Looking for smarter ways to save money in your small business? Follow these tips.
Don’t worry; this isn’t one of those posts that tells you to save money by cutting your morning latte. That rarely works, does it?
After all, advice like “cut back on the lattes” relies on willpower to consciously say “No,” to something you enjoy.
It also fails to consider:
- The added stress of having to make this conscious effort
- The benefits you get from drinking that morning cup (I know I love going to a coffee shop, sitting down and absorbing the vibrant atmosphere; it makes me happy)
- That you aren’t saving this money unless you set it aside and reinvest
So, what’s the smarter way to save money? Look for the small, unnoticed leaks.
Many small business owners overpay for certain expenses. These amounts are often so small that they barely notice them. But, added up over a year, they can cumulatively cost a business hundreds, if not thousands of dollars. The result is a negative impact on the bottom line and cash flow.
Thankfully, this doesn’t have to be you. There are a few simple things you can do today to cut costs without depriving yourself of those little joys like your morning coffee. It just takes some smarts, a little negotiation, scrutiny of your existing bills, and making loan prepayments. Did I forget to mention there’s a bonus?
1. Negotiate Your Monthly Bills
It may surprise you that you can negotiate your bills, including gym memberships, insurance, cell phone and cable costs.
Yes, I know that shopping around and haggling isn’t fun, but if you put in a little effort you can save heaps.
But, how exactly do you negotiate? It starts with a simple phone call. Ramit Sethi of I Will Teach You to Be Rich provides a script you can use in this four-minute video:
- Tell the company that you’re a loyal customer (mention for how long to reaffirm this)
- States that you wouldn’t want to switch because of a simple money problem (reference another company’s lower rates to show that you’ve done research)
- Ask them what they can do for you
He admits that it won’t work for every company, but for those it does, it can save well over $1000 yearly. If you’re still questioning whether it works, consider that many of his students have used it to significant effect.
Furthermore, if the above script doesn’t work ask if the representative can transfer you to the customer services department or another department who can help with your query. If this still doesn’t work, cut your losses and move on to a company that can help.
2. Cut Unnecessary Subscription Costs
Have you ever signed up for a monthly service you now rarely use? Perhaps it was a good deal, you were interested in the product, or they were offering a free two-week trial?
Regardless what the motives were, your account now gets debited each month. You may decide to keep the service because it’s a negligible amount, and you want it handy for those “just in case moments.”
But, those moments rarely arrive and – in a blink of an eye – you’ve lost, hundreds of dollars for a service you rarely use. Seems silly, right?
This happened to me when I signed up for a membership to an online writing site. I have since canceled that membership.
So, review and cancel all those subscription-related services you rarely use. If you’re worried that you may need to use the service in the future, take comfort knowing that many companies let you pay as you go. Think of gyms that offer day passes instead of monthly payments or cell phone companies that allow you top up your data as you need it.
3. Increase Your Monthly Loan Payments
If you’re someone who takes out loans to get more working capital for your business you likely have a standard monthly payment you make to meet the payment schedule of that loan.
The thing is, if you increase that monthly payment, you will pay less interest over the lifetime of the loan and save money in the process. It doesn’t even have to be a large monthly payment to realize large savings.
To see how much you can save, use Bankrate’s Loan calculator and type in your relevant loan details. For example, if you have a loan amount of $5,000 over five years with an interest rate of 6% your total interest for that period is $799,84. By including an added payment of $30 per month, the interest is now $583,72.
Of course, you should review your cash flow situation, and other business needs each month to make sure that you can afford to make that payment.
Bonus Tip: Invest in Cloud Accounting
Yes: Sometimes you have to spend money to save money.
Investing in an accounting system you’ll actually use will help you get a grip on your costs.
Unfortunately, many small business owners are unable to determine their spending habits and improve their money management because they track expenses using methods that are time-consuming and messy.
Often, these methods even lead to lost money because expenses which should be tax deductible are not disclosed as such. I know that when I started my business, I was using such a method; I was tracking business expenses using spreadsheets. Sound familiar? Fortunately, there’s a better way to track expenses: cloud accounting.
Cloud accounting, like FreshBooks, helps you track expenses without the manual effort and on the go, thanks to mobile apps. More importantly, it saves you money by helping you:
- Organize and classify your expenses in the cloud for an improved tax record so you’re not paying more than you should on your tax return
Capture all billables expenses that you can pull over to an invoice so that you don’t forget to charge a client
Create a neat list of expenses that can be pulled into expense reports so that you keep a firm handle on your costs and improve your money management
Telling you to save money by cutting those small luxuries in life isn’t sustainable. This approach relies on you making that decision each day and deprives you of the things you enjoy. Honestly, who wants that?
Fortunately, there are a few simple solutions you can implement today that will see substantial savings down the line. These are:
- Negotiating your monthly bills with companies by following a script
- Cutting unnecessary monthly services and shifting to pay as you go plans
- Increasing your monthly loan repayments to reduce total interest
- Investing in cloud accounting to improve your money management and make sure you’re not overpaying on your tax returns
How do you save money?