Cutting the Fat: Make the Most of Your 2017 Budget
For many small to mid-sized businesses, the details of a budget can take a back seat to producing the best possible product or providing the best possible service. You’re profitable. You’re managing cash flow. And you have a big picture idea of where your money goes.
You can do better. Controlling your expenses can improve profits, free up extra capital for growth opportunities, help you take advantage of tax benefits, and put you in a proactive rather than reactive mindset.
Understanding Expenses
The first step in "cutting the fat", or developing a disciplined approach to budgeting is analyzing your profit and loss statement from the previous year.
- What worked?
- What areas went over budget?
- Which months were your most profitable and why?
- Did you have a slow period?
If you aren’t sure how to create or read a financial statement for the month or the year, consider reaching out to one of the many business resources in the area, such as UW’s Small Business Development Center, the online tools offered by the U.S. Small Business Administration (SBA), or your local chamber of commerce.
You also may want to think about outsourcing your financials to an accountant or bookkeeper. The expense of hiring someone to manage this part of your business is usually more than offset by the time and money you save over trying to do it yourself without the necessary expertise.
Tips for Finding the Fat
Once you have the information you need at your fingertips, the following areas are a good place to start looking for extraneous expenses:
- Efficiency. What’s your process for getting from A to B? Is each document passing through 10 people when it really only requires two? Understanding your workflow can lead to efficiencies that save time, money, and manpower.
- Where are your best customers coming from? It’s important to measure and analyze the return on investment for your marketing efforts. Don’t forget to maximize some of the no-cost or low-cost opportunities available via social media and public relations.
- I read somewhere that most people use about 10 percent of any given technology’s full capabilities. If you’re paying for the technology, consider investing in some training for yourself or your staff to take advantage of its full power. In addition, there are tools that might replace traditional ways of doing things. For instance, face-to-face meetings are important, but not necessary every time. Look into online meeting technology to manage travel expenses.
Accounts Payable. Turn your vendors into partners. Find out if there are incentives for paying quickly or paying in a certain way, such as PayPal. Could you pay for the year all at once for a discount? I’ve seen businesses get very good at reducing expenses by talking to their business partners and creating mutually beneficial arrangements.
Lake Ridge Bank has an entire team of professionals ready to help you add to your bottom line. From our business banking tools to treasury management consultation, we’re here to serve as your business partner, resource, and secret weapon.Member FDIC.