1. Keep a watchful eye over collections and billing
By developing tight controls over billing and collections will go along way in helping you improve profits of your small business. One way you can speed up cash flow is to consider semimonthly billing versus monthly billing. Also, being diligent on sending second notices.
2. Collect on over-due invoices
Of all the small businesses I talk to, there will enviably be some amount of past overdue invoices as we have all ran into those people that survive on other people’s money! Be sure to call those who owe you the most money, and try to resolve the problem on the spot, possibly by charging it to a credit card. What you lose in fees for the quicker payment is far less than dealing with the check is in the mail for two months. If you can't collect the total immediately, negotiate a payment schedule.
3. Wait, did I already pay for that?
The busier you get, the easier it is to let things fall through the cracks, especially if you are often writing and mailing checks. There are many businesses that accidentally will overpay their vendors. Be sure to have a procedure in place to help prevent the issue. If you have an accounts payable person, be sure to have them be diligent in the following:
- Check the invoice numbers so that you don’t pay twice.
- Don't pay for goods that you return to the supplier or vendor. Be sure to check the invoices that the adjustment has been made.
- If you get a credit memo, be sure to keep track of it and subtract them from the next invoice.
- If a vendor or supplier offers you a discount for early payment, then take them!
- Be diligent in watching for charges that are incorrectly included on the invoice. These include things such as a shipping charge that the vendor had agreed to pay.
What is one of the largest line items in any business? If you guessed payroll, then you would be correct. There are ways in which you can reduce payroll costs by looking at increasing efficiency. Simply planing a route to avoid traffic could save you 15 minutes. Add that 15 minutes up, and in a week’s time, you may have saved yourself from paying overtime! Also, look at adding temporary employees and subcontractors to help with temporary workloads.
While I am by far not an expert in insurance and employee benefits, I do know that a simple review of your workers' compensation insurance can help reduce costs. Also, look into group insurance programs, leverage the bidding process to find better rates.
5. Watch your numbers
Use previous financial statements to guide you as you prepare budgets and long-range projections for the coming year. Your actual results will need to be compared to these projections to highlight areas where you need to pay closer attention before significant problems develop.
6. Keep your advisors on speed dial
You will want to keep people like your lawyer, accountant, banker, insurance agent, and marketing agency informed about your business. Keeping these pros informed about your business will help them cut costs and add to your bottom line. Just like you are an expert in your field, so are they. It’s their job to keep up with changes and trends that you may have overlooked or simply don’t know about.
7. Leverage the power of online marketing
While your marketing budget may be seen as an expense, it can actually help add to your profit margins. Online marketing is one of the cheapest and most effective ways to get your business name out in the world. By merely having an updated Google My Business profile listing can go along way into increasing your leads and new sales.