With the economy fast slipping into recession territory and consumers coming under intense financial strain from all corners, entrepreneurs and small business-owners are facing a tough year or two ahead.
Cash flow, experts warn, is likely to be the biggest storm that small business-owners will have to ride out, but if you get it right, there’s no reason why you won’t be able to successfully overcome this potentially fatal problem.
Deciding how much whether to make small adjustments or eliminate an entire department or function requires a delicate balancing act.
Jannie Rossouw, head of Sanlam Business Market, says that a good place to start when determining what to trim is to run a detailed expense report that will break down every subset of the business so that you are able to determine the exact cost of each aspect of your business.
READ MORE: How to manage your cash flow
“First make sure you have a true reflection of the cash flow status of your business. Many business-owners manage their finances via their bank account, but this gives a very short-term view of cash flow,” says Rossouw.
“Getting into the habit of doing a cash flow forecast is extremely useful. It will help you identify areas in your business where expenses can be trimmed down.”
Cash flow templates are freely available for download on the Internet.
When was the last time that you compared insurance policies and got competitive quotes?
Your business might have changed over time, meaning that values might need to be adjusted, you may be over-insured and thus paying inflated premiums or you might find that some policies have become redundant.
As a small business-owner, it’s highly unlikely that you are debt-free. It’s a necessary evil for growing a business, but with the South African Reserve Bank warning that it remains in an interest rate-hiking cycle, it poses a major threat to a small business’s survival.
Consider reviewing all of your outstanding debt and consolidating to save on interest rates.
Elize Giese, FNB Business Head of Investments, says small business-owners can cut costs by cutting down on meetings or more realistically, by suggesting meetings via Skype or conference call where possible. This way, you reduce travel expenses (petrol and maintenance) by cutting down on travelling and the cost of hiring meeting facilities.
READ MORE: Cost cutting for tough times
Another way you could cut costs is to look at negotiating for discounts.
“Negotiating and entering into long-term contracts with your suppliers can earn the business big discounts on certain products and services. Your supplier wants to stay in business too and they are dealing with a tough economy just as you are, so they may be willing to offer you a better deal, rather than face the prospect of losing a regular customer,” she advises.
Lastly, while it’s inevitable that certain areas will need to face cuts, it doesn’t mean that everything has to go.
Try thinking outside the box a little bit. Instead of thinking cash, explore the possibility of trade exchanges, offering a supplier a service or a product in exchange for hard cash. This will help you free up some much-needed money.