Want To Increase Income, Manage Your Expenses First

What are the biggest factors that affect directly any business’s income? Of course, they are revenues and expenses, or in other words, inputs and outputs. While most revenues come from the outside and hard to be controlled, expenses are things that incur internally and can be added up or cut off depends on your business management structure and design. Hence, before staying up all night thinking about boosting sales, try to manage business expenditures first.

General expenses management
  • Understanding: Before you do anything, you need to understand it right from the beginning. Looking at all the expense reports and budget plans to see what are your expenses both ordinary and extraordinary. Then you need to predict those output number’s patterns in the short future so that you can alter the cash flow to afford them.

  • Reducing: After you have fully understood your expenses, try to find the redundant one(s) and cut it off. The more unnecessary spending you can reduce, the higher your net income is.

  • Boosting: It might sound crazy to you when trying to take on more expenses after trying to reduce them. However, merely cutting expenses off can only keep your business stable for a while then it will fall behind other competitors. You need to pay the right costs if want to gain. Invest in marketing, professional consulting, system upgrading, and any other aspects which can push your company forward even though they are costly.
Detailed expenses management
Salaries and Wages

At the first stage, you just started your small business and did not need staff. Salaries and wages might not be a problem. However, when your company grows bigger, recruitment is inevitable. Of course, managers all want to have talented employees in the team yet not all of them have enough budget to afford those staff. Thus, when recruiting your team, consider the funds you can distribute to payroll.

With the aid of software like Glassdoor (https://www.careers.govt.nz/job-hunting/whats-happening-in-the-job-market/salary-guide/), you can anticipate the growth rates for each position’s salary. It will help you prepare the budget plan for wages expenses more precisely as sometimes, this amount can vary in a very wide range from hundreds to thousands of dollars. If hiring qualified and professional employees is too costly for your new business, think about freelancers and outside contractors. They might be cheaper and quite often even more efficient.
You can not run a business without any equipment. Even a computer only is still your equipment not to mention the case that your business is a restaurant or art design which requires a huge number of machines and different types of assets. You should find a multifunctional one which can be used for many functions such as an internet modem can distribute wifi signal at the same time. Moreover, you also need to think about the useful life of all the equipment. If the equipment is not too crucial and only necessary for a short period of time, buy a second hand one to save money.
Unless you are running an online business from home, rent will be a huge one. Hence, only rent enough space for your business, do not make room for unnecessary decoration. Sharing renting space is also a common option now to reduce this cost. Or definitely look at a work from home option.
Repairs and Maintainance
When buying any equipment, what you also should do is preparing a budget for maintenance. No matter how awesome the machine is, it will be worthless when broken and you have no money to fix it. Instead of setting aside a small fund for unexpected outage moments, instantly proactive repairing is a good way of preventing passively abusing that costly expense. You ought to choose sellers who also provide maintenance until the end of their useful life.
Supplies and Utilities
Do not think that only the big costs should be taken care of. You need to keep an eye on the small but repeating expenses too. All resources like electricity, gas or the internet might not always be fix costs, you can still find a way to reduce them. Consider equipment that has the latest technology to save energy, although the initial cost may be higher than an older one, it would certainly save you a huge amount of budget for the long run. Likewise, small supplies like paper or pens consumption can be decreased by proper usage. Some strict rules for utility consumption should be stated clearly. Also, consider reviewing different deals from different suppliers on an annual basis.
Project expenses (Travel, Meals, and Entertainment)
Those are small cash disbursements for each project if your business’s main product is service. There will be a large number of direct meetings with clients in a coffee shop or a restaurant. And because those are for client relationship improvement and sometimes, talent recruitment, it is hard to cut off. The only way to reduce this type of cost is by avoiding expensive places. Do not try to make a perfect first impression by booking a fancy restaurant for the meeting with a new client while your fund can barely afford this for the second time. Consider a certain budget for each type of expense for example $15 for each coffee meeting or a limit of 10% of the project budget for disbursements.
Professional Fees
Of course, as a business owner, you want to do everything on your own. However, as a human, you can not excel in every aspect. Sometimes, you need to hire a third party to handle things like taxes or maintenance or lawsuit. Although the fees for professional agencies will be a little bit high, it is still more reasonable than you do it yourself for free then make serious mistakes which might cost you even double the amount to fix. Besides, if you can conduct some minor research to collect reviews from local businesses, you can find a reasonable but qualified company to help you with your big problems.
Professional Memberships
Some specific industries require businesses to pay membership or association fees or else yours will be treated as the outsider of this industry and you will miss out on database access and certified qualifications which are sometimes required when working with other companies in the same industry. Unless you are 100% sure that your business is still fine without those costs, do not try to cut them off.
Marketing and Advertising
This type of expense is not compulsory or a must-have. When your company has gained a stable number of customers, and you just want to keep things like this, investing more in marketing might not necessary. However, that will not last long as competitors will come up with new advertising strategies to lure your loyal clients while you do nothing to hold them. Hence, marketing investment will never be the excess. What you need to do is planning a strategy with a high ROI (Return on Investment) rate to ensure that the return is enough to cover all the costs. It is a long-term investment yet essential to develop the business so be patient.
Theft and Fraud
Sometimes, incurred expenses are not related to the business. They are for security systems protecting your company against thieves and internal frauds. You should equip a camera system for the office as well as anti-virus software for computers. Moreover, ensure that each of your team members is fully aware of the importance of protecting the company’s internal data including the client’s personal details. In the business world today, you have to face not only tangible assets stealing but also information scams. A little investment in proactive defence will minimise the risk of taking serious damage from those attacks.
Other losses

There are some extraordinary losses that would also be counted as your business’s expenses. Things like natural disasters happen all the time and often cause unexpected severe damage. Your cash flow will be affected badly pushing your business into a chaotic situation. Thus, get some types of insurance for your business just in case so that you can get your money back for most of the losses.

Of course, these are very typical costs for businesses. As we always mention to our clients, every business is different and to be able to optimise expense management, a business needs proper management consultancy and analysis to design the best management system. At Black Arrow Business Studio, we specialise in business analysis and provide problem-solving solutions to small and medium businesses. Over the years, we have helped our clients thrive with our comprehensive solutions. Contact us for specialised solutions for your business.



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