Article provided by The Alternative Board
With the strains of the lockdown, many businesses are finding their profits diminished or uncertain. Many leaders are relying on tried and true revenue generating strategies like upselling to existing clients, branching out to new markets, or offering special offers or discounts to attract new customers.
Extraordinary circumstances often require extraordinary solutions. Here are 10 creative solutions you can deploy to find hidden money in your business.
Use credit reward programs
All businesses have outgoing expenses that must be paid each month. If you have expenses that can be paid by credit card, with the balance paid off in full each month, using a corporate credit card with loyalty reward programs gives you access to free money. For example, a credit card that gives you a percent of all purchases made in the month, can be used for regular office expenditures like coffee or stationery. Be warned, this only works if you have enough cash flow to pay off your corporate credit card each month, otherwise you will be paying interest on the expenses you charge to the card. When properly managed, credit card reward programs can give you free products and services, freeing up cash to be used in other ways.
Understand the ROI of your expenses
Every business owner should know their numbers and stop spending money on expenses that don’t bring a return on their investment. Too many owners defer all of their financial knowledge to an accountant or advisor who may tell them where the money went, but not what the ROI is for that expense. Business owners should know and understand their balance sheet, cash flow statement, and profit and loss statement and be able to explain them to a third party. The numbers tell a story, and often in that story are ways to save money or increase the ROI for the money that is spent.
Do more with your human capital
Assess the strengths of your team members. There may be strengths and skills that you’re not leveraging for the good of your business.
Boost vendor credit with early pay discounts
Companies who have received financial assistance during the lockdown period might actually have an unusual level of liquidity right now. They may be able to capture a few “Gross Margin” percentage points by taking advantage of early pay discounts. Even if that practice is only going to be temporary, it will improve margins and potentially boost their vendor credit.
Crowdsource the issue with your team
One often overlooked way to find savings is asking your employees for their insight. They see the wasted time, effort and money spent every day. I know of an employee who, when told of an attempt to make a significant savings, said, “That is simple, I know of ways we could stop doing this, it would achieve your objective, because I designed the current system and I know there is waste in there. I just never knew we needed to eliminate this waste!” He was given a huge reward just for offering a perspective his leadership did not share.
Only keep expenses with a critical business impact
Challenged by a sudden and critical decrease in revenue due to the COVID-19 crisis, one business owner decided to gather his executive team for an urgent meeting. He gave them a copy of the company´s expense report and they spent hours reviewing it line by line and cancelling the majority of expenses. After several weeks, he and his team found two kinds of company expenses: those that they cancelled but needed to restart due to the nature of the expense itself, and those that they could continue to do without because they had no critical impact on the business. This process allowed them to discover unnecessary expenses that lived in “transparency,” meaning that nobody in the organization saw, noticed, or analyzed them before. They were just part of the status quo until someone, the leader in this case, declared a breakdown and made visible what was transparent before.
Don’t wait until a crisis arises. Establish a disciplined, formal and regular practice for thoroughly reviewing and restructuring your company expenses. Especially in these convoluted times, your profits and loss statement will definitely thank you.
Negotiate with vendors
A strong recommendation in terms of cost savings is asking supply chain vendors for a discount for paying in full at the time of the transaction. Cash is king.
Make the most out of your assets
Your business most likely has assets which sit idle during working hours (let alone outside of working hours). Could you hire out the asset when it is not required? Similarly, is there a local non-competing business that has the asset you cannot justify buying, but who may be willing to hire it out to you when they are not using it? Sweat those assets.
Re-evaluate your tech tools and services
Cancel or downgrade services with monthly fees. Often there are several levels of service or software plans, and sometimes you can go with a less expensive plan and still get the features or support you need. Additionally, cancel subscriptions you aren’t using or can fulfil in another way.
See what features you get with your current software subscription that you aren’t using. You may be able to cancel another subscription and still get the job done. For example, OneNote comes with many Microsoft packages and might be able to meet the needs of companies using EverNote. Another example is using Google Drive for shared documents rather than also paying for Dropbox.
Turn inventory into cash
There is one overlooked place where you can free up money for your business. If you carry inventory, take this opportunity to assess it. Do you have slow-moving or obsolete inventory on hand? If you do, get rid of it! Sell it off at a discount, otherwise it will just sit there collecting dust. Why not turn this inventory into cash? If you don’t, eventually you will have to write it off.