• Friday, March 29, 2024
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BusinessDay

15 money-saving hacks for your business

It is no hidden secret that properly run businesses have a far higher probability of living longer than their founders, even if those founders

It is no hidden secret that properly run businesses have a far higher probability of living longer than their founders, even if those founders live to be 100 years old. These businesses are constantly mindful of their revenue generation activities and their cost drivers, so that they can consistently remain profitable.

How do businesses increase profit? They do this by increasing revenue generation and also by reducing costs.

The focus today is on adopting a few hacks that can result in money savings for the business and consequently, higher profit.

Here are just a few cost saving hacks and you may already be applying some of them. If so, keep it up.

1. You don’t have to buy brand new fixed assets. Fans, TVs, computers, etc. do not have to be purchased brand new. Look for reliable vendors selling second hand assets. Furniture like tables and chairs don’t have to come from popular retail centres; get recommendations from friends, acquaintances or colleagues for reliable second hand dealers. I know a certain business owner who bought a second hand HP laptop for N100,000. The brand-new laptop of that particular model was costing N300,000. He has now used that fairly used laptop for three years and it’s still functioning properly. Choose utility over aesthetics where aesthetics is going to cost you so much more; especially if you are not selling luxury products. You need to remember that your office is neither a museum nor a tourist centre, therefore keep things practical.

2. Use independent contractors for different services – Accounting, Marketing, IT Support, HR and so on. Only keep in full employment those who form the core part of your operations. Even your sales team can be outsourced. There are Direct Sales Agencies who can deliver sales for a minimal fixed fee and commissions on each sale. In doing this, you are not denying your business the benefits of such services, rather you have found a cost-effective way to acquire those benefits.

3. Be reluctant to sell on credit. It is advisable that you sell on credit with great caution after several background checks. That’s right; you also have a right to research your customers’ behavioural patterns with your competition. The reason is that sales on credit can easily become bad debts written off to your Profit or Loss statement. This translates to a reduction in your profit.

4. Consider barter arrangements for some services, so you don’t have to part with money. You might part with time or products. You would therefore need to quantify properly. In adopting this, you need to assess that the exchange value for both items of products or service are at par, so that neither party is cheated.

5. Get a prepaid electricity meter for your business premises so that you can control how much you are spending on electricity. In doing this, you avoid getting bogged down with estimated bills that are sent to you even when no electricity has been supplied. With a prepaid electricity meter, you can decide you will only spend N10,000 monthly, for instance, and control how you use your appliances. You may not have to use the fridge for the entire 8 hours you are in your office; maybe opt for 4 hours. Same goes for other heavy power consuming appliances. Here you have control, so take advantage of it.

6. Minimise costs associated with inventory and supply chain. There are costs associated with having too much goods and having too little goods in store. Ascertain your economic order quantity. That is, the amount of stock/inventory that will allow you minimise both holding cost and ordering costs. If your supplier and logistics company will grant you a discount for certain bulk orders, you need to compare that discount to the additional storage space you might need. Are you also sure these items will move fast enough for you to recover profit multiple times and cover the storage cost? Such considerations lead to more effective cost savings.

7. Office stationery is usually overlooked and constitutes a whole lot of wastage in some offices. Go paperless as much as possible. Print only those things that must be printed, perhaps for regulatory reasons. For instance, invoices and other tax audit related documents, because routinely these officials come around to check. But stationery consumption is one area of waste that businesses don’t typically check. If you want your staff to learn something, for instance, just send it to them electronically. If you’re worried about loss of data, then consider cloud-based storage options. Drop Box, We Transfer etc. They are comparatively cheaper than having all documents printed and filed.

8. Get a smaller, cheaper office space or sublet to other credible business owners. How many of your customers visit your office? Right now, the future of work is going to be more virtual; brick and mortar offices will no longer be as prominent. But this still doesn’t apply to all business types. Some businesses still need to have their staff together due to the sort of collaboration required to get work done. For instance, manufacturing concerns, fashion houses, and so on. Even then, make the most of the space and sublet excess space to reduce the rent burden.

9. Pay taxes on time to avoid costs arising from late payment penalties. Several businesses have lost money by delaying payments on taxes; thus, accumulating huge amounts in penalties and increasing overall amounts paid out to tax authorities. For example, VAT attracts a N5,000 penalty for every month you don’t remit your taxes plus interest. This is avoidable by paying promptly on or before due dates.

10. Get most, if not all your meetings online. Use Zoom, Skype, WhatsApp and other alternatives to have your meetings. Don’t feel embarrassed about saving on GSM call costs when you can make those calls over data. This is even a good way to maximise your data plan. Virtual meetings also impact positively on your travel time and costs of fuel and vehicle maintenance and repairs from going all around town in the pursuit of business.

11. Consider repair options before going for full replacement. There is always the temptation to quickly replace an item if it is not working, when you can actually opt for a repair and save money thereby. For instance, if your laptop battery life is shorter than its original lifespan, consider changing the battery for N15,000 rather than deciding you need a new laptop that may cost you N200,000 or more.

12. Ensure you follow through with routine maintenance of your assets. This will prevent such assets packing up before their estimated useful life. If you have a generator that requires servicing every two months, schedule this on a calendar and ensure it is done. In this instance, skipping routine maintenance could lead to major damage in the generator and consequently a far more significant outlay of money to replace such a spare part or the generator altogether.

13. Constantly review for idle time and ensure that there is always productive activity going on during work hours. If you are keeping human resources that aren’t fully maximised, then you need to either reallocate work by delegating some of what you are doing as a business owner, or you need to let go of the underutilised human resource. Staff cost must be justified by productivity, measured by significant incremental revenue. If you do not pause to review, you will not identify your recruitment errors.

14. For business trips, book them in advance. Last minute bookings usually cost a lot more. Look for days with cheapest fares. Let the fares decide the date you travel. Don’t pick a date and then pay whatever fare aligns with that date. As long as it is not an emergency, let the fares decide the date of this face to face meeting with your supplier, customer or other business stakeholder.

15. Use a budget. At the start of each financial year, have a budget. A budget is a plan for your expenditure and revenue. But we will focus on the expense part. However, a budget would only be realistic if you were keeping track of how you spent in previous periods. Do not spend on an item if it is not planned for. Check for variances with your budget on a monthly or quarterly basis, investigate reasons for the variances and then course correct.

There you have it! The next step is up to you. Go over your various expense elements one after the other and find out those items you need to modify or eliminate totally.

Madojemu is the Managing Director of Pundit Bookkeeping Services; a company bridging the gap between emerging businesses and professionally prepared accounts. Jovita seeks to empower young businesses with financial intelligence, for business growth and sustainability. Instagram @jovitamadojemu, @punditbk; Twitter @punditbk; Email – [email protected]