Cost Savings Ideas to Improve Cash FlowDocument Transcript
Cost Savings Ideas to Improve Cash FlowCost SavingsIdeas toImprove CashFlow
Cost Savings Ideas to Improve Cash FlowTurnaround your business with a strategic business plan. Improve cash flowand revenue, cut business costs and ultimately increase revenue. Click here.Sales are important in any business but a good cash flow is evenmore important and improving cash flow is one of the mostpowerful things that a business owner can do to create a moresuccessful business. Exploring ways to increase cash flow willforce a business owner to look not only at inflows, but alsooutflows of cash.For many businesses the top expense categories are cost ofsales, inventory, wages, employee benefits, taxes, energy andrent. By finding savings in these high value categories, acompany can see their bottom line grow and their cash flowimprove.In order to highlight opportunities for savings in the cost of sales,conduct a spend analysis and review your current suppliercontracts. A spend analysis monitored over time will illuminatehigh dollar expenses and provide a starting point to attack somecost reductions. Next, review your contracts with suppliers andnegotiate cost reductions. Part of this review could entail workingwith suppliers on programs to identify cost improvementinitiatives. These negotiations could also include having suppliersperform more services for you so that you lessen costs in yourown business. In addition, process improvement initiatives andtechnological efficiencies have produced cost savings in many
Cost Savings Ideas to Improve Cash Flowsupplier companies that can be extended to your business in theform of price reductions.The Periodic Review of inventory, period end counts, traditionallyhas been one of the main ways companies have identified excesscosts such as obsolete or slow moving inventory. While thismethod continues to be important, it is routine and other methodscan be used to complement the periodic review. Many small andmedium sized businesses can use inventory ratios to monitor andbenchmark their inventory control practices. By monitoringinventory turnover, the owner can identify areas where cost canbe managed more effectively. Slower turnover may reveal thatthere are slow-moving or obsolete items in inventory. It mayfurther reveal that inventory order quantities are not correct andgoods are sitting on the shelf too long. With this knowledge, theowner can act and create systems design to effectively managethings like economic order quantity, usage rates, lead times andobsolete items.Wages and benefits are another large expenditure in manybusinesses as we have moved to a service oriented economy.For a business to compete for good quality personnel, the ownershould have a firm understanding of the market for salaries in hisindustry and in the region where the business in located. Sincecertain job skills become hot while still others become acommodity, salaries in the market place change over time andbusiness owner must adjust. Understanding the market for thetypes of employees utilized in your business will help to ensure
Cost Savings Ideas to Improve Cash Flowthat you are not over or under paying for the skills that arerequired to run your business. In addition, a business should alsodefine its own pay philosophy which describes how employeesare paid and what types on benefits or incentives employees areoffered. As pay for performance has come into vogue, businessesneed to determine if that is right for their business and incent thedesired performance of their employees in order to get the bestreturn on the payroll expenditure.Budget planning is a tool that businesses use to control andanticipate expenditures as well as select from the bestalternatives for cost effective solutions. Tax planning can performthe same function for tax expenditures in a business. Surveyshave shown that companies who actively plan and manage theirdecisions while taking into account the tax impacts have moreeffectively kept their tax costs lower than companies that did not.Larger companies can hire people in-house that are specialists inthis area but a small business must use his own outside taxaccountant to perform this function. Keep in mind, your outsideaccountant can help in the planning and execution stages.However, your accountants hands are tied after the transaction iscomplete, so involve them early in the planning and decision-making process.Energy savings and going green are hot topics in the news andwhether its skyrocketing gas prices, or new computer equipmentthat uses more power to operate, companies must consistentlylook for ways to save cash in this category. Fortunately, there
Cost Savings Ideas to Improve Cash Flowhave been innovations in these areas that help businesses bringdown these costs. Business owners should review their energyexpenditures and put in place programs to control and managetheir energy use. It may involve simple solutions for a smallbusiness like using programmable thermostats, turning offcomputers when not in use or using occupancy sensors in certainareas so that the lights are turned off when the room is not in use.Larger companies may need to combine the efforts of their facilityand IT teams to research better energy efficient options to run thecompanys infrastructure. Here businesses may considersolutions that include smart technologies that control the coolingof systems and servers, utilizing the internet for meetings to avoidtravel costs or even installing solar panels to generate your ownpower. With the rising costs of energy and the additional powerrequirements of computer equipment, it is necessary forcompanies to continuously explore solutions to achieve savings.A sometimes overlooked, but large, recurring cost for a businessis rent. Many businesses sign long term lease agreements andthen forget about them until the agreement nears the end of itsterm. Changes in real estate values and occupancy rates canalter the going rate for commercial rentals. Periodically, abusiness owner can explore the alternatives and work with theirlandlord to obtain potential savings or additional rental perks fortheir business.We have only touched the surface. This article was meant to getbusiness owners to begin to think about some of the ways to
Cost Savings Ideas to Improve Cash Flowexplore savings in areas that carry large costs for a business. Bycutting costs in these high expenditure areas, a business ownerhas the opportunity to greatly enhance his cash flow and createsavings to fund investment for the future.Turnaround your business with a strategic business plan. Improve cash flowand revenue, cut business costs and ultimately increase revenue. Click here.
Cost Savings Ideas to Improve Cash FlowMs. Roberts is the owner of Business Rx, LLC. She works with business owners whoare passionate about improving their business in pursuit of their vision, goals andbusiness success. For more information please visit her website @ http://www.bizrx-advisors.comArticle Source:http://EzineArticles.com/?expert=LM_Roberts