Budgeting and Keeping Overheads Low

Budgeting and Keeping Overheads Low

Keeping the costs down in a business requires discipline, and that requires an annual budget, spending targets and regular tracking of sales and expenses. Compartmentalizing expenses can help effectively control spending and maintain target financial goals.

A carefully constructed budget allows a business to continually track where they are financially.  This allows for strategic, long-term planning for everything from current operating costs to potential expansion. Knowing where the budget stands opens up the ability to hire new staff, invest in new product lines and set earning goals in line with the organizations’ corporate financial objectives.

Other benefits include:

  • The potential to attract investors
  • The ability to set sales goals
  • The chance to open lines of credit
  • The ability to make decisions about salaries, bonuses, benefits and overhead operating expenses
  • Easier tax preparation 

There are plenty of things a business can do to keep costs down without compromising the quality of goods or services.

  1. Do you need new office space or can you plan the space differently to allow your business to grow?

    If you are a start-up business it is important to portray yourself in a professional way when you meet with clients but there are hot-desking options or meeting rooms that can be hired as and when required, still allowing you to work from home in the early start-up phase of a business.

  2. Keeping accurate records and cashflow projections

    If a business requires a cash injection it is important to show possible lenders that the business is monitoring cash flow and trying to manage it; up-to-date records and projections can help to persuade potential creditors that the business is a good risk.

  3. Outsource

    Doing everything yourself to cut costs isn’t always the answer but neither is hiring a large team of people you can’t sustain through the lean times.

  4. Credit Control

    Keep your debtor days (the average number of days required for a company to receive payment from its customers for invoices issued) as low as you can.

  5. Plan, Plan, Plan

Regularly review how much you spend on your overheads, check you are getting the best deals.

Plan how you pay your bills to ensure your cashflow isn’t unnecessarily stretched.

Budgeting is a key component of business planning.

 

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