Small businesses don’t always have a surplus of cash lying around. When your enterprise performs well or you have an exceptional month in terms of sales, you’re shrewdly deciding how to best allocate that revenue to keep the company stable and grow in an effective, sustainable way.
Because most small organizations don’t have the endlessly deep pockets of multinational conglomerates, making the most of each dollar earned in revenue is critical. Consider these tips to get the maximum value from your cash assets:
Prioritize efficient inventory and purchasing
While there are some exceptions, many small businesses have a variety of inventory and purchasing needs. That includes merchandise sold to customers as well as products used internally by staff, from office supplies to items more specific to your industry and market.
The Staples Business Hub suggested creating strong, single sources for both inventory itself and the information used to track it. Storing these assets in multiple locations can make them hard to find and lead to duplicate purchasing, as well as inefficient use for items used by you and your staff. Instead, designate specific storage areas and develop a singular system for tracking ordering and use. The additional labor required for this organizational effort won’t be much in the long run, and your organization will reap the benefits in terms of less spending.
Some steps to take to make this more efficient mode of operation a reality include:
- Specifically assigning inventory and purchasing duties to yourself or a trusted staff member.
- Implementing regular inventory counts.
- Maintaining a secure spreadsheet or other database to house this information and make sure it remains accurate.
- Emphasizing the importance of this new, streamlined process to your staff.
Pay vendors early when discounts are available
It’s not a universal practice, but some vendors and suppliers will offer a discount or other deal if you pay their invoices sooner than is required. This strategy is simple but powerful – you enjoy lower overall costs, as long as your company has the cash on hand to pay in full.
In an excerpt from “The Marketing Plan Handbook,” author Robert W. Bly highlighted this strategy specifically for extending the value of a marketing budget, but it applies to any vendor that offers a time-based payment discount. Even small cost savings on monthly bills can add up over a year or two, and ultimately save your business money in a direct, easily accountable way.
The other element to consider with consistently paying these bills early or on time is generating positive engagement with vendors. If you’re seen as a reliable business partner, your vendors and suppliers will be more likely to work with you if you encounter any short-term operational difficulties or have an ambitious or complicated purchase or task you need fulfilled.
Reaching a position where your business can regularly pay off all bills early or on time might be difficult due to available cash reserves, even though the benefits are clear. In that instance, consider alternative business loans as a way to get your finances in order and start taking advantage of these discounts. With these loans paid back in manageable monthly installments, taking one out can set your company up for long-term savings.
Find and eliminate waste
This strategy involves a significant amount of work up front as well as continuing efforts to locate and adjust around wasteful practices, but it can also yield significant cost savings. Each business is different, sometimes drastically so, which means getting too specific can only help so much. However, there are some basic areas of operation to consider at the start of an effort to find and mitigate or eliminate waste:
- Labor costs and job duties.
- Vendor pricing and quality.
- Use of utilities and other resources.
- Ineffective or unnecessary spending across the business.
Reviewing what your business spends and what it receives in return is a major undertaking. You may want to divide operations into buckets and use a given amount of time to work through each. For example, you could dedicate a few free hours each week looking at labor costs and make necessary decisions and changes, if any, at the end the month. Then, you could move onto vendor pricing and conduct a review over the course of that month. This approach means you can start making positive changes without getting overwhelmed or overlooking potential concerns.
Making effective plans for the future
Setting firm goals and deadlines is critical when it comes to stretching your business dollars. You may not be able to make any changes today, but you can start organizing your efforts and laying out plans to follow the advice previously detailed. Make a plan and stick to it whenever possible, and you can start seeing the money your business brings in provide more overall value.