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Small Business Cost Management

Simple Alliance, Kenya Limited

Expense Management

Proper management of costs is a crucial determinant of whether your business succeeds or not. Expense management is thus a critical task in small business management. Such control enables you to handle two common business problems, namely:

  • Ballooning costs
  • Haphazard cash flow

Swelling Business Expenses

If your costs are not controlled, they could rapidly grow, thus eating into your profits. This situation threatens the financial integrity of your business.  

Disorganised Cash Flow

You may be aware of your cash inflows but have a blurry view of your cash outflows. Such a situation is dangerous. To avoid it, you could:

  • Periodically re-examine your costs
  • Devise cost-saving strategies

Reducing Your Expenditures

Some important cost management initiatives include: 

  • Regularly assess your suppliers and contractors
  • Compare different suppliers’ prices
  • Make use of discount offers
  • Always negotiate

Frequently Evaluating your Suppliers and Contractors

Be sure to examine your existing business partners and compare them to similar suppliers.

Capitalising on Discounts

You could benefit from the discounts usually offered by trade and professional bodies. Such discounts could be on costs items like:

  • Transport
  • Utilities
  • Health insurance  

Reducing Health Insurance Costs

You could manage your health insurance expenses by:

  • Assessing your premiums and rates twice yearly to determine if they satisfy your requirements
  • Determining the services and rates being levied by other insurance providers
  • Ensuring that all you use all your paid for benefits; Asking your provider to identify underutilised benefits that you could axe, thus cutting costs     
  • Capitalising on group discounts offered to trade and professional group as well as to the Kenya Chambers of Commerce members     
  • Carefully reviewing your business’ claims history to ensure that your company does not levy excessive premiums rates based on one-time costly claims   

Reducing Utility Expenses

Two key utilities whose costs you could seek to manage are:

  • Telephone 
  • Electricity

Managing Telephone Expenses

To minimise your telephone charges, you could adopt a number of strategies, including:

  • Regularly consulting your provider to determine if your current plan is the most appropriate for your business
  • Frequently investigating the presence of usual ‘small business’ packages that are normally cost saving
  • Ask your provider to calculate your home office bill in six-second instalment so as to save money  
  • Check alternative telephony companies’ offers. Based on your findings, negotiate for better rates with your current provider 
  • Ask your provider if your current plan is the best. If not, ask for a better deal

Minimising Transport Expenditures 

You could institute a number of measures so as to bring down your transportation costs. Key strategies include: 

  • To cut pick up, identify and use a proper drop off point; You could utilise your carrier’s drop box or service centre  
  • Negotiating for a volume rebate with your frequent carrier
  • Using online tracking software or by asking for authentication from your carrier, monitor the delivery of your package; In case you identify late delivery, ask for refund 
  • Align your customer’s needs with the timing of delivery ; This way, you could save by utilising slower delivery schedules   

Reducing Electricity Costs

A viable strategy is carefully examining your bill for common errors like wrong rate structure, meter reading, meter number, or meter multiplier   

Comparison Shopping

While sourcing for all of your supplies, compare different stores. Buy from the best priced vendor.  

Be Ready to Always Discuss with Suppliers

Do not limit your negotiation to new suppliers. Rather, approach your existing suppliers. Ask for rebates.

If you effectively control costs, you have successfully crossed one of the key challenges to small business management. Your cost management tasks involve your careful tracking of expenses. This initiative ensures that your business expenses do not irregularly grow, thus eating up your profits. Some cost reduction strategies include: comparison shopping; regularly assessing your suppliers; always being willing to negotiate for price cuts; and capitalising on discounts. Another expense management strategy involves careful cash flow management. This way, you remain on top of all your cash inflows and outflows.

Copyright (C) 2016, Simple Alliance Kenya Limited

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