There are two main variables that will determine the profitability of your business: the income you have invested and the expenses you have incurred. If you can maintain control over these two variables, your business can continue to function properly. Unfortunately, there are many other variables to consider. If you do not manage them properly, it could lead to your business failing. Here are some ways to manage the major business expenses that affect all types of companies.
Let’s focus on the “spending” side of the equation. Here’s what it takes to effectively manage your expenses:
- Reduction of expenses. When most people think about expense management, it comes to me in the spirit of reducing them as much as possible. It’s a good strategy. Every dollar you save on expenses (while maintaining the same standards and operations) is an extra dollar of profit.
- Understanding and forecasting expenses. You must also understand what your expenses are and how they work. For example, you should be able to predict your recurring costs. In addition, you should predict how these costs might change over time. This allows you to keep your cash flow positive and make better sales goals. In the end, you can effectively plan the future of your business.
- Strategic management of expenditures. Managing expenses means paying for other expenses, provided that they are valuable to you. For example, you could invest more money in a new marketing campaign if it promises to return new sales.
Tips for Controlling Business Expenses
Let’s take a look at some of the main categories of expenses you will assume and how to manage them more effectively:
1. Salaries and Benefits
Without a team of employees, your business will not last long. If you are starting out, you must first decide who will be in your team and what responsibilities will be assumed. With the help of Glassdoor or a similar salary index, you can calculate the rate in effect for each role you plan to hire. Estimate the cost of the benefits you will pay. That could go from almost anything to tens of thousands of extra dollars a year. Keep your costs low here by calling only the people you need to do the work. In addition, use independent contractors and part-time help to cover any other task.
2. Rent (or Mortgage)
Aside from personnel costs, this will be your biggest predictable expense. If you bought a building, it means making a mortgage payment and paying property taxes. If you rent, you will probably pay a flat rate. Even a small business can expect to pay several hundred to several thousand dollars a month for rent, depending on your area. Keep your space small and away from densely populated areas or consider the possibility of subleasing your commercial space.
Your business probably needs equipment, that it ‘sa multi – million dollar workpiece or just a traditional copier / printer. it means spending at least several hundred dollars on initial equipment. Save money by finding devices that provide multiple features in a single package or by buying used equipment rather than new ones. Make sure you understand the decrease in life expectancy and / or performance of used equipment.
4. Utilities and office supplies
The ongoing monthly costs of opening a business can also hurt your budget. Here you will have to plan things like water, electricity, gas, internet and basic office supplies that include pencils, pens and paper. Reduce utility costs by “going green” and by installing more efficient equipment and occupying a smaller space. In addition, apply strict standards on how and when utilities are used, for example by requiring all devices to be turned off and unplugged at the end of the night. If you wanted to become extreme with office shaving costs, you could go paperless and keep your office uncluttered.
You must consider that your office can become vulnerable to criminals. In addition, you must be aware of the threat of cyber attacks to small businesses. All it takes is one compromised password to put your business on your knees. As a result, you will need to invest at least a little money in better security standards. Fortunately, modern camera systems are relatively inexpensive, and protecting your digital presence is as simple as educating your employees and keeping their software up-to-date. These strategies are both free.
6. Other losses
Consider lawsuits, natural disasters, and sudden changes that interrupt your income stream. There are several types of business insurance available. Get a policy that protects your business against a viable threat. However, you can reduce your rates by getting your policies from the same provider and committing yourself to safer practices.
7. Professional fees
Although some entrepreneurs like the idea of trying to manage everything themselves, there are areas where novices can do more harm than good. For matters relating to the law, taxes or other complex disciplines, it is best to hire someone who knows what he is doing. This means paying a high hourly rate or a flat fee. Fortunately, if you are doing excavations, you can probably find some of the affordable ones in each area that you can trust for wise advice. Start by asking the other local business owners that they use and why, and then interview them to find out their point of view.
8. Marketing and Advertising
If you want your business to generate more leads, interests and brands, you will need to invest in marketing and advertising. However, not all strategies are the same. You can save money by focusing on the strategies most likely to give you a high return on investment (ROI) or those that work particularly well for your industry. It may take some time for you to find these candidates through experimentation, interviews with other business owners and research. However, it is worth investing if it means getting a better rate and a higher return.
9. Professional Memberships
Depending on your area of activity, you may have to pay professional membership fees or association fees. Otherwise, you risk being out of the industry. You may have to pay to be certified in some discipline or pay monthly fees to be part of a registry or database. Fees vary from minimal to obvious. Unfortunately, you can not do much to reduce these costs unless you intend to operate outside of these standards and group operations.
10. Travel, restoration and entertainment
If your business involves traveling to meet customers, launching your business or recruiting talented people from across the country, you could see significant expenses in the category of travel, dining and entertainment. You will have to reimburse yourself or your employees when traveling to the outside, invite guests to dinner or even discuss business during entertainment events such as sports. Keeping costs down here is a sacrifice. You will have to spend less money on personalized dinners and substitute a few video calls for in-person meetings. If this saves you hundreds of dollars a month, it may be worth it. It depends heavily on your industry, your target market and how much your company can afford to spend.
11. Repairs and maintenance
If you own something in the name of the business, including your own building, equipment, or personal devices like laptops, you will have to save money for repairs and repairs. # 39; maintenance. Preventive maintenance and proactive repairs tend to fade over the cost of major repairs and replacements. Work to find reliable contact in every category that can handle these routine tasks.
12. Preparation of taxes
Business taxes can be complex, covering several categories such as income tax, estimated taxes, taxes on self-employment, taxes withheld and excise taxes . If you are not ready for these expenses, they can take you by surprise. And, if you do not pay them appropriately, you may find yourself in legal trouble.
These tips should allow you to budget your expenses more accurately and reduce your operating costs. If you can do it consistently, while increasing the amount of your income, there will be nothing left to prevent your business from becoming profitable. The more you learn and the more experience you gain in this area, the more intuitive it becomes. Keep investing in your financial skills and always work to better manage your money.
Reissued with permission. Original here.
Image from Due.com
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