Part 2 of 2
I’m glad you’ve returned to the Smart Business Cash Flow blog in order to read the second part of my post on small business cash flow projection and cash management strategies for the new year which deals specifically with making a detailed review of your expenses. If you missed the first half of this post, I encourage you to read part 1 (Small Business Cash Flow Projection and Cash Management Strategies for the New Year: Make a Detailed Review of your Revenue Streams) before you get started.
Make a Detailed Review of Your Expenses
Perform a detailed review of your expenses in order to determine whether you still need all of the products and services you are paying for. Consider whether or not your needs will change in the coming year based on the amount of revenue you plan to bring in. Will the planned revenue increase prompt you to hire more personnel? Do you anticipate any other changes that will increase or decrease your expenses?
- Decrease Your Costs While Maintaining Quality:If you want to maintain increased revenue streams you must be intentional about keeping your expenses as low as possible without compromising the quality of the products and services you provide. You also need to maintain a high standard for the quality of the people you employ in addition to the environment they work in. Invest some time in researching your highest costs. Are there new products and services available that can do the job the same or even better? With new technologies popping up all the time you may find an improved and/or more cost-effective solution.I’ve found it easy to implement several simple changes that have saved my business both time and money.I use Stamps.com nearly every day to print USPS approved postage directly from my computer. This saves myself and members of my staff from spending time at the post office picking up postage or standing in line to ship standard or priority mail. UPrinting.com is a great resource for inexpensive business cards, postcards and flyers. Their online templates are easy to use and save you the expense of employing a graphic designer to create your print publications. I’ve also used Wix.com to create professional-looking, flash-based websites. Their interface is completely drag and drop and it is simple to work with even without any web-development experience. I encourage you to visit the Smart Business Cash Flow Additional Resources page for more time and money-saving ideas for your business.
- Plan for Staffing Changes:Will you need to hire additional personnel or reorganize your existing staff? This decision needs to be made with utmost care. Take a look at what your current personnel are doing. Review their job descriptions and determine if what your employees are doing is the primarily the same as their job descriptions or if their duties have changed? Do you need to re-task employees with different duties that will be more in line with your new year plans? Staffing is one of the most (if not the most) costly parts of running your business. You want to make sure you have structured your employees’ work environments and duty assignments so that they are as efficient and productive as possible.
- Evaluate your Need for and Ability to Repay Additional Financing:
This is another decision that needs to be made with care. If you think you need additional financing, make sure you plan appropriately for making the loan or outside financing payments. These payments must be a part of your cash flow projection. Consider the effect that the loan payment will have on your comprehensive cash flow projection picture based on a low, medium and high expectation of the additional revenue you plan to bring in. The obligation to repay your financing will have to be met even if you don’t meet the projected increase in revenue, so have a plan to be able to cut back on expenses in order to be able to make your loan payments in case it becomes necessary.
Before implementing any changes to your overall cash management strategy, take time to read my post on Taking a Look at the Bottom Line of Your Cash Flow Projection to analyze how your changes affect the bottom line of each month and make sure you still have a cash positive situation.
It’s very important to review your cash flow at a minimum of a monthly basis so you can monitor your growth and make sure you are able to operate realistically in light of the changes you’ve made to your cash management strategy. Remember you have a greater chance to achieve your goals and be successful if you constantly monitor your cash flow projection and make changes along the way. If you procrastinate and only evaluate your cash flow at the end of the year, you will almost certainly have wasted valuable opportunities to bring in the additional revenue you want to make.