Economizing can be the best solution to guarantee a strong cash flow and keep your business competitive. The problem is that frequently managers don’t know where to begin, since there doesn’t seem to be much fat to eliminate from their expenses.
With this in mind, we’re offering a few simple tips to reduce costs which can make all the difference for your company. Check them out!
1. Optimize production
It’s always possible to improve some production process – and you don’t have to sacrifice the quality of your products or services to do this. Start by looking at your consumption of water, energy and telecommunications services.
Beyond this, study the whole production process and soon you’ll discover points where waste is occurring, whether it’s in terms of time, materials or labor. With all of this information in hand, prepare a strategic plan for improvements and in a short time you’ll have a more optimized production process with lower costs.
2. Stock control
Stock can be one of the most wasteful areas in a company, since poor purchases can immobilize financial resources for a long time. To achieve greater cost reductions, plan your purchases so that they include products that have higher turnover during periods of great demand.
Through purchase and sales reports, it’s possible to make projections of what to order, in what quantity and when. Doing this will give your products and services greater turnover, increasing cash flow and reducing unnecessary purchases.
3. Negotiate with suppliers
Review your buying contracts with suppliers of products and services and analyze the conditions for delivery, payment plans and minimum buying volumes required, etc.
Survey other suppliers to find the best opportunities and, if you wish to continue with your current suppliers, renegotiate with them based on the information you’ve gathered from the competition. You’ll probably be surprised by the new parameters that you’ll be able to establish in exchange for fidelity, and your business will achieve a great reduction in costs.
4. Control your cash flow
Using your reports again, examine your expense accounts and analyze each expense to identify how to reduce them or eliminate them entirely. Then make a forecast of future revenues and expenses to align your cash flow with programmed purchases.
For example: program your purchases to be paid always on the same dates when forecasts indicate that you’ll have money from sales coming in. With these techniques, along with reducing your costs, you’ll always guarantee a positive cash flow.
5. Automate your company
Many companies still use manual processes, requiring large amounts of rework due to human error, wasted time due to tasks that could be automated, reports with unreliable data, an excess of printing costs and a large quantity of wasted raw materials in the production process. The solution for all of this is to automate your business using strategic and operational management software (systems) which, along with contributing to cost reductions, should improve the overall performance of your business.
Maintaining your costs under control is what sustains the survival of companies in competitive markets and putting these tips into practice can increase your company’s competitive force, leading to sustained growth.