Good cost control isnt just about a better nights sleep, it also provides an ability to not only be reactive to certain situations but also not be stung too hard by downturns or unexpected events.
Surviving month-to-month makes it very difficult to have any confidence in developments deemed risky, especially if there are staff to be paid at the end of each month and a livelihood to be kept going.
A recent Canon survey of 1,200 small business owners found that 21 per cent believe the availability of credit or finance was the biggest barrier to achieving future business aspirations. This shows that costs are high up on the small business agenda, with many owners demanding greater flexibility and more control over how accessible finance is.
Mark Robinson, market business developer at Canon, said on the subject: In todays business climate, which is characterised by tougher competition, shorter margins and the increasing pressure to innovate, any organisation small or large has to keep a firm eye on their costs.
The difference between larger and smaller companies when it comes to cost control is a larger firms ability to absorb the impact of fluctuations. While a smaller-than-expected cash flow for a particular month or quarter is not ideal, larger companies are able to balance this out with previously generated profit, bank credits or investor trust. For small businesses, the impact can be more profound usually, you work with few assets and few people, so an increase in expenditure one month can easily impact the ability to run your business profitably.
Pub landlord Gary Duff-Godfrey, who runs the Thornbury Castle in Marylebone, London, knows all too well about cost control. Being a predominantly cash-driven business, flow and control of capital are of paramount importance , he explained.
Margins are always very tight and, with so many variables involved with running a pub, keeping on top of it all is by far the biggest challenge he faces day-to-day. Most importantly, we need to know when money is coming in so we can schedule payments for suppliers on time,” he added.
Quite simply, the more I can do online the better. Being able to see everything in one place and schedule payments remotely makes our lives much easier. Fortunately, I have a strong background in technology so this all comes very naturally to me.
Duff-Godfrey uses a digital dashboard to stay ahead of cash flow in an era of increasing debit and credit card usage in drinking establishments like his. He is able to see, at a glance, what is coming in and going out to have a better overview of how the family-run business is performing.
Your vision is narrowed when you’re stuck behind the bar, so this kind of technology is very important in helping you to step back and look at how, when and where customers are actually spending. If you interpret and react to that information in the right way, youll be able to improve trade.
The recession was very difficult for Duff-Godfrey, but in the past two years the family has seen increasing profits and are now firmly back on track ” with the data and technological approach to running the pub proving instrumental in achieving this, he said.
Tom Craig, the 29 year-old co-founder of Nottingham-based digital marketing agency Impression, has overseen growth from 20,000 in year one back in 2012 to 600,000 in its most recent accounting period.
The nature of his business means that many clients push for 30-day payment terms which, as each operate on monthly retainers, means it can be up to 60 days after the work has been delivered and 30 days after the employee has been paid.
Compared to some industries I’d say we’re lucky that we don’t have to hold stock, but we’re also not able to charge up front, and often end up waiting for clients to pay well past the due date,” he said.
To conquer cost control, Craig and his team make sure to get all invoices out on time and have contracted payment terms. Where clients miss payments, he makes sure to contact quickly and ask if they are aware of the payment date.
It can be difficult trying to build rapport with a client and then a day later having to chase down an overdue payment. We understand that cash is very important to maintain our growth and we’re confident in our results, so therefore we don’t mind asking our clients when we’re not paid on time.
Away from invoicing and chasing, where possible the business uses low energy appliances and products. Plumen lightbulbs are utilised, and Impression purchased the most energy efficient fridge and dishwasher it could afford. We choose monitors which are deemed energy efficient and make use of sleep and low power modes where possible,” he explained.
This consciousness when it comes to energy and bills was echoed by Canons Robinson who commented: Many SMEs are tempted by discounted or cheap screens, printers, or shredders, but dont realise that the total running costs can often be high.
As every penny matters, small business owners need look at features such as low energy consumption in standby mode, large ink tanks, duplex functionality or automatic sleep mode instead, as these will help running an energy-efficient office and save the most money in the long term.
Canons research has also shown that only 43 per cent of small business owners in the UK see their offices as environmentally friendly more than ten per cent below the European average.
Craig is part of that 43 per cent, and said: We do try to keep the office environmentally friendly. For example, we try not to print when we can avoid it, and we try not to use the lights if not required.
For larger businesses wondering about cost control, Will Rees of Direct Online Services has techniques hes found to be particularly useful. The ecommerce business was founded in 2009 but is already expecting to turn over 19m for 2015. Growing at a rate of over 100 per cent means a firm grasp of cash is key.
Traditionally, cost control and cash flow have been a massive issue for companies in the kitchen industry. Fortunately, we’ve adopted a more modern approach to money management which has served us well to date,” he told Real Business.
The beauty of ecommerce is that we’re paid for all goods at point of order before we despatch resulting in very little bad debt. On the other hand, we pro-actively manage our cash flow to forward-pay suppliers on despatch of goods, too. This leads to better pricing, and also helps to secure our position everything in our warehouse is paid for.
For Rees, constant innovation is a must if business leaders want to create a fast-growing, scalable business. He uses a number of cloud-based tools to improve productivity in the company. He is a fan of hosted platforms, but recommends not having all your eggs in one basket.
Staying up to date with innovation comes down to having it built into culture, Rees went on to say. He and the company did struggle in the years when it was growing from a small to medium-sized business but he believes it was ultimately innovation that pulled the team through. Innovation has provided him with the requisite tools required to stay on top of cost control, removing unwanted surprises at the end of the month. He also added: Keeping a keen eye on customer experience resulted in us developing our own in-house delivery service, which with hindsight has been one of the smartest things that we’ve done.
Cost control used to be seen as slight black magic conducted by finance experts who had a professional grasp of the numbers. Nowadays, technology, and the new tools it has brought with it, mean business leaders of all kinds are able to get involved. Cost control can now be dealt with at the tap of a button or flick of a screen.
Technology has also made the hardware we deal with more efficient and kinder on bills received at the end of each month. Companies can now run leaner operations, living in an existence where documents live in the cloud rather than filing cabinets.
And with greater control of where and when cash is coming in, the problems associated with access to finance become less pronounced. Knowing when a business is able to take a risk means a business can do just that take a risk.