The best ways to save your business cash and improve your cash flow.
For small business owners operating in the season of coronavirus, it’s never been more important to improve your cash flow and save your business money. After all, you don’t want to lose any capital, be forced to lay off staff or sell your assets.
Below are the 5 most helpful tips that may help your business save money in 2020.
1. Check eligibility for government assistance
If you haven’t already, one of the first steps to saving your business money is to see what government assistance is available and which your business may be eligible for.
Several government stimulus packages and grants have been announced by the Australian government since the first of the economic impacts of COVID-19 started to hit in March, including:
- JobSeeker and JobKeeper Payments
- Relief for commercial tenants from rent payments
- Boosting cash flow for employees
- Small Business Recovery Grant (NSW)
However, new packages are continually being announced, with the Victorian government revealing its $534 million support package for businesses in early July. This will include $30 million for hospitality businesses, a $26 million mental health support package for small businesses, $40 million to help regional tourism businesses to cover refunds and marketing, an additional $20 million for small businesses in Melbourne's CBD and more.
This is why it pays (literally) to keep on top of the latest grants and support packages on offer.
2. Commercial leasing
If you are currently occupying commercial space, it’s no secret that this can be one of the biggest costs your business faces. However, many offices will have moved towards work-from-home protocols since March.
In fact, JLL Research found that the Sydney CBD office vacancy rate surged to 7.5% at the end of June quarter, a significant jump from 3.9% in pre-coronavirus January.
If your business is running just as sufficiently from your home office, this begs the question of whether you should downsize your office space or leave it altogether. This is a sure-fire way to inject some serious cash flow back into your business.
3. Examine your operational expenses
Another way you may be able to cut down on costs is to consider your operating income. Your operating income is the total profit of your company’s operations, and is calculated as:
Operating income = Total revenues – operating expenses
Operating expenses include running costs like rent, equipment, inventory costs, marketing, payroll, insurance, and funds allocated for research and development.
Once you know just how much income your business is generating during the season of coronavirus, you can be realistic about where you can cut down on these operating expenses. Now, go through your operational expenses with a fine-tooth comb and work out where you may be able to reduce costs.
For example, you may see that your supplier rates are particularly high, and that it’s been a while since you negotiated these costs. Call up each of your suppliers and have a discussion with them to see if they’re willing to budge on rates. You may be surprised at how much you can save on production supply costs just by opening up these lines of dialogue.
4. Invoice factoring
If you’re not familiar with invoice factoring, it is a process in which you sell your outstanding invoices to a third-party factoring company. This company will then pay you a lump sum (around 80% of the invoice debt) and collect these debts for you. Once the invoices have been paid, the remaining 20% is then paid back to you, minus a collection fee.
One of the hardest parts of being a business owner can be chasing up funds from unpaid invoices. Not only can it be stressful in terms of client relationships, but it also creates financial strain on your business. Using invoice factoring is one way that you can not only save time in chasing up unpaid invoices, so that you can focus on running your business, but it can also get that much needed money into your company and improve your working capital.
5. Go green
If you’re still operating in an office, warehouse or factory, another way you can potentially boost your business’ savings (and feel good about it in the process) is to make your space as green as possible.
Reducing your energy usage will significantly reduce your energy costs overall. Consider switching to energy efficient light bulbs, improve your insulation and windows to lower the heating and cooling costs and try to cut down on the amount of physical waste your business is creating.
For example, if something can be done online and not on paper, make the switch today. Not only will you keep down utility costs, but you’ll be able to save on office supply costs too.
If you think that your business can benefit from Earlypay's modern invoice finance facility and would like to find out more, please contact our team today on 1300 760 205.