7 Ways To Keep Business Costs Low
Are you thinking of starting a new business? In 2019, JPMorgan Chase announced a three-year, $10 billion lending commitment to women and small business owners to help women grow and scale their companies.
Covid-19 has put a lot of stress on women in the workforce, and women are now seeking viable alternatives to the 9-5 daily grind. In a report issued by McKinsey & Co, women’s jobs are 1.8 times more vulnerable to this crisis than men’s jobs. Women constitute 39 percent of global employment but account for 54 percent of job losses.
As a result of these inequalities, women are searching for viable alternatives such as entrepreneurship that will offer flexibility in their work hours, allow women to charge what they are worth, shatter that glass ceiling, and advance their careers on their terms.
As you enter the world of entrepreneurism, there are many things you need to be aware of. Knowing your business start-up costs and controlling costs at the beginning of a business is essential, as cash flow into the company can be challenging at the start.
Steps you can take to help prevent any cash crunch in your business:
1. DO manage your spending
It’s tempting in the beginning to get everything aligned perfectly in your company and spend on marketing, courses, and shiny objects that you think will help improve your sales. But initially, it is cost-effective to set up your business soundly. Wise spending of your money is essential.
2. DON’T overestimate sales goals
When starting a business, the excitement can make us believe we will immediately impact the world. However, I caution you to overestimate your sales. I always advise you to be more conservative; if you exceed it, that’s fantastic. But it is crucial to plan for the worst and be prepared should those lower forecasts be a reality.
3. DO manage your cash well
Cash mismanagement is one of the top reasons new start-ups fail. Cash is the lifeline of a business, and you need money to meet your financial obligations. If the money has been spent and sales starts are slow, you will be in a terrible position and likely have to fold the business. Be careful with your cash initially and stick to a shoestring budget.
4. DON’T confuse cash with money available to spend
Often, entrepreneurs believe that the bank's cash balance is money for them to spend but often forget about future financial obligations that need to be paid, such as tax bills, payroll, rent, or any other financial debt.
That's why it is vital to put your business on a cash management system that will forecast what you have coming due and reflect the bank's actual cash balance.
5. DO keep separate bank accounts
Many entrepreneurs blend their business expenses with personal expenses, creating confusion. Keep your business and personal finance accounts separate. Not only does it leave an excellent audit trail should the government decide to audit you, but it makes your bookkeeping less confusing and much more reliable.
6. DON’T operate without a budget, ever
Another word to describe a budget is a business financial plan. And having a plan gives your business direction and a map of achieving your goals. An operating budget will help you set revenue targets and understand the costs to achieve those targets. You'll realize how many sales you'll need to complete to break even and how many sales you'll need to bring in to achieve your desired profit levels.
7. DO keep accurate books
Your recordkeeping provides you with the data you need to understand your numbers, so be sure you are keeping accurate and current bookkeeping. People often hire bookkeepers who are not up to date with the accounting rules and end up miscoding your transactions, which leaves you with false financial information, resulting in costly mistakes. Invest in a good bookkeeper.
Entrepreneurism offers various options for women and is an exciting career choice with many challenges. However, when you are set up with the skills you need to succeed, the challenges decrease, and you can spend more time and resources on making your business a success.
Grab your FREE copy of the 5-Step Roadmap to a Profitable Biz to get your financial foundation in your business set up!
