Small businesses often have a multitude of contributing factors that can affect their bottom line. Rising costs and excess stock contribute drastically with cash flow and over purchasing.
In Part 1 of our 3 part series we give a few tips on how to go about turning your high overhead business turn into a Lean Mean Fighting Machine.
Watch out for credit-worthiness of customers. If you are a service based business, try to get up front deposits and progress payments. If you are a product based business, check previous payments history of customers who make big purchases and negotiate better payment terms from them.
Closely monitor stock requirements. Check sales figures to see trends and allow for some decline in sales compared to previous periods.
Don’t get sucked into buying stock because of discounts unless you are absolutely certain you can turn stock over quickly
Think of stock or work-in-progress as cash piled up on the shelves! Work closely with good customers to predict their short and long term requirements.
Get the maximum terms possible from suppliers and know what business you’re doing with suppliers monthly to get better returns. Be prepared to shop around for alternatives.
A small reduction in Costs can have as much impact on the bottom line as big increase in sales, and may be easier to achieve. Shop around and look for more effective ways to achieve the results.
Don’t just ‘slash and burn’ when it comes to cost reduction. Get a copy of your last Profit and Loss statement and take the time to go through each line of the P&L asking what can and cannot be cut.