No matter how tightly you run your ship, there’s always an opportunity to run it even tighter, and every dollar you save goes toward your bottom line. The only problem is, a financial detox can seem like a huge time commitment, especially if you don’t have a dedicated finance department. The key is taking it one step at a time and cutting back wherever you see the opportunity.
Here’s how to put your business through a financial detox, from the first step to the last:
#1: Audit Your Budget
First thing’s first. Your budget holds all the valuable information about how your business runs financially on a daily, quarterly, and annual basis. Ideally, you want every dollar to be accounted for, especially if you’re looking to detox and “trim the fat.” Look for payables that aren’t categorized as core operating costs, and decide which ones are vital to the business—and which ones can be cut.
Some common places to cut back include:
- Downsizing your office space
- Cutting production costs
- Consolidating insurance policies
- Going with organic marketing instead of paid
- Setting productivity expectations with hourly employees
#2: Know Your Targets
Figure out your business goals for the year. If you’re detoxing at the beginning of the fiscal year, this is especially important before you make any important budget changes. When you’re looking to open a new location, unveil a new service, or roll out a new marketing plan during the upcoming year, you have to account for that when overhauling your budget.
While you are detoxing, you aren’t running a bare-bones operation, so leave enough extra space for what needs to be done this year.
#3: Overhaul Accounts Receivable
It’s all too common for unpaid accounts to roll over from month to month… to month to month. This year, make a plan for collecting past-due invoices, and stick to it. Start with gentle reminders at the four-week mark, and then escalate as necessary every 30 days thereafter.
Have a policy in place for late payment fees and sending accounts to collections, and make sure that your clients know. Your cash flow is immeasurably better when you have payments coming in on time. There may also come a point when placing a customer on C.O.D. until they catch up might be your best best.
#4: Seek Out Better Deals
Have a great relationship with your vendors? Talk to them about negotiating a better deal on your purchase orders and services. Aim low during initial talks to leave some wiggle room for negotiation. Chances are that your vendors will be happy to help you, especially if you explain that you’re pleased with their services, but experiencing some budget changes and looking to keep them on board any way possible.
#5: Revamp Your Cash Flow with a Business Line of Credit
Get your cash flow in order; it’ll make the rest of your financial detox much easier. It’s hard to justify cutting costs when you’re already struggling to operate efficiently. Consider enlisting the help of a business line of credit that you can keep on hand as a safety net.
With this type of credit, you aren’t obligated to use any of the credit you have available to you, nor do you pay fees on it until you’re actually using it. You could have a $100,000 line of credit sitting by the wayside, and use $20,000 of it to get you through a tough month’s worth of accounts payable. You only pay interest and fees on that $20,000, and the remaining $80,000 is waiting in case you need it.
The key to finding successful cash flow management with a business line of credit is finding the right vendor. Mulligan Funding offers flexible repayment terms and a high approval rate, making them a great choice for most small businesses.
#6: It’s Not All or Nothing
It’s overwhelming to overhaul your entire business’ finances all at once, so don’t fret if your financial detox doesn’t accomplish everything right away. If you only have the time and resources to audit your budget and negotiate deals with your vendors, then so be it.
Take it one step at a time, and tackle the other steps (such as auditing accounts receivable and applying for a line of business credit) when you have the time to do it. Remember, every step that you accomplish right now still saves your business money ultimately, so don’t be afraid to get started even if you know you can’t finish the entire detox process right now.
While this is a great starting point for a financial detox business plan, it’s far from the only way to cut costs. Start with these six steps, and then move on to more detailed cost-cutting measures as you find the opportunity. This can mean cutting back on seasonal employees, setting an overall goal to cut 10 percent of operating costs in every department, and minimizing incidentals and discretionary costs. However you make it happen, your company budget will thank you.
Call Mulligan Funding at 855-326-3564 to discuss your financing options today!