure you pay less than the retail or list price for what you want.
To keep your custom, most suppliers will sweeten the deal in some way. For instance, they might offer a blanket discount on your orders. Or they might offer free shipping and installation. It doesn’t matter what you buy. What matters is that you negotiate on the price so that you end up buying what you want for less.
Lease instead of buying, if possible
If you buy everything you need for your business, you need to stop! OK, so there are some things you cannot lease (like consumables, food, drink and so forth). But there are plenty of things that you can rent instead of buy.
You might think that leasing is a bad idea, but when you run a business it isn’t! For example, do you operate a fleet of cars for your employees to use? Forget about buying those cars! The costs of buying cars are high and you’ll have a hard time selling them when you don’t need them anymore.
Check out listers.co.uk to see what I mean. That shiny new Honda Civic you want to get for one of your workers will cost you a lot less if you lease it. The same principle applies to things like mobile phones, IT equipment and even your premises.
There are plenty of benefits to leasing. For instance, it will free up your cash flow to use on other areas of your business. You can get new items after a specified period. And you don’t need to worry about maintenance costs, because most lease deals include that as standard.
Outsource your staff
One of the biggest overheads to any business, regardless of size, is the staff that it employs. Apart from salary costs, you have to organise their tax payments and pensions. You also have to pay for some taxes as well in some cases. And if they take days off or phone in sick, you will have to pay them!
Outsourcing is a much better idea. There is a plethora of firms that offer outsourced staff to cover any type of work. Some companies outsource their IT departments. While others outsource their call centres.
You don’t have to worry about employee overheads with outsourced staff. All you need to do is pay an invoice each month, just like with your other suppliers. That’s it!
There are so many outsourcing firms out there; you are bound to find companies you can work with that will fulfil your needs. Many companies operate in the same country as you, so that means you don’t have to worry about language barriers, for instance.
Now you’ve got the information you need to cut back on your expenses, it’s time to action these tips and idea!