Keeping Your Cash in an Economic Downturn
By Mark Wardell @MarkWardell | December 31, 2008
Times are tough, and many business owners are getting nervous. It's not surprising considering the state of the economy and the fact that the likelihood of business failure is skyrocketing. To avoid this fate for your own business, start simple. The following are three easy, practical steps you can take immediately to reduce unnecessary expenses and conserve your cash.
Become friends with budgeting
You might think you already know what you spend and how, but if you don't create a budget to track expenses- in every area of your business- you can't be sure. And trust me, when times get tough, you want to be sure. A budget brings to life any unnecessary expenses you can live without for the time being.
Re-examine (and possibly revamp) your expenses
Don't assume that the costs you see on your budget are set in stone. As a business owner, and especially in tough times, you can negotiate and renegotiate everything you're spending your money on. You may be surprised at the results. Even your banking fees are sometimes negotiable if you're doing enough business. The trick is to see the transaction from your supplier's perspective. For example, even if you don't buy in large batches, you may be able to negotiate a volume discount on materials that you purchase over the course of one year, essentially guaranteeing your business in return for a discount.
Another common opportunity for reducing expenses is in employee overtime. It's common for the feast or famine cycle that many businesses go through to drive costs up without a corresponding increase in sales. In my experience, with a little preplanning of work schedules and projects, overtime can be drastically reduced or eliminated. Your objective is to keep a steady pace with your work, so you can avoid needing to pay overtime simply to keep from missing your deadlines.
Nurture a cost-saving business culture- at all levels
In a cost-saving culture, everyone can and should take fiscal responsibility for their work. This type of culture is especially necessary when times are tough.
One way you can nurture a cost-saving mentality is to involve everyone in the budget. A budget isn't just a tool for Management. Make all your employees accountable for the line items that affect them. For example, an office administrator may be accountable for keeping your office supplies on target with your budget.
Another employee engagement tool you can use is to play what I call "the savings game". Do this by getting together a small team of employees and go through your income statement line by line. The goal is for each person to come up with 3 ideas for saving money for each line item. It will be difficult for some items, but think outside of the box on this. They don't all have to be keepers. Make it an open brainstorming session and tell your people that no idea is a bad idea. You can prioritize and implement the top 10 ideas once you are done.
And of course, if you haven't already done so, now is the time to go green!
There are a limitless number of ways you can do this. You can reduce your utility expenses by becoming a "power smart" business. Turn off the lights when they're not needed- automatic switches will help with this. Use energy efficient lighting. Turn the heat and a/c off on weekends and/or evenings. Don't use the photocopier unless you have to. Don't print out emails or articles- instead review them on your computer. And so forth. Give your local power company a call for more ideas.
