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How to cut costs and improve your business finances

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Every business owner knows that one of the best ways to improve their business finances is to cut costs. Many times businesses are just plain and simple spending to much. On a regular basis, savvy business owners need to take a hard look at each and every expense within their business, and determine if it can be reduced or even eliminated. This can bring about a drastic improvement in the finances of the businesses and improve cash flow. However, there should be a note of caution here. While not cutting enough, won't really help your business, if you cut expenses to dramatically you risk serious damage to your business. Cutting with precision is your best bet. Here is what you need to know about how to cut costs and improve your business finances-

  • Know why you are spending-Everything that you purchase, for your business, should contribute to the bottom line, in some way. If you are purchasing something that is not doing this, then it should be eliminated. From the office supplies to the heavy equipment that you use, everything you purchase should have the potential to increase your profit. Anything that is bought out of habit, for luxury, or even for fun, needs to be cut.
  • Get some marketing results-Marketing can be one of the largest costs, for any business, and with good reason. Keep in mind that if times get tough, your first reaction may be to cut marketing. This can be a serious mistake. It is important to understand that if your potential customers don't know what your company can offer them, or even where to find you, then there is practically not chance they will buy from you. A better marketing strategy is to focus on results. A simple way to do this is to start asking your customers where they heard about you. This is an easy way to determine exactly what marketing methods are working and what is not. When you are not hearing about a particular marketing strategy, from your customers, then its time to get rid of it.
  • Reduce the limit on your business credit cards-Interest can be a fast way to suck up your cash flow. Carefully examining your statements can let you know how much you are paying in interest, along with other credit card fees, on a monthly basis. While totally getting rid of a business credit card may not be possible, reducing the limits will reduce the urge to purchase, just because you can. Keep in mind that for even a fairly small purchase, you are paying at least something in interest. Getting rid of that can drastically improve your business finances.
  • Keep good people-Sometimes business owners fail to realize that having a high turnover can seriously be affecting their business finances. The cost of recruiting, hiring and training can be high, and should be avoided whenever possible. If you are experiencing a high turnover within your staff, then it can be helpful to a close look at why that is happening. Perhaps a change in the hours worked, a small raise or some other compensatory measure, will help you keep the good employees that you already have. The bottom line is that keeping your good, long term employees is a lot better for your business finances, then constantly having to hire new ones.
  • Review your contracts and plans at least every 6 months-Whether it is your business phone plan, insurance or even a contract with a supplier, you should take the time to shop them around, at least every 6 months. This allows you to make sure that you are getting the best deal possible. Best of all you may find an even better deal that lets you save money and improve the finances of your business.
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