When is the last time you worked on your business and not just in it? Worked on your expenses, not just begrudgingly paid them? We know, this is almost the oldest of oldest clichés; work on it, not in it. But, it has foundation, roots, grounding. It has a salt of the earth kinda’ feel. The simplest of principles, usually are the most long lasting and sustaining. We can push you all day long with this concept, but understanding what you need to do vs. knowing how to do it are two totally different things.
“At the end of the month, I do what everyone told me to do; review my finances and pay my bills on time”, states Allison Jones, owner, proprietor and chief complainer of bill paying stated. I promptly ask her, “What do you review when reviewing your reports?” “I review what I am paying, what I am making and what I am loosing. I get really mad, grab a glass of wine and then go back to paying the bills that I so wish would go away.”
While bills and expenses will never go away (Would you really have a business without them?), reducing expenses through strategic work can save hundreds, sometimes thousands of wasted dollars. To remain a leader in a highly competitive marketplace (challenge us on an industry that isn’t), you must put energy on both sides of the balance sheet; revenue and expenses. Reducing expenses can be everywhere and will very much feel like an endless task, because it is; just as everything else is in your business. Most leaders open up shop, set up relationships with vendors, bargain for the best rates and never, ever repeat the behavior again. What if you did this on the revenue side? What if you never created a better product, stronger service offering, and new deliverables? Your competition would see you as a dream—because you would be left in the dust. Expenses are no different. With the rising cost of everything these days, consistent and strategic behavior must be made on this side of the income statement. You need a system.
Review, Research, Reduce, Repeat
While Allison is taking the initial steps in reviewing her finances (Congrats Allison, you are doing more than 70% of business owners), it is not leading her to the desired result we know she knows she needs. The first step is reviewing the percentage individual expenses are vs. your total revenue. Are your reports set up to include percentages? Different regions and industries will dictate different standards; yet your vision should be your ultimate guiding light for your individual needs.
Start tracking your trends. So, while it is so easy to stuff those reports back into the black hole that bottom drawer of your desk has become, you need to keep them close. Tracking trends from month to month, quarter to quarter and year to year will begin to provide you with trending. Are certain times of the year more expensive? Why? Should it be as such?
If an expense has never changed, is out of proportion with your standards or just plain confusing; start asking. If you haven’t spoken to your vendors since the first time your accounts were created, then you are probably paying too much. Vendors want your business and will become highly competitive with pricing when questioned. Many industries have changed. Take that allusive merchant services expense; something most of you have to have to do business, but have you questioned your rates recently? This industry has become highly competitive over the last 5 years as regulations have changed, allowing for new organizations to compete with the larger players; meaning much better pricing for the consumer. Terri of ADVOPAY stated, “We can now deliver better customer service, reporting, quantification and rates that you aren’t seeing with some of the larger institutions. This not only leads to better pricing, but a better value for that price”
As your research leads you to new opportunities, find your reductions. If your current vendor cannot create a better option for you, research new ones. Being loyal is one thing, giving away money is just plain wasteful. If your vendors don’t show an interest in working for you, move on. They should want and appreciate your business; just as you do with your own clients. Get the service, quality and pricing levels that keep you competitive.
Repeating this behavior consistently over time will ensure nothing ever gets out of hand again. Begin to build the habit of investigating one expense every month and continue to cycle through them year after year. While nothing may be able to be offered one month, you never know what changes from quarter to quarter or year to year. When your vendors see you active, they suddenly become active and interested in keeping you.
“I saved $1500 dollars this month”, Allison shared with me a few weeks ago. She was excited, pleased and fulfilled. She was satisfied that her review process finally produced something, as it should have. It feels good to know your time is spent productively as a leader and $1500 dollars a month was exactly what we needed to start her new marketing campaign. Slowly but surely success is born through consistent financial management.