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When you are running a small business, things can get complicated really fast. To avoid this from happening, it’s important to be sensible about how you run every aspect of the business, including the financial side. To help you do better, here are 10 smart budget tips for your small business.
Best Budget Tips For Small Businesses
- Best Budget Tips For Small Businesses
- 1. Always Get Value for Money
- 2. Look for Discounts for Better Payment Terms
- 3. Bring Marketing Back In-House
- 4. Look to Purchase Second-Hand, Not New
- 5. Use Business Lending to Handle Unexpected Expenses
- 6. Take a Flexible Approach to Staff
- Flexible Working Reduces Fixed Payroll Costs
- 7. Take Your Ego Out of the Equation
- 8. Get the Most Out of Marketing Plans
- 9. Buy Business Supplies in Bulk
- 10. Never Lose Sight of the Essentials
- Summing Up
1. Always Get Value for Money
As a small business, there’s never enough money to run the operations and afford everything you need. It’s necessary to be as frugal as possible as an entrepreneur to squeeze the expenditures to find the profits.
One way to do this is to look at the variable spending and aim to cut it by 10 percent every few months. Reviewing the costs and seeking better deals isn’t something that every business takes the time to do, but it certainly pays off. Companies can tell when you’re seeking a better deal and may offer a discount to their current prices to keep you on board.
2. Look for Discounts for Better Payment Terms
Many companies in the UK offer preferential payment terms to encourage customers or clients to pay sooner. While it might seem counterintuitive for them to do this, it does reduce the time their staff must spend chasing outstanding invoices or the cost of using expensive business debt collection services just to get paid.
Payment options like Nett 30 days are common to see on invoices. Sometimes, at the bottom of the invoice is a notation about an available discount when you pay in a shorter amount of time.
If you cannot see anything, get in touch with the company to see if you can negotiate a discount for faster payment. They may not be willing to offer it on the outstanding invoice, but all future ones could include this money-saving incentive.
3. Bring Marketing Back In-House
If you’ve previously outsourced the marketing to a marketing agency, then their price charged includes a healthy profit for their company. This profit is coming directly out of your business revenues and doesn’t fall to the bottom line.
See if you can get one or more members of staff up to speed on how to market the business effectively online and offline. Even if they can only master certain aspects like managing an affordable pay-per-click online advertising campaign, that’s still a considerable amount of money saved.
Also, marketing or digital media agencies may be handling your social media accounts. If that’s the case, it’s certainly something that an employee in your business can do. Failing that, there are social media freelancers that run many accounts for clients at a fraction of the price of large media agencies.
4. Look to Purchase Second-Hand, Not New
While with some items, it’s either necessary or beneficial to purchase new, that’s not always the case. For larger companies, it doesn’t make sense to hunt down a previously owned option, but for a small business needing to control costs any way they can, it certainly does.
A Good Task for Near the End of the Day
This is the type of task that can be done when most of the staff have gone home. It doesn’t require much energy or focus on looking at Gumtree classified ads, eBay, and second-hand sales on Amazon.co.uk too. Yet, taking the time to do this can save considerable costs compared to purchasing new every time.
Which Second-hand Items Offer Considerable Savings?
The most obvious areas where savings can be made is with office furniture (chairs, desks, storage cabinets, etc.) and computers. With computers, rarely do staff needs the latest technology or the fastest computer to get their work done.
Also, desktop PCs are less expensive to upgrade the internals than when using laptops just because they’re convenient. Upgrading the RAM memory on a desktop PC is inexpensive and can give an older PC another year of use before finally needing to replace it.
5. Use Business Lending to Handle Unexpected Expenses
With a small business, money is usually always tight. Because of this, there’s not always the opportunity to put money aside as a rainy-day fund. As a result, when any unexpected expenses arise like a PC breaking down out of the blue or the failure of another important piece of equipment, money may be needed to purchase a replacement. At which point, the business has come unstuck.
It’s useful to take out short term loans for your business to cover these types of unexpected events. While building up cash reserves to handle an unanticipated issue is a good idea in the medium to long-term, prior to that, it’s helpful to have to spare money in the bank. It provides some extra peace of mind. It’s also useful to avoid hitting panic mode where you’re likely to give excessively discounted deals to potential customers to avoid a cash crunch – this would only make matters worse.
6. Take a Flexible Approach to Staff
The cost of payroll is high. When money is tight, it’s unpleasant almost to have to hold your breath when the payroll payments are being sent out to staff. Running your payroll like this only leads to stress and ulcers!
The True Cost of Employees is Hidden
Gone are the days when it was necessary to have an office filled with only full-time employees with all the attendant costs of their employment. Employment costs don’t just include their salary – it also bundles in office space, computer and other equipment, software, electricity usage, sick pay, and more. Instead, embrace remote workers, freelancers, and contractors.
Flexible Working Reduces Fixed Payroll Costs
By using flexible workers who can provide services from their location using their own equipment, it lowers the payroll expenses and other costs of the business. Assigning individual tasks to specialists who have experience in those specific areas may provide better results than what an employee wearing multiple hats can deliver.
Handle Seasonality without Necessarily Needing to Lay People Off
Also, it becomes easier to scale staffing up and down based on business demand or seasonality variances. This can be done without needing to make people redundant (or certainly not as many people) and is far less disruptive to employee morale too.
7. Take Your Ego Out of the Equation
It can happen that pride of ownership causes a founder to spend up on unnecessary things. Such is life as a business owner where that marble floor in the new reception area is calling their name.
Don’t fall for the trap of trying to impress other people, be it, friends, business colleagues, customers, or competitors, with overly fancy things. If it’s not needed, think once, twice and maybe even three times before agreeing to it. Business expenditure should have a return derived from it. When it’s just there for ego’s sake, then it’s usually a bad move. Save the money for when it’s really needed.
8. Get the Most Out of Marketing Plans
Having brought some or all of the marketing back under your roof, it’s time to make it really work for you.
Don’t follow the popular “Be Everywhere” idea as discussed on the Entrepreneurs on Fire podcast, as it relates to social media. Whilst trying to build out and maintain accounts across multiple social media platforms, it’s easy to lose sight of what’s important to the business. Plus, who has time to create original, interesting content frequently anyway?
Look at your website traffic to see which platforms and channels are delivering new visitors to your website. You may well discover that Pinterest serves you well, but Facebook is stingy when it comes to letting your followers visit your site. In which case, keep Pinterest image pinning, but radically scale back Facebook marketing efforts.
9. Buy Business Supplies in Bulk
When you regularly use certain business supplies, and you can only get a better price by purchasing in bulk, consider doing so. While these types of supplies aren’t vital to your business, they are usually still necessary.
These are typically consumable items that get used eventually. Screen the list of items to ensure they won’t expire (e.g., pens with dried up ink). Also, ensure they’re not still on the purchase list even though they aren’t used much in the business anymore or could be easily eliminated.
10. Never Lose Sight of the Essentials
Getting and keeping control of your business budget is no small matter. It’s all too easy to take your eye off the ball, and before you know it, spending is out of whack, and profits to have evaporated. If the business only has a 10% net margin, then it doesn’t require much to get to a point where you’re struggling once again.
Set an appointment in your calendar to look over the aspects of the budget and spending that matter the most. This avoids forgetting to focus on it because your attention is elsewhere within the business.
Also, read –
Managing the budget and finances of a business is where the rubber meets the road. While other things like customers, products, and services also are important, when you don’t manage the money side well, the rest doesn’t really matter in the end.