How to Manage Costs Well
Cost management is critical for start-ups and small businesses in general. Part of that is not paying more than you need to for any goods and services. Also, look at the bigger picture and evaluate whether processes and ways of doing business are efficient and cost-effective.
Always keep costs as part of the equation.
When growing a small business, you often have to spend money to make money. But when spending on any item, keep cost consideration in mind. Are you spending needlessly or unwisely? Are you keeping income and expenses in line? One critical element is cash flow. Keep tabs on accounts receivable and follow up promptly when invoices are unpaid beyond the standards you set, such as 30 or 60 days.
When evaluating business activities, consider costs and benefits as well as value.
Every expense should be for something valid and worthwhile. But does the benefit justify the cost? Are you receiving good value for every dollar you spend? Consider these questions at least annually, and preferably more often. For example, every few months, review your business and its focus. Are you marketing or developing new markets and products that are likely to justify the expenses involved? What does your return on investment look like?
Instill cost consciousness among all employees.
Taking costs seriously can make a major difference to your company’s financial health. Getting buy-in from employees is critical. It could pay off in many little ways, such as discouraging wasteful activities and expenses. For example, attention to energy efficiency can add up, and employees should be aware of and practice good time management.