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Budgeting Essentials Blog

Helping you master the practical essentials of Budgeting, Cash Flow, Accounting and Debt Relief.
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Who Sets the Vision? Tips for implementing

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Last week I talked generally about leading your small business by setting the vision.  This week, I am going to give you some specific suggestions on ways to explore cost saving for your business.  So what can you do to ensure that you get as much of your sales to the bottom line as possible?  A big area to look at is your vendors.  There are a number of things you need to look at with your vendors.

 

An area that has good potential for saving you money is who you are purchasing from.  Are you and your staff using approved vendors or are you running out to the retail store to pick up what you need?  An approved vendor should be someone you can set up an account with that you pay based on terms you arrange with them.  In essence you agree to do more business with them and they agree to give you better pricing based upon that agreement.  How much better your pricing will be is going to depend upon the volume of business that you bring to them.  If you have a sufficient volume of business, this is a great way to save money for your business.  Build a relationship with the vendor if you can.  People like doing business with people they know, especially if they have a good history with them.  When they know that you are going to do what you say and not take advantage of them, they are going to be more willing to help you.  This can mean better pricing, better customer service, or even as simple as getting your transaction completed more efficiently, giving you back the time that you may have been waiting.  Make sure that you are leading in this also.  You can’t expect your staff to use approved vendors and treat them well if you aren’t.  Set a positive example all around, it will pay for you in the long run.  Use retail stores only when absolutely necessary, not as a substitute for good planning and proper preparation.

You can also lead your business expenses by setting expectations for your staff and vendors.  Are you getting appropriate pricing and paying the bills timely?  This includes paying according to the terms on your account.  If your vendor is offering discounts, are you paying so you can receive them?  Discounts can add up for you in the long run.  To receive these discounts, you typically have to pay your invoice sooner, but you are paying less money.  If your cash flow will support this (you can predict cash flow using your budget), this is a great way to reduce your costs.  If money is typically tight for you, it may make more sense not to take the discount to ease your cash needs.  Remember that you want to treat your vendors the way you want to be treated, so if you want to be paid in a timely manner, make sure you are paying your vendors in a timely manner, also.

Set time every year to review the vendors you are using and the contracts you have with them , if any.  Even if you are happy with your vendor and want to keep them, you should get bids from other potential vendors.  This way you have leverage with your existing vendor on pricing.  Keep in mind that some vendors will discount initial bids with new customers to pickup new business.  Prices typically will go up after an initial period.  Make sure you check out all aspects of a new vendor, for example, if it is going to take twice as long to process your orders with a different vendor, you may not want to change to that vendor to save that time for yourself to generate your own sales.

Vendor reviews should coincide with your budget prep time or be as close to it as possible.  That way you will be able to measure the effectiveness of any changes you make as a part of your regular monthly financial and budget review.  This also saves the extra work of having to manually track the changes.  Set yourself a reminder to begin your reviews two to three months in advance of the contract expiring or renewing to give yourself enough time to complete your review, even if it is mid-year. 

These are just some examples of ways that you can save money for your business so more of it goes into your pocket! 

Copyright

© 2017 Dan Heiland 2017 Kat Heil, LLC

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