As a leading accounting firm in India it is our responsibility that we time to time provide tips and tricks to business owners, in this series we are explaining cost reduction measures.
Effective Cost Reduction and Streamline Cash flow for your business
For effectiveness of any business, two things are necessary to take care of.
Reduction of Cost
Streamline Cash Flow
Together they play a vital role in maintaining the viability of the business. It’s the core of any business to stand in the market. So here are few tips on how to reduce cost and maintain cash flow in the business.
1.Prepare a list of current fixed and variable costs
To effectively manage your cash flow, you need to prepare a list of what are your fixed costs like rental cost, electricity, salary, insurance, along with variable costs like, commission, credit card fees, etc. By doing this, you can arrange for the capital in advance and avoid last time chaos, that will also reduceexpenses.
2.Create provision to meet fixed cost of your business
Before thinking of doing variable expenses, crate provision for fixed costs, as that’s the base of your business. After all, where will you work if you failed to pay the rent? For this, a steady cash flow is a must. Make a strategy so that the chain of cash flow works continuously and your business functions hinder-free.
3.Know what are your capital expenses in advance
As discussed above make a plan about what capital expenditure you are going to do for the coming month and create provisions for that, so that at the hit of the moment you don’t have to spend more than required for any expenses. It will reduce your cost.
4.Explore markets by using pre-decided cash flow
For a business, it’s necessary to get expanded, and in the manner to do so, it’s needed to explore the market and try new things. But at the same time, it’s also important that the liquidity is maintained. Do not utilize all the cash in expanding your market share, as that will result in an imbalance of the daily chores of your business. It’s better if you use a certain percent of your cash flow for the exploration activity.
5.Cash flow is your backbone in Economic slowdowns
We all remember the crisis of 2007, which slowed down the economy worldwide. In such situation, if you do not have any financial provisions, you will have to void your business. So try reducing cost and create provisions to meet future instability.
Reducing cost will help you maintain a good cash flow and in the long run, will help you to even stand in the chaos of imbalance. So prepare a plan now and be secured.
