The first few months of operation are a vital period for small businesses trying to get off the ground, and success can often depend on the careful management of financial resources. Since new and small businesses often operate on restricted budgets, decision makers will need to take every step possible to creatively cut costs and free up resources for business investment. In a recent San Angelo Standard Times article, Paul Howard, an adviser at the Angelo State University Small Business Development Center, explored the basics of small business, with a specific emphasis on costs and finances.
“Before opening the doors of your new small business, you will need to determine what your startup costs will be,” Howard wrote. “Then estimate what your monthly expenses will be, and then look at your cash flow. Startup costs will show you how much money you will need to get your business up and running. Expense estimates should include those costs you will need to cover every month, whether you are open or not. Sales forecasts need to be realistic, show the effects of seasonality or calendar trends, and other ups and downs of any small business. If revenues are not covering expenses, you need to know why and what you can do about it. Cash flow shows what your cash balance is every month. You could make a profit and still be broke. Managing your cash is extremely important.”
Tips to Cut Small Business Costs
Howard’s advice on managing money and financial planning demonstrate how even with the best innovative ideas to back a business’s success, marketplace survival can often come down to dollars. Bolt Insurance Agency recently released an infographic detailing small business expenses, finding that one out of every five dollars a business earns goes toward paying employee salaries. While SmallBizTechnology contributor Vincenzo Ravina noted that it can be particularly challenging to cut business expenses going toward employee compensation, companies still a lot of room to reduce expenses related to equipment, utilities, virtual phone services and shipping.
Agency Manages to Cut Costs
Bolt Insurance Agency noted the importance of making every penny count for small businesses, finding that the largest expenses most companies face include employee wages (19.4 percent), inventories (7.7 percent) and rent (4.6 percent). However, other costly expenses include business equipment-related costs, vehicle expenses, business insurance, employee benefits, business taxes, utilities and promotional advertising.
A virtual PBX system from AccessDirect is one technology choice that small businesses can make to help reduce costs. Small businesses can leverage a PBX system for affordable phone service that can even set up lines on existing mobile devices. In this way, a company can cut communications costs, reduce its hardware footprint, free up financial resources for further business investment and enjoy further tax deductions.
In addition, businesses gain the advantage of fax-to-email functionality with AccessDirect phone systems, which can help cut expenses and even eliminate costs associated with printing and shipping. With more corporate tasks capable of being done virtually, small businesses can take advantage of a single system to cut costs across the whole business.