Expense blow outs are inevitable in business. Reducing expenditure should be looked at regularly to help strengthen your business.
Strengthen your Business
Strengthening your business doesn’t just involve financial management, but also includes strategies to retain and broaden your customer base, market your business affordably, keep high morale among staff and improve your business practices and processes.
To Strengthen your business during downturn or unforeseen events, you should consider the following:
Making Customer Service a Priority
Provide your customers with what they want. If you provide quality customer service, your business is likely to retain your existing customer base.
Customer service is not just about the initial sale, it’s also meeting customer expectations, building a relationship with your customer/client and exceeding expectations in the after care and maintenance of that customer.
This also means you have a greater chance of keeping and increasing your client base.
It is particularly important to find ways to retain your existing customers and providing good after sales service is one of them.
I hate having to clean up after a trades person has left but if they use drop sheets or clean up after the job is done that impresses me. You have no idea how something so small can have a huge impact with your customers.
Reviewing your marketing strategies can help you come up with new ideas to increase sales and find better ways to market your business.
Focus on communicating your competitive advantage and market that strength to benefit your customer.
But don’t forget to measure the effectiveness of your marketing. It’s no use marketing to your client base on social media if they have no online presence and never forget word-of-mouth marketing. Concentrate on your competitive advantage and market to benefit your customer.
Managing your cashflow also helps your business viability and financially stable. Excessive costs within a profitable business can cause it to fail so managing your cash Is important and Reducing expenditure and overheads is one main way to manage your cash flow.
Manage your debtors and creditors
- Assess your receivables, inventory, expenses and working capital.
- How much excess stock do you have sitting on the shelf? and How long has it been sitting there?
- Enforce your Trading Terms, do you have a Terms of trade signed by your clients?
- What do you have outstanding? Is it out of terms?
- How long will it take to bring in your outstanding debtors’ payments?
- What ratio is product wastage? or
- Is there a better way to reduce?
Review your accounts payable expenses.
- Reduce costs by rationalising or even cancelling.
- Are there any excessive changes over the past year?
- Expected (annual price increases) or
- Unexpected (paying top of the line price when a cheaper item would have done just as well)
- Compare P&L reports from same period last year.
- Scanning and digital management will result in reduction of Printing Costs
- Subscriptions and staff amenities. Think about what type of coffee and biscuits are provided, do you really need to provide lunch for your staff regularly?
- Bank Fees and Merchant fees
- High telephone and internet bills.
- Do you really need or are you only using certain features or
- Is this reducible in times of economic stress?
- Mobile Bills – what is the actual business/personal ratio, do you use internet on your phone for business or would call only be more effective? Combined internet bundle on multiple phones?
- Do you really need music on hold?
- Pay registrations more frequently if able
- If you are in hiatus – can you reduce some insurances
- Can you reduce rent or negotiate with your landlord?
- Excessive fuel costs? How can you reduce these?
- Utilities – Better deals, reductions in consumption and
- Freight Costs – can you find or negotiate a better deal
- Negotiate with your suppliers for better prices, better credit terms or early payment discounts
- Consider deposits, work in progress instalments or shortening the time between customer ordering, job completion and payment
- Sending invoices quickly, possibly offering discounts for early payment
- Do you know who to talk to at the financial institution?
- Review your business overheads and processes. Spending money/time making your business more efficient will make it more resilient and competitive.
- Investigate how to get the best use out of your assets by renting any unused space or equipment.
Bookkeepers, Financial planners and Accountants help with unforeseen downturns in business. Find out what support services are in place to help your business survive. Consider
- Business continuity planning
- Industry associations
It’s never to late to plan for unexpected events. Reducing expenditure is one of the key items that should be monitored and curtailed regularly.
Keeping tabs on your income and expenditure is good business and Planning for the future is excellent business.
Mental “Business as usual” can give you insight into what you need to plan and provision for in future.
For more information on crisis response plans www.businessaustralia.com