Tips for saving money in tough times
Every business I know has been through the wringer during the past
two years. Sadly the good times arenít returning any time soon. So Iíve
compiled a list of some more creative and worthwhile ways companies can
save money to help entrepreneurs keep afloat in spite of the challenges.
*Use open-source software. Free software such as Linux is used by
millions, including organisations like Google, Ticketmaster and the
Canadian government. They pay no licence fees, and the mainstream
systems are constantly supported by armies of volunteers around the
globe. Many in the IT industry hate the concept because it undermines
much of its business model, but qualified advocates are becoming more
and more common.
* Do random expense claim audits. Abuse of expenses is endemic, but
if staff know that even their mobile phone bills are checked
occasionally, then they are less likely to take advantage. You should
have very clear expense policies, so fiddlers are not able to use
confusion to get away with cheating.
*Use procurement specialists. For costs like electricity and
insurance, it can pay to pool your buying power with others and
negotiate bulk discounts, especially if you run a small business. You
can organise this on an ad hoc basis with partners or formal consortia
that work together to drive efficiencies.
*Barter. For a start-up this can be especially valuable. Whatever
service you offer, see if you can trade it with your suppliers in
exchange for their services. Far too few entrepreneurs try this, but at
the very least you may be able to negotiate discounts in return for
goods in kind.
*Buy second-hand. We frequently buy reconditioned kitchen equipment
for our restaurants. Do not hesitate to choose used over showroom-new if
it makes economic sense.
*Lead from the front about costs. As a boss, you should constantly
question costs and try to be seen to be abstemious rather than
extravagant - at least with corporate assets. If you are a spendthrift,
you set a poor example that others will copy - with the companyís money.
*Sign the cheques. Many of the most successful founders I know still
sit down and pay all the bills every week, so they see exactly how the
money is spent. They scrutinise unusual items and bring a proprietorís
conscientious attitude to bear.
*Ask for early payment discounts. If you have the cash, it might be a
great way to improve your margins. If your suppliers are under financial
pressure, they may well agree a 5 per cent discount for swift
settlement. It would take almost two years with current low interest
rates to earn that much if you kept the money in the bank.
*Monitor absenteeism. Apparently almost two-thirds of employers donít
bother. But on average the cost per staff member of absence in the UK is
- 692. It damages productivity and puts extra pressure on staff who do
show up. You should put absence targets in place and adopt
return-to-work interviews where appropriate.
*Use auctions to purchase. Online bidding for supplies is
increasingly common, especially in areas such as graphic design and web
programming. There are many Ebay-style websites where you can put up
your brief for auction. I recently used this system to get a pretty
decent website built for less than - 2,000.
*Understand what everyone does. At least once a year, undertake a
thorough analysis of all staff roles and try to work out their true
productivity - and rationalise posts if necessary. Remember: no one ever
tells you they are underworked or that their contribution is
*Question travel. Video and teleconferencing can replace many
expensive trips to meetings. A modest investment in the latest
technology can save enormous amounts of time and travel expense.
Connecting with people face-to-face should only be necessary if the
alternatives really donít deliver. Too often staff go on jaunts just
because they like time out of the workplace.
*Just shut the HQ. Admittedly a radical step, but with modern
technology, everyone can work remotely and much can be outsourced.
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