Left unattended, even the smallest expenses can quickly add up and cut into profits and your business’ overall economic health without moving your business forward.
Many small business owners know where money comes in from but are not as clear where it goes. This can have a significant impact on your business’ cash flow. It is important to review your expenses regularly — every quarter if possible — so you can accurately manage your outgoing expenditures and look for ways to save.
Basic rules apply to all types of expenditures:
- Comparison shop for the best buys
You can do this in all phases of your business, from pens and other office supplies to your insurance costs.
- Evaluate your contracts and your suppliers regularly.
Every time you pay an invoice or write out a check, ask yourself when the last time was you shopped around for a better price.
- Don’t be afraid to negotiate.
Do not just do this when a new contract comes up. You can also negotiate with current suppliers who want to keep your business.
- Take advantage of discounts
Professional and trade associations often offer their members discounts on insurance, travel, shipping, and other common expenses. Similarly, your charge or credit card may get you discounts as well; for example, by using an American Express Corporate Card for Small Business, you can receive discounts on gasoline, car rentals, hotel stays, and air shipping services. Here are some common areas where small business owners overspend. Click on the appropriate area to learn ways to reduce those costs:
- Health Insurance
- Check and double-check all charges on your phone bill. Mistakes can and do happen.
- Speak with your phone company’s customer service representative to find out whether you are getting the best possible local and long-distance rates for your business. Be aware that you often can get a better rate than the one you see advertised. But you must ask.
- Do not be afraid to check out the competition and valuate your choice once or twice a year. If one long-distance carrier offers you a deal to switch, take it to your current carrier and ask if they will meet the offer. It is often cheaper for a phone company to cut a deal with an existing customer than it is to go out and replace you.
- If you’re operating from a home office, ask to have your phone bill calculated in 6-second increments. Residential calling plans (commonly used by home-based businesses) usually bill you by the minute and round up any fractions. So, a 1 minute, 1 second call is actually billed at 2 minutes. You may save money by using 6-second billing, even if the per-minute rate is higher.
- Sit down quarterly with a carrier representative to see if your calling plan is still the most appropriate option for your growing business. Remember that phone companies regularly add new “small business” packages to their menu of services that can give you new ways to save.
- Overcharges are not uncommon on utility bills. Make sure you are assigned the best rate structure. Double check the meter number, meter reading and the meter “constant”, a cost multiplier written on your meter that helps determine monthly usage.
- Health Insurance
- Take stock of your policies and premiums at least twice a year to make sure they meet your needs. Shop around to see what rates and services are being offered by competitors. Do not take the word of one agent. Ask for bids from at least three.
- Take advantage of group discounts available to members of local Chambers of Commerce and professional and trade groups.
- Analyse your company’s claims history carefully. Make sure your insurance company is not overcharging you on premiums, particularly as a result of an expensive non-recurring claim (such as a premature birth that resulted in high hospital bills).
- Compare actual claims with expectations based on the demographics of your workforce. For example, you might be charged full rates for maternity benefits when the likelihood of them being used is rather slim if your workforce is young and single.
- Make sure that all the benefits you are buying are really being used. Ask your insurer what you might save by eliminating or reducing some of these underutilized benefits.
- Try to negotiate a volume discount with a company that you use frequently for your shipping and delivery needs. Most of the “next day” delivery services build flexibility into their rates. If you are sending as few as seven packages per week, you may be able to reduce your rates. Call your sales representative and start negotiating.
- Track the delivery time of your packages, either by asking for proof from the carrier or using their online tracking software. Carriers typically guarantee time and date of delivery. Ask for a refund for packages that are delivered late.
- Does it really need to be there overnight? Make sure that your timing meets your customers’ needs. You may be spending money for 10 a.m. delivery when next-day or 2-day service might be just fine.
- Look for a convenient drop-off point. You might not realize it, but you pay extra when you have a package picked up. Many of the major carriers have local service centres or drop boxes. Using these can save you money on every package.