When dealing with suppliers, timing your payments correctly can save you money. Ask suppliers if they give discounts for early payment. If not, it’s to your advantage to pay your bills, including utilities, taxes and suppliers, as late as possible without incurring a fee. The longer funds are under your control, the longer they’re earning a return for you rather than someone else.
Even mundane purchases merit shopping around. If you quote a competitor’s lower price, a supplier will often match that price to win your business.
There is invariably a conflict here, as suppliers want to be paid as soon as possible and your customers want to pay you as late as possible! This is called the funding cycle: the period of time you have to fund between paying your supplier and receiving payment from your customer.
The shorter the time between these two important dates, the better it is for your cash flow, and in an ideal world you’ll be paid by your customers before you have to pay you suppliers.
Creating a cost-cutting plan
If your sales are down, your customers have disappeared and you’re dipping into personal savings to meet the payroll, it takes some serious belt-tightening to strengthen your business. Here are some practical, easy-to-implement cost-cutting strategies to consider:
- Rent out unused office space and equipment to another business owner who needs it
- Review your telephone contract and use
- Review and update your business insurance coverage
- Limit business travel, and see where you can use technology instead (with virtual meetings for example)
- Print on both sides of the paper for internal documents – it’ll halve your paper bill!
- Buy ad space after the official closing deadline, when prices crash to fill the empty space
- Turn off lights, computers and air conditioners when you leave the office
- Team up with other small businesses in your area to share the cost of training
The professionals you work with regularly are often easy to bargain with, thanks to the rapport you’ve developed with them. Ask your insurance agent, accountant or coach/mentor how you can cut back on their costs. You’d be surprised at the suggestions they might offer on ways to cut your premiums, reduce billable hours or avoid huge retainers. You might also barter your services.
Spotting the quick and easy wins
No-one knows your business like you, but at times you may spend more time fire-fighting than focusing on what your business should be doing to make money. If you feel like this is happening, take a step back and prioritise.
There is the old 80/20 adage that says you spend 20% of your time earning 80% of your profit, and 80% of your time earning just 20%. Therefore how much could you achieve if you move that around a bit and focused 80% of your effort on the more profitable 80% – or better still 100% of your time there and ditching the time-swallowing 20% monster!