14 Smart, Simple Strategies To Help Small-Business Owners Manage Expenses
Keeping a tight rein on expenses is important for a small business operating with a limited budget. If unchecked, spending can get out of hand quickly, putting a serious strain on financial health. In addition to looking for ways to cut spending, it’s important for small-business owners to consider smarter ways to meet necessary expenses for essential functions and services.
Fortunately, there are multiple strategies small-business owners can leverage to better manage expenses and improve cash flow. Below, 14 members of Forbes Finance Council offer insights to help small-business owners stretch (and save) their budget dollars.
Members of Forbes Finance Council share strategies to help small-business owners manage expenses.
Photos courtesy of the individual members.
1. Consider Outsourcing Key Functions
It is important for all small businesses to have individuals who are experts in different areas be involved in the operations of the company. However, that does not necessarily mean you need to hire specific individuals for each role. A good way to bring on these different areas of expertise without hiring full-time employees is to outsource key functions, such as HR, accounting, legal and so on. - Randy Crabtree, Tri-Merit
2. Track Spending And The Resulting ROI
Tracking spending and determining the return on investment is the best way for a small business to keep track of what is working and what needs to be cut. This holds true for materials, staff, marketing and operations. Growth attribution is key! Focus on delivering a high-quality service or product, and cut the frills. Word of mouth is still the best source of advertisement you can’t buy. - Cynthia Dalagelis, Amalgamated Bank
3. Reexamine Payroll Management
Small businesses operating with a limited budget should absolutely reexamine their payroll costs. In addition to saving time, an automated payroll system can help you cut costs and stay within budget. On average, it takes five to ten days for a small business to resolve a payroll error. Instead of wasting time on tedious tasks, payroll automation saves time and money by reducing errors. - Mara Garcia, Phonexa Holdings, LLC
4. Review Big Expenses And Contracts
Start by looking at your biggest expenses and contracts. Go through them one by one, looking for opportunities to negotiate and reduce costs or find more cost-efficient vendors. With inflation rising, it is a good time to consider some max-price terms that could help mitigate rising costs of goods sold. - Kelly Crane, CFP®, CFA, CLU, MBA, Napa Valley Wealth Management, Inc.
5. Restructure Salary Packages
With wage inflation skyrocketing, we must be mindful of our staffing costs. One way to keep fixed costs down is to hire team players with lower salaries and variable bonuses. We’ve tried to steer away from chasing larger salary demands, especially from the support team. Once growth slows down, and it will, our fixed salary costs won’t be unattainable. - Richard Martin, Bluestone Wealth Partners
6. Explore Platforms To Streamline Financial Tasks
Time is money for small-business owners. Most did not start a business with financial expertise or interest in pouring hours of time into necessary processes such as payroll, accounting and taxes, vendor payment and management, and more. It may behoove you to explore platforms that make this part of starting and managing a business much more efficient so you can focus your valuable time on growth. - Dan Henry, Green Dot
7. Don’t Overlook Smaller Costs
Although most business owners focus on large expenses such as rent, payroll and cost of goods, they overlook smaller items (and there are many), such as utilities, insurance, internet and phone service, and so on. These can add up to more than most business owners know. - Ellio Nurieli, Macmoor Capital
8. Cut Payroll Costs Through Stock Options
An owner of a small business or early-stage company that will need several funding rounds must always look at ways to cut their payroll or personal salary. Sharing early-stage deals with plans for growth can help you show employees that being compensated with stock today can result in reaping millions in the future. Offering an option for employees to take equity not only improves the monthly burn rate but can also be viewed as a reward! - JD Morris, SPE Funds Advisors LLC
9. Assessing Necessary Versus Unnecessary Costs
Covid-19 has taught us how much we can accomplish without getting on a plane and staying in a hotel. Reexamine your travel and entertainment budget and assess what is truly necessary versus what is just “habit.” Not only are there potential savings in hard dollars, but there are also savings in travel aggravation, including delayed flights, cold weather, understaffed hotels and so on. Travel only when it is truly necessary. - Michael Seltzer, Vérité Group, LLC
10. Assess Your P&L And Costs Each Quarter
Take time each quarter to review your P&L, and know where your money is being allocated. Look into specific areas to see if you are getting the results to continue growth. Reducing labor and marketing costs is an option if you are not getting results. Think about updating technology and efficiencies on your end, and then you can reset. Maybe it is time to renegotiate your priorities. - Letitia Berbaum, The Zandbergen Group
11. Closely Monitor Digital Ad Campaigns
Nowadays, small businesses channel much of their budget into digital advertising. Yet, there’s lots of avoidable waste in their investments. Google and Facebook don’t build technology to help businesses automate and focus on high-performing ads. It’s incumbent upon businesses to watch their campaigns like hawks and calibrate accordingly. Not monitoring ad campaigns can quickly wipe out your margins. - Jaideep Singh, FlyFin AI, Inc.
12. Leverage A Business Credit Card For Cashback Rewards
In addition to cutting costs where possible, consider using a business credit card as a purchasing tool to earn rewards on everyday expenses. For example, insurance is usually a large expense, and entrepreneurs can earn significant cashback rewards when they pay for it with a credit card. You can reinvest those cashback rewards in your business in the form of new equipment, employee bonuses and so on. - Jenn Flynn, Small Business Bank at Capital One
13. Look For Ways To Decrease Your Dependence On Ad Spending
Look for new ways to attract customers. For example, it can make sense for small businesses to advertise on Google. However, it also makes sense to take a long-term view and look for partnerships and affiliate relationships where you are able to accrue customers without paying the “Google tax.” Focus on increasing your profitability while reducing spending on ads over time so you don’t depend on that ad spend to succeed. - Andrew Glaze, Wealth Stack
14. Prioritize Inbound Marketing Over Cold Outreach
If you are paying full-time sales staff to do cold outreach or run product demos, you could be throwing money out the window. It might be better to invest in creating inbound marketing content that educates your audience and empowers them to arrive in conversations already prepared to buy from you. So teach your salespeople marketing instead, and watch your customer acquisition costs drop. - Amanda Dixon, Barney
