It’s just amazing how the cost of doing business has risen. Consider fuel costs – they have sky rocketed Electricity prices have gone through the roof. Rentals, wages and business services are all shooting up. The inflation rate running around 5,8% lulls one into thinking that everything is not as bad as it seems. But costs of products and services that are essential for doing business are increasing at an alarming rate.
Small business owners burdened by these massive cost increases have been lulled into a false sense of security thinking that if they just make more sales everything will be all right. It doesn’t. Slowly, imperceptibly rising costs eat away at your competitiveness. Sharp thinking is needed to reduce costs, to increase cash flow and competitiveness in your local market.
Cost-cutting needs to be done carefully and thought through otherwise you can affect customer service levels and turn away customers that you so desperately need in this economy.
Costs need to be cut with care. For example: When the time comes to replace your delivery vehicles, rather move to fuel-efficient ones. Another way to cut costs, is to see how best to try get suppliers to make deliveries to your premises. I know this is difficult in a small business where you need to go out to wholesalers. But where possible try to get your goods to ride on the back of other deliveries.
Closely monitor all your costs. For example: do it yourself or get your bookkeeper to make a listing of all your costs over the previous 12 months. Then anticipate which costs are going to rise. You can find out information from press reports, newsletters and the Internet. This little exercise may seem tedious but such information will enable you to be in a far better position to plan the action you can take to avoid cost increases.
In this economy cash flow is the number one headache for most small business owners. It pays to have a better understanding of cash flow forecasting and cash flow management. Recommendation: prepare a simple cash flow analysis not only monthly but also weekly – if you are under cash pressures consider a daily cash flow statement.
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