Business costs have been steadily increasing over the past few years. According to the National Association of Home Builders, residential construction costs are still climbing, although at a slower rate than in previous years. Any increase in cost can still be a problem for cash flow and your bottom line, but when problems like rising costs arise in your business, it’s the perfect opportunity to stop and look at how you can recalibrate for success.
The first thing to do is look at your business’s cash flow. Cash flow is the movement of money in and out of a company. It shows how much liquidated cash your business has on hand at any given time. Ideally, you’re looking to create a consistent, positive cash flow, which means that your business has more money coming in than going out. Money coming in would be customer payments or loans. Money going out would be expenses such as payroll, supplies, and maintenance. If you find that you have a lot more money leaving your business than coming in, you’ll need to make some changes. Here are some tips to help take back control of your business costs:
Recalibrate Your Inventory
Now, you may think the following method of inventory review is extremely simplistic, but sometimes the simplest things in life are the best. The first step is to make a list of what your company uses daily, weekly, and monthly. This includes everything down to pencils, pens, paper, and even toilet paper in the shop – those are still part of the inventory you try to keep on hand.
Now as you go down the list you created, put a star next to the items that are necessary to get projects completed on a daily basis (and yes, you can include toilet paper in those essentials). Then you’ll note for each item how often you purchase that item and if you’re purchasing that item in bulk. Are there certain items you purchase from the same supplier to reduce fees, extra trips, or even work up a bulk discount with that supplier?
The next part is a little bit more time-consuming. Go through past invoices and receipts to determine how much you are paying for each inventory item, how often you are purchasing each item, and how long those items sit in storage before you can put them to use in the field. Are there certain items you can decide to stop stocking and order on an as-needed basis? After that, you should review any extra items that aren’t necessary to complete projects on a daily basis and weigh if they are worth the cost to your business at all. From there, start shopping around to see if you can find lower prices or better bulk pricing.
Remove or Replace Underperforming Services
When times are good, we tend to add on more services and products than we may actually need. For instance, did you sign up for a trade magazine subscription that you haven’t read in years? Although that subscription cost may only be $36 a year, if your business is no longer getting any value from it, that’s $36 back in your pocket, working toward positive cash flow.
Magazine or newspaper subscriptions are the easy ones. How about services like internet or phone lines? Have you shopped around recently to see if you can find a lower price? Most likely, you can find a better deal with the same amount of coverage. There are even times where you can get a discounted rate if you bundle your mobile phone and internet. Of course, you’ll always want to watch out for deals that lock you into a contract for a set period of time. Make sure you still have the flexibility to move on from that service if you need to in the future.
Another service to shop around for is insurance. Insurance is one of those services that you need, but the prices will start to creep up if you aren’t paying attention. When looking at a new insurance package, always make sure to compare the quotes you receive to your current coverage because the last thing you want to do is skimp on coverage you currently utilize.
Automate Processes
Leverage technology to accelerate manual processes that eat up a lot of valuable time. Keep in mind that your time is worth money. If you’re spending time performing a task that’s preventing you from completing billable hours, that’s a cost to your business.
Project 2 Payment can’t take on revenue-producing activities for you, but it can save you money by making you and your team far more efficient at sending estimates, creating invoices, and collecting payments. It’s simple, easy-to-use interface helps you and your team save time and money — from project creation to payment. You can even set Project 2 Payment to automatically send invoice reminders to your customers with unpaid invoices, so you get paid faster for completed work. Now THAT’S a way to boost your cash flow in a hurry.
You may not be able to control building material costs, but there are other things you can do to lower business spending. All the hard work you put in on the front end to get costs under control will pay off (literally) in the long run.
