Not meeting financial obligations can sink your enterprise. According to the SBA’s Office of Advocacy, about two-thirds of businesses with employees survive at least 2 years and about half survive at least 5 years. The most common reasons small businesses fail include a lack of capital or funding, retaining an inadequate management team, a faulty infrastructure, and unsuccessful marketing. It’s safe to say that a healthy cash flow can help weather the start-up storm and set your business up for future success.
To address your cash flow issues and avoid business disruption, it’s important to take a hard look at your finances. Here are some top tips to help business owners in any stage of growth stretch cash so you can have adequate working capital available for business operations.
1. Review all expenses, big and small
Perform an overall analysis to understand all of your small business expenses. If a cost isn’t providing a return on investment, cut back to the bare minimum or completely eliminate that expense. Do you eat out frequently or travel? Explore ways to reduce those costs as well. You might be surprised how much you can cut back without affecting day-to-day operations or the ability to meet long-term goals.
This post from the SmartBiz® Small Business blog outlines
How to Keep Track of Business Expenses – When you set up an organized system, it will be easier to identify costs to cut or eliminate. Tracking expenses also help to build financial reports, measure business growth, and simplify tax time.
2. Shop around for utilities
Whether it’s your energy bills, water supply, trash pickup, electricity, and even internet costs. Reliable wifi can cost anywhere from $20.00 per month to $650.00 per month, depending on what your business needs are.
It makes sense to shop around, compare prices, and take advantage of special deals for businesses.
3. Reduce energy usage
Your first step should be an energy audit to determine the energy efficiency of your space. With this information, you can identify and correct any issues to cut electricity costs.Your state or local government energy or weatherization office may help you identify a local company or organization that performs audits. Ways to cut energy costs include:
- Purchase energy-efficient office equipment
- Reduce Peak Demand
- Program your thermostats
- Turn off lights when not in use
- Use energy-efficient light bulbs
- Take advantage of natural sunlight
According to cnet.com®, utility companies are increasingly offering time-of-use plans, which charge more for electricity during peak hours but offer cheaper service during off-peak times.
4. Assess insurance policy costs
Running an operation on location – an office building, store front, or manufacturing facility – comes with significant insurance costs. But carrying the proper insurance policies can protect your business and even your personal assets.
Umbrella policies are relatively inexpensive so they are worth the investment if you have significant assets you’re looking to protect from costly liability claims.
Note that even home-based operations need a variety of insurance so check with a business insurance specialist to make sure you’re covered. Learn more on the SmartBiz Small Business Blog: What Home-Based Business Owners Need to Know About Insurance.
5. Embrace remote/flexible working
Renting a space or paying a mortgage and associated taxes is a huge cost for business owners. If you pivoted to remote operations during the pandemic, determine if you can ditch the office altogether.
If 100% remote isn’t an option, you can downsize your office space by not having all your employees in at the same time. The SmartBiz Blog covers remote working extensively: Here’s 6 Tips on How to Adjust Your Company for Remote Work. Our strategies can help current employees and help to onboard new remote employees.