About 60 percent of businesses fail within 10 years. A remarkably high number (82 percent) of these failures are a result of financial challenges. These financial challenges come in different forms, including poor cash flow, funds mismanagement, and theft.
Any of these scenarios can cause a business to be cash-strapped. If you’re in this situation, you need to take action immediately; otherwise, your business will grind to a halt.
There are a number of steps you can take to prevent or get out of a cash strap. Reducing your expenses is one of them.
Read on to learn how to spend less money.
Know Where the Money Is Going
Every business, however small, has expenses. Even if you’re running it out of your home garage, there are still business-related bills to pay.
Your expenses will increase as your business expands, but it’s easy to lose track of what you’re spending your money on when the business is thriving. It’s not until your business starts getting cash strapped that you remember your expenses.
The first step to reducing your expenses is having a clear picture of your expenses. Identify core or primary expenses as well as secondary expenses. Core expenses are those that your business must incur, such as rent, electricity, internet, and wages. Secondary are those that make running a business easier but can do without.
Minimize Business Expenses
Cutting secondary expenses shouldn’t be difficult. If your employees are always flying business class to meet clients, for instance, you can simply scale down to economy or use road transport. Tough times call for uncomfortable travel!
It’s in primary expenses that you might have a difficult time scaling down, but it’s doable. For example, laying off workers is always a difficult decision for many small employers, but it’s an effective way to cut the wage bill and possibly save your business from the deadly fangs of a cash strap.
Use Spend Management Technology
Working to reduce business spending can be a tough task especially if you’re looking to see big results quickly. You’re human after all and crunching numbers might not be your strong suit.
Investing in spend management software like Bento is a savvier move. Say goodbye to unnecessary expenses, especially if your business has a debit card with multiple users. You can set daily spending limits and even restrict certain transactions.
Find Cheaper Service Providers
Now is the best time to give what your various service providers are charging you a closer look.
Have you outsourced marketing to an agency? Chances are they aren’t giving you the best deal. You can find similar or even better service at a cheaper cost.
Is the company hosting your business website charging you an arm and a leg? Find a cheaper hosting provider and you could save good money while getting good service.
Learn How to Spend Less
In business, cash is king. If it runs out, the consequences can be dire. Learning how to spend less will see your business retain more money, which you can redirect to your cash reserves.
Be sure to keep getting more financial lessons on our blog!