We could all do with a little extra cash, but sometimes it’s a real struggle to keep your SME going. The cost of living in Australia is accelerating steadily, while wages lag behind. This puts pressure on business owners to save at every opportunity. The good news is, you’ve probably fallen into a pattern of spending that can be tightened up. Here are some practical ways to generate more cash right now and in the months and years ahead.
1. Staff costs
Jane Asscher, founding partner of business management advisers 23 Red, has a simple tip to save money on wages: “If someone leaves the company, resist the urge to replace them immediately,” she advises. “This may seem odd but if you delay replacing someone quite often the gap gets closed by ambitious people picking up their role. If the gap’s still there and really needs filling, then you’ve saved money in the meantime. You could also keep the number of lower-skilled employees to a minimum, taking on new staff temporarily at short notice when required. Another option is adopting a DIY ethos – let executives book their own meetings and travel without relying on a PA.
2. Save power
The core of the issue is that most people are concerned by the cost of energy at home, but don’t think about their employer’s bills. If you can recognise employee actions to save power, they’re more likely to be on board. You can save a considerable amount by having all computers shut down at night, lights used only when required, and heating or air-con restricted to only the parts of the office that need it. Consider using fans or oil heaters to save cash.
3. Suspend buying
It is surprising how effective this simple tip is at to reducing outgoings in the short term. Most SMEs have accounts with suppliers that staff turn to without thinking twice about the cost. A typically overused account is stationary. John Starr, a serial entrepreneur who has run publishing and communications companies for many years, says: “Each year at random I ban stationery purchases for a month and it gives a saving of around 8-9%,” he says. “In all the years it has never caused a problem as staff manage to find huge amounts in their desk drawers, on shelves and so on. It has to be at random or stocks will build up.” Imagine suspending all buying in the business – how bad would it actually be? Close all accounts not essential to business operations for a month if you need extra money fast.
4. Hire contractors
Employee costs, from salaries to insurance to office space, often takes up the biggest chunk of the budget. Keep your full-time staff to an absolute minimum and outsource extra work to independent contractors as needed. Use sites like Upwork and Freelancer for instant access to workers. Search for nearby consultants and try to negotiate a lower rate for ongoing work. You’ll save money on full-time staff and office space while benefiting from the varied experience these contractors bring.
5. Negotiate with suppliers
What you’ve been paying your suppliers so far doesn’t have to be the final word on what you pay from now on. Ultimately, suppliers want to stay in business too, and are often willing to negotiate lower prices rather than lose a regular client. You could negotiate better prices on everything from office supplies to phone and energy bills. You won’t lose anything by trying, and you may find yourself able to shave a few hundred dollars off your monthly operating costs.
6. Move to the cloud
The meteoric rise of cloud computing means software performing a wide range of functions has become a lot cheaper and easier to use. Using cloud-based platforms avoids the cost of expensive hardware and storing data. It also makes it easier for your team to communicate and collaborate remotely (save more money by having staff work from home). The ease-of-use can also allow you to hire lower-skilled staff. For cloud platforms like Zero, Salesforce, Hootsuite and Dropbox, you can typically pay per user, rather than needing to purchase and maintain expensive software in-house.
7. Hire smart, inexperienced people
Experience isn’t everything, and it costs more. Next time you post a job ad, delete the line that says, ” X years of experience required,” and replace it with “Recent graduates welcome to apply.” By hiring developers fresh out of uni you can gain a monetary advantage by providing an entry-level salary. You’ll also get employees who are up-to-date with the latest technology and eager to prove themselves.
8. Cut down on employee time
Could you cut some staff down to a four-day work week? If so, it might work better for your employees as well as you. A four-day workweek results in lower operating costs, increased savings in utility and a lower salary cost for the business as a whole. With the ratio of part-time and casual jobs accelerating, many employees are interested in greater work/life balance. It’s worth asking if they’re on board with the idea.
9. Cut back on maintenance
Do you really need a daily cleaning service at the office? Review ongoing maintenance costs such as this, and cut back wherever possible. A cleaning service can come in weekly instead of daily. Employees can empty their own bin. Reduce the frequency of maintenance costs, and you can save money without getting rid of necessary services completely.
10. Review all expenses, even the little ones
It’s smart business practice, but it’s often overlooked. Analyse all company expenses to cut anything unnecessary. Why not give one of your employees a project of reviewing all expenses and proposing strategic cuts. Ask them to try and save 10% across the board and see what they come up with. You’ll probably get some fresh new ideas. Small cuts can add up to large savings over the long-term. Review everything that isn’t providing a ROI, cut back to the bare minimum, and completely eliminate anything unnecessary.