5 tips for avoiding operational leaks
In the spirit of “Look after the pennies and the pounds will look after themselves,” here are 5 effective ways to avoid unnecessary financial overheads, avoid operational leaks, and ensure as much of the top line as possible converts into bottom line gain.
1. Plan ahead for cash-flow issues. Few small businesses miss out on the occasional ‘dry’ period when late payers and a glut of expenses hit the books all at the same time. Equally however, many organisations review cash-flow monthly and cast only a cursory eye on the forward plan. A small amount of time spent just a few weeks early can amount to savings of hundreds or even thousands of pounds in invoice interest, overdraft fees or indeed, missed opportunities due to potentially avoidable cash-flow problems.
2. Automate financial management. Think of any manual intervention — that is, getting people to do the things a computer could be doing — as costing you a pound a minute. So, while you might baulk at monthly service fees, weigh these up against the false economy of getting a person to do the job. Giving employees debit cards for example, can significantly reduce their paperwork and increase the time they spend doing their job.
3. Chase invoices early and often. Of course you should be nice to your clients, but there’s no prize for accepting the behaviour of bad payers. If it helps, get someone in to do the chasing (or indeed, following point 2, use the auto-chase facility in your software). Likewise, pay your own outgoings off promptly, so you can concentrate on growing your own business — it’s a false economy to do otherwise.
4. Put your money to work. If you have an excess of capital, planned or otherwise, then shift it into a deposit account — while interest rates are not brilliant at the moment, they are better than the alternative and you may get a good deal if you shop around. Consider currency exchange as a way of saving money: whether or not you want to trade actively, don’t leave your cash languishing in a currency on the down.
5. Monitor and control your overheads. As a final point, remember that all business is about leverage — that is, your ability to generate a return on your investment of time and money. While it may be overkill to monitor every aspect of your business to the n’th degree, you can nonetheless create a view that enables you to see where the margins are, how much risk you are taking on, and so on. By keeping an eye on the more critical factors, you should be better able to spot when a small overhead becomes big, and do something about it.