Small business owners must spend prudently. At the same time, they must set money aside. Some of that money should be for personal needs, goals and retirement. But, small business entrepreneurs must also save to grow the business, retain employees and satisfy customers.
Business owners must manage money well. A new business can count on cash flow problems from the beginning. They see money drain while they wait for income. Unfortunately, without cash on hand or accessible, the business has no liquidity; it’s only value is negative. Still, there are ways to save money without realizing it and we’ve compiled five of the best ways to do so.
1. Budget Savings
Any budget needs a savings component. It should have a daily or weekly pocket where you can plan on placing a specific amount of money. The amount can be small, but your future depends on it being enough that it’ll multiply over the months and years. A budget is all about commitment and projection. With regular payments, you can forecast the business’ future and your own. But, you must remember that a budget is about saving and spending.
You must pay bills, of course, but you should also commit to regular payments to your piggy bank. You should find that each time you budget a spend or save, you’ll seriously think over the item. Each budget entry asks you to consider how well you’ll stick with your plan. If, in time, you find you’re spending outside the plan, then it’s time to rethink the budget so that the savings offsets or balances the spending.
2. Trade Goods And Services
You and your business are not alone. Thousands of small business owners attend regular Chamber of Commerce meetings. Most also belong to other associations or networks where they listen to motivational speakers and local campaigners. Each meeting also creates an opportunity to barter your business’ goods or services. Small business entrepreneurs generally have special skills other businesses need. It’s usually a short-term need, but the exchange creates a relationship and expands the network for your business’ future.
3. Use Cash
Cash is a business owner’s friend. Where you can, you should pay outstanding bills with cash. Credit cards have value when used prudently, but every cent put on a credit card risks interest charges. On the positive side, credit cards do create a paper trail, and they let you spread out your spending.
How you use cash and credit reveals how you think about revenues. Revenues are not income. The dollar that comes across the counter is neither income nor profit. Each penny is assigned to one line or another in your business operation and budget. That should be true in your head as well.
4. Keep Paying When You’re Done
If you close a debt that has been on the books for a while, you can save money by continuing to pay that amount into your savings. For example, if you were paying $500 a month on a loan to pay for the van you use for business, you can continue to pay that same amount into your savings. With that $500 a month, you can pay some or all into the savings, or some into paying down other obligations. You’re saving either way. Redirecting that regular payment takes discipline, but it also helps define your management.
Reassigning the money will force you to plan and adapt. Paying off the debt is a relief, but putting that money aside saves more than you think. For instance, that same $500 a month did not all go to paying principal. A large percentage of it paid interest or finance charges on the original loan. So, when you redirect the $500, you’re saving money in more ways than one.
5. Organize The Business Well
Even the best planning can slip out of your hands when you open the business doors, but you cannot get careless about the business operation. There are common sense and best business practices that can save you money. You should, for example, give smart and serious thought to the office or retail space you really need. You must consider the address, furniture, lighting fixtures, electronics and so on. You must “budget” that thinking, as it were to assess what you must have, what you would like to have and what you can put off until the following year.
You can save by going green in plan and practice. Your entire supply chain offers savings at each stage. You’ll find significant savings in power, office supplies, software, communications and more. And, when you need help, you must hire for talent, not for busy hands.
Saving money while operating a small business does require some realization. It must be a conscious effort in planning and behavior. A small business owner’s ability and discipline in saving pretty much defines the business’ future. It hurts the business if you cannot plan your way out of debt, invest what you can or pay it forward.