By Mike DuBose and Blake DuBose
People often ask, “What is the secret to business success?” Research and history indicate that several components—combined with the right staff pursuing a carefully crafted strategy, mission, and purpose—tend to breed great businesses. One simple but crucial way to create a strong organization is to generate more money than you spend. Let’s explore ways to save money, therefore raising the potential for business success:
Create detailed annual budgets. These plans, which should incorporate conservative income and liberal expense projections, allow leaders to anticipate monthly spending and recognize trouble signals early. One might think that this is a “no-brainer;” however, 61% of small businesses surveyed by market research firm Clutch didn’t have official 2018 budgets, according to a recent report!
Develop money-smart corporate cultures. When it comes to business expenditures, strive to purchase high-quality goods and services at the best possible price…without being cheap. Invite employees to submit money-saving ideas (for example, buy flights on Tuesday through Thursday to obtain the lowest ticket prices) and look at saving like a game. Recognize those who go the extra mile. Company leaders should set the example, modeling frugal behaviors and suggesting ways to save when cash flow problems arise. Encourage everyone to ask: “Does my company really need this? Where is the most economical place to buy it?” Using existing resources wisely is also important: for example, turning off computer and copier systems at night can save up to $200 per unit annually!
Practice smart hiring. Leverage above-average salaries and benefits to entice outstanding people to apply at your organization. This will save money in the long run by avoiding costly employee turnover and training costs for new staff, as well as increasing the quality of the goods and services you offer. Hiring competent finance professionals (including CPAs) is especially important. These experts may not be cheap, but they can help you legally obtain tax savings, analyze your monthly expenditures, and suggest wiser spending practices.
Profits can be unpredictable, and once you hire an employee, you are committed to paying their salary, benefits, and payroll taxes. Create a thorough process so that you employ only the best candidates, and consider supplementing full-time staff with reliable, high-quality contractors. Contractors’ workloads can expand as business blossoms and decrease when revenue dips, thus avoiding staff layoffs.
Charge all expenditures to credit cards. Checks don’t generate the benefits that credit cards can: cash back; travel perks and upgrades; and hotel, rental car, and airline points. Assign staff members company credit cards (with limits) to be utilized for all business purchases and pay off the balances each month to avoid interest. Leaders should periodically audit their employees’ spending to ensure compliance with company policy.
Designate a specific airline for company travel. Airlines offer corporate programs (such as Delta SkyBonus) that allow both staff and organizations to accrue perks and even free tickets during business travel. Although booking trips through multiple airlines may reduce costs, spending a little more to fly on a single, quality airline pays off in loyalty rewards, greater ease in making travel changes, and fewer staff frustrations.
Consider allowing employees to work from home. Technological advances like videoconferencing have made it possible for many jobs to be performed remotely, allowing employers to maintain smaller physical offices and save money on rent, utilities, and insurance. Although work-from-home privileges should be decided on a case-by-case basis, if you hire the right staff, remote professionals are just as productive as their in-office counterparts. For their part, home-based employees tend to appreciate the casual work environment, lack of commute, and savings in terms of vehicular wear, tear, and maintenance, dry cleaning costs, etc.
Establish an internal corporate travel agency. You’ll generate 10% in commissions for company hotel, cruise, and rental car expenditures. The International Air Transport Association (IATA) and Airlines Reporting Corporation (ARC) are two organizations that certify businesses as travel agencies.
Make large purchases wisely. For expenses over a certain cost threshold ($3,000-$5,000), we recommend soliciting simple bids. Focus on quality rather than the cheapest price (“you get what you pay for!”). Your preferred vendor may even price-match a lower bid. Also, ask merchants if they will provide a 2-3% discount for early payments. Everything is negotiable, but try to keep a “win-win” mindset. You want your vendors to make good profits, stay in business, and view your organization as a valued partner!
Assign one person to coordinate purchasing, serving as a single point of contact for staff and vendors. Ask this individual to create a chart of supplies needed annually (based on employee input) with retail pricing and catalog numbers. Then, obtain quotes from vendors for a single bulk purchase, which can be paid by credit card to generate additional perks. This could save 20-30% in discounts versus ordering individual supplies as needed!
To reduce administrative time, allow employees to buy items costing less than $100 on their own, with supervisor approval required for large purchases. When you buy furniture or other equipment, gently used items are often as good as new and can save you considerable money. We don’t recommend buying used electronics.
Examine insurance costs. Look for the best possible pricing from reputable companies to adequately protect the business and staff from threats. If it makes sense based on your industry and risk level, increase your deductibles to save on premiums.
Create clear travel reimbursement guidelines. Develop fair corporate travel structures based on research—government rates can usually serve as good guidelines. Encourage staff to use short-term travel means such as Uber or rental cars when it will be less expensive than using their personal vehicles. Also, if your organization is affiliated with government agencies, you can often obtain government contractor rates to save on hotel and other costs.
Barter. Professionals can swap their services for the benefit of both parties.
Cross-train staff. When essential employees go on leave, another trained staff member can pick up some of his or her workload versus hiring outside contractors or additional employees.
Join groups with product and service discounts. Many professional associations give discounts on insurance, while others like AAA and AARP provide 15% discounts on hotels, rental cars, etc.
Disengage from labor-intensive, low-profit customers. Some clients cause too many staff headaches while not bringing in enough money to be worthwhile. Periodically invite all employees to rate clients in terms of profitability and culture fit versus the time spent keeping them happy. Then, tactfully sever relationships with problem customers.
Pay attention to billing. Create systems that issue customer invoices promptly and monitor payment delays. You want clients to pay on time so you can avoid drawing on cash reserves and expensive bank credit lines. If cash flow permits, delay fourth quarter billings to reduce taxes, resulting in a cash-rich January for the company.
Shop credit lines and interest rates. Obtain a liberal credit line with a quality bank before you need the support for cash flow to overcome lean months. Shop around for the best terms; then, stay loyal and build positive relationships with banking officers so they know you and your business. Pay off lines of credit promptly since interest can drain profits.
The bottom line: Saving money in small ways really adds up. Incorporate these tips to help increase your organization’s financial security. No effort is too small!
Mike DuBose has owned the DuBose Family of Companies since 1981. His non-profit website, www.mikedubose.com, features a free copy of his book The Art of Building a Great Business; previously published business, travel, and personal columns; and health articles written with Dr. Surb Guram, MD.
Blake DuBose is president of DuBose Web (www.duboseweb.com) and is Mike’s business partner.