Many small businesses operate on paper-thin margins, so every money-saving decision can be worth its weight in gold. Balancing a small-business budget is like walking a tightrope — even the slightest change can cause tremors, and without proper planning, a widespread downturn can lead to disaster.
Luckily, the members of Forbes Finance Council can shed some light on lesser-known methods of saving money for your small business, whether you’re planning ahead or making adjustments in the face of circ*mstances. Below, 14 of them share their tips for saving precious budget dollars.
1. Reevaluate your toolkit.
The current pandemic is a black swan—it’s a catalyst for change in every aspect of our businesses. Look at each expenditure—especially recurring costs—and ask yourself if it is really necessary. Effective work from home relies on a different toolkit that obviates some expenses. Pause, cancel and repurpose funds from tools that you deem as nonessential. - Maryanne Morrow, 9th Gear Technologies
2. Set aside 1% of sales—and then add more.
There are obvious cash-saving strategies you can employ, and then there are more subtle ones. Start by putting 1% of your sales in a separate account, and increase that percentage every one or two weeks until you start to feel the pinch. As your operating budget shrinks, necessity will breed creativity and you’ll come up with dozens of ways to save cash. - Vlad Rusz, Centaur Digital Corp.
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3. Negotiate with your vendors.
When the economy is struggling, entire business ecosystems are affected—not just small businesses. Vendors want to ensure continued cash flow, so they are often willing to negotiate lower prices rather than lose long-standing customers. If you reach out to your vendors and explain how you’re being affected by the economy, they will likely work with you to reach a resolution. - Ryan Rosett, Credibly
4. Keep 10% of annual revenue in cash.
Small-business owners should work toward having 10% of their annualized revenue in cash in the bank at all times. The higher the risk involved for your business, the higher the percentage you should track. That 10% will aid in making good decisions—not reactive decisions based on how much cash you have on hand. - Jody Grunden, Summit CPA Group
5. Manage your waste.
When times are good we don’t really focus on the small things—office supplies, leases of unused assets, food waste, etc. So if you estimate that your operating expenses are $1 million per year and your normal waste is 3% to 5% annually, saving 1% of this waste generates $10,000 in cash. The little things can really add up, so focus on ways to reuse or recycle these items to save real money. - Chris Tierney, Moore Colson CPAs and Advisors
6. Cut office expenses.
Most businesses in this country are not using their office space right now, but office expenses are likely continuing. For example, some companies have standard monthly orders on items like office supplies, while others have fixed payment arrangements on utilities, internet and other services that are not being used. While you may not be able to cancel these, you can probably get discounts or pause services until later. - Mia Erickson, Whitnell
7. Amend recent tax filings.
One of the most overlooked ways to generate extra savings for a business is to review and amend the last three years of taxes. This is allowed by the IRS, and if you have a good CPA who really knows the tax code, they can usually find deductions that were missed. I have seen businesses get up to $100,000 back via amended filings. It’s typically very low-cost to do and can have a very high return. - Jerry Fetta, Wealth DynamX
8. Calculate ROI on your largest expenses.
Look at your top expenses and calculate a rough return on investment for each. You can count “soft” or non-direct monetary returns. It doesn’t matter what the actual ROI is—by asking the question, you will change your awareness and be more conscious of your spending. Over time, anything with a low ROI becomes a target to evaluate or eliminate. - Aaron Spool, Eventus Advisory Group, LLC
9. Supplement your main income stream.
Each business can have a number of ways to generate income beyond its core competencies. Look for additional ways for your business to have supplemental or passive streams of income to conserve extra cash. - Jonathan Moisan, Advertise Purple
10. Save at least 5% every month.
In my company, we have a rule: We always save 5% of all monthly revenue—it goes straight into our business reserve. Doing this will allow you to slowly build a cushion, which is much needed in these times. A pro tip: Make this process automatic. Once it’s automated, you don’t have to “remember” or consider if you can afford it—you will get used to it. It is also a conservative percentage that most people can do. - Gabriela Berrospi, Latino Wall Street
11. Take a look at accounts payable and accounts receivable.
Two of the most effective cash conservation methods are two of the oldest ideas. The first is to improve your accounts payable/accounts receivable cycles—extending payables and speeding up invoicing will go far in conserving cash. The second is the concept of barter—the exchange of goods and services without cash. Your vendors are in a similar position and would welcome the ability to transact without cash. - Brian Daniells, Enterprising Solutions
12. Review renewal terms on annual premiums.
Review all subscriptions for renewal terms and evaluate the ROI of the subscription, whether it is to drive business (marketing) or protect your business (insurance). This is a time to evaluate your current strategy and what you expect your industry landscape to be in the next 12 to 24 months—e.g., reducing spend on worker’s compensation insurance can provide quick cash savings in upcoming months. - John Tytko, Caremerge, Inc.
13. Rethink your advertising strategy.
Instead of spending six figures on traditional advertising channels, adopt a homegrown marketing strategy that relies on word-of-mouth, shareable social media posts, blog writing and email marketing blasts. Not only will this save you money in the short run, but it will also generate leads long into the future—as opposed to conventional ads that stop creating value the minute they expire. - Tyler Gallagher, Regal Assets
14. Slaughter the sacred cow.
Virtually every type of business, whether large or small, has sacred cows. These are often initiatives that business owners hope will produce ROI at some point in the future. But a struggling economy gives you license to rethink your investment in the sacred cow and maybe put it on pause. Who knows? You might even decide to let it go permanently, and this might free up a lot of cash. - Brian Henderson, Whitnell
