This article offers 90 tips for cutting your business costs and improving your cash flow.
- Eliminate excess and/or duplicate association dues and publication subscriptions.
- Sub-lease unused office space.
- Renegotiate your lease by asking for downward rental adjustments.
- Cut down on entertainment expenses. For example, have meetings in the office rather than at a restaurant.
- Take advantage of local seminars to reduce travel expenses.
- Examine your telecoms bill for billing errors.
- Negotiate special terms and prices with suppliers to accommodate your cash flow requirements.
- Sell idle assets.
- If you do not receive significant price reductions for bulk purchases, order inventory on an as-needed basis.
- Send a PDF by email instead of using a messenger or delivery service.
- Turn off lights when not in use.
- Turn down or turn off air conditioning and heating at night.
- Use two-sided copies instead of single-sided copies.
- Pay bills when due, not before.
- Check postage scales for accuracy.
- If you paid income taxes in prior years, remember that current year losses can be carried back to generate tax refunds.
- If your income has decreased significantly from last year, check with your accountant to avoid over-paying estimated corporate taxes.
- Meet with your accountant before your fiscal year end to consider tax planning opportunities.
Track and measure
- Develop key ratios and key performance indicators for your business. Monitor them on a periodic basis. (See the TCii White Papers Key financial management ratios and Key performance indicators.)
- Develop flash reports of critical financial items and monitor them weekly.
- Identify profit centres by analysing monthly financial statements; consider closing down unprofitable areas.
- Set up and/or monitor departmental budgets.
- For at least several months, sign all cheques for expenses and eliminate unnecessary items.
- Send pre-addressed return envelopes with bills. In some cases this will expedite customer payments.
- Closely monitor individual customer accounts receivable balances. Contact customers immediately when their average collection period increases.
- Save significant collection fees by using a dunning service before sending bad debts to a collection agency.
- Use a collection agency or hire a collection manager to accelerate collections.
Insurance and benefits
- Consult your life insurance agent for ways to reduce costs of life, disability and health insurance.
- Consult your casualty insurance agent to reduce costs of all other insurance.
- Consider using non-cash bonuses such as stock options, ESOPs, etc., as employee compensation.
- Make use of tax-advantaged "cash or deferred" fringes to reduce payroll costs.
Credit and billing management
- Tighten credit policies for all customers.
- Take advantage of purchase discounts, even if borrowing is necessary.
- Check references before extending credit to a new customer.
- Be certain that customers understand your credit terms.
- Ask customers to pay by invoice rather than by statement.
- Consider sending out semi-monthly statements.
- Charge customers interest on delinquent accounts.
- Settle customer billing disputes promptly.
- Prepare monthly cash flow analysis to determine cash needs before borrowed funds are required.
- Secure two lines of credit at different banks, before you need the funds. Be sure to shop for rate and payback arrangements.
- Set up an alternative financing arrangement.
- Don't surprise your bankers – keep them informed in good times and bad. Send them copies of your interim financial statements.
- Take advantage of interest-bearing current accounts.
- If no other sources of financing are available, borrow against the cash surrender values of life insurance policies.
- Consider the use of outside investors to raise needed capital.
- Consolidate loans to obtain a lower interest rate.
- Look for ways to secure your personal assets. Do not sign for business debts personally, and never permit your spouse to sign on the obligation.
- Shop around for credit cards with the best processing fees and interest rates.
- Make deposits daily to accelerate cash inflow.
- Use extra cash to reduce debt.
- Draw on your line of credit and place proceeds in a savings account at another bank. Otherwise, the bank may cancel your line of credit if you don't use it.
- Consider using a night safe system at your bank to accelerate cash inflow. Caution: instruct the bank to contact you before depositing any cheques marked "Payment in Full."
- Keep investments liquid to accommodate short-term cash needs.
Equipment and vehicles
- When it's necessary to purchase equipment, use trade industry surveys that rate the equipment's performance.
- Cancel insurance on vehicles and equipment that are not in use.
- Consider leasing equipment and real estate rather than purchasing.
- Negotiate equipment lease terms to be paid during peak business cycles.
- Discourage personal use of company cars.
- Prepare comparative analysis of competitors' pricing.
- Comparison-shop for supply prices.
- Get bids on any major expenditures.
- Set up an employee incentive programme to generate cost reduction ideas.
- Eliminate employee theft by implementing adequate internal controls.
- Reduce your compensation to the level necessary to cover your living expenses. This shows your sincerity in tackling cash flow problems.
- Decide whether bonuses are justified. (Bonuses should be determined by profit or performance, and not time of year.)
- Limit expense authorisation to upper management.
- Put a freeze on hiring and salary increases.
- Use independent contractors instead of employees when possible.
- Consider using part-time employees. This reduces the amount of benefit payments.
- Utilise an administrative or part-time employee instead of a messenger service.
- Eliminate all overtime hours that don't receive prior approval.
- Ask managers for written plans on eliminating unnecessary expenses in their own and other departments.
- Discuss economic issues with staff to help motivate them to do a better job for your clients, customers and business.
- Set up a committee to create new cost-cutting measures and enforce existing measures.
- Consider reducing employees' hours rather than eliminating positions. For example, go to a six-hour day rather than an eight-hour day.
- Prepare a procedures manual to scale down training costs and make job transitions less costly.
- Reduce unnecessary meetings; use an agenda to make meetings more efficient; suspend discussion of non-agenda items; set a time limit on meetings.
- Cross-train staff to perform multiple functions, and combine job duties where possible.
- Look closely at employees to determine their productivity. Non-productive employees should be dismissed and replaced with productive personnel.
- Be alert to the increased number of job-seekers. Be selective and choose the best employees now.
- Send one person on a particular course – for example, software training –and make that person a resource to others on that subject.
- Consider using an automated payroll service to reduce in-house costs.
- Understand and promote what separates you from your competition. Let staff and customers know what you do best!
- Evaluate the pricing of your goods and services and analyse for sensitivity to increases or decreases in prices.
- Consider adjusting hours of operation to meet customer demand.
- Investigate related products and services to identify emerging markets.
- Monitor the competition and related fields for their responses to the economy.
- Have company owners and upper management call on customers personally to identify their needs (product, service, or economic).
- Bundle products or services and offer them at attractive prices to stimulate sales.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.