Managing overhead costs can be challenging for large and small businesses alike. Whether you have a modest operating budget that you’re looking to grow or you’re already commanding a substantial amount of capital in your day-to-day operations, you still need to be judicious in the way that you build your budget. Here are some key budget management strategies that can help business owners make consistent progress toward their development goals.
Avoid taking a budgeting approach that sets parameters based on best-case scenario outcomes. It’s foreseeable that costs would be likely to increase as the availability of products or services and other economic conditions change over time. Leave some space in various line items so that you won’t be struggling to balance your budget when costs run higher than you expected.
Anticipate Seasonal Variations
Your costs and sales volume are both likely to change over the course of the year. Your budgeting needs will change month over month, so you need to be ready to apply an adaptive review of your overhead estimates.
When seasonal sales increases give you a spike in revenue, you may need to be putting money away in your coffers for the leaner months of the year. When you have peak sales volume, add a line item for reserve funding. Having rainy day funds and emergency cash reserves can make it possible to fill gaps while you’re gearing up for the greenest part of your sales cycle.
Bid Out Services Competitively
You should be getting reasonable rates for every contract that your business has with service providers. Your budgeting practices should include a close review of your current agreements. Three months prior to the expiration of an agreement, you should conduct a bid analysis to ensure that you are getting the best possible value for your service needs. Forcing providers to be competitive can help you lower one or more costly line items on your monthly budget.
Explore Sustainability Solutions to Generate Savings
Finding ways to operate your business more sustainably could make it possible to put a dent in your budget. Your business’ energy usage may make up a considerable percentage of your overhead costs. Energy efficiency strategies can lower your utility bills while also allowing you to scale back your activities’ environmental footprint.
Practical but forward-looking budget management can drive growth and equip you to weather unstable conditions. Be diligent in your planning, but also be adaptive so that you can respond to challenges effectively.
A business can run into financial difficulties for a variety of reasons. Whether you are dealing with a period of slow sales or simply are not seeing the access to working capital that you need, you may find it useful to take a look at alternative financing solutions when you need assistance. Since there are countless paths you can wander when it comes to financing a business, focusing on a specific category of finance will make your search much easier. Asset-based lending solutions are a great example of services with a lot to offer.
What Is ABL?
Understanding how to borrow based on your assets is your first step toward success. Basically, this type of financing allows business owners the opportunity to secure necessary funds for their companies by putting forth collateral of a particular value. Examples of assets often used in such arrangements can include real estate, account receivables, and equipment. In order to see the best results from your efforts, it is important that you take time to find a solution that is geared toward the exact problem you are currently facing.
Invoices as Assets
As mentioned, account receivables can be used as an asset when you are securing specific asset-based lending options. When customers are not paying in a timely manner for goods and services you have provided, it can lead to major setbacks for your company. Instead of waiting around for the clients to make payments, you can sell the qualifying invoices to a lender. A portion of the value is given to you as an advance, then you receive the difference after you pay a fee and the lender is able to collect the full debt from your customer.
Understanding the Fine Print
Though alternative financing services can prove advantageous for many reasons, you need to think through the details before you make any assumptions. For example, you must consider the fees attached to the services. With invoice factoring, lenders often take a significant chunk of change from the value of the receivables as payment. If you do not factor this expense into the equation, you might be surprised to learn that you will not be seeing anywhere near the amount that you had initially anticipated. Be thorough when researching services and it can make a world of difference in your budget.
There are many angles to consider when it comes to asset-based lending arrangements. As long as you give yourself time to understand the services available to you and what is expected of borrowers, you will have no trouble discovering a fit that works for your company.
Kenbry Capital LLC offers ABL solutions to businesses across every industry. Contact our offices today to get the financing you need.
Business owners looking to improve their market share should recognize that brand reputation is as important as customer retention. Today’s customer demands that businesses respond to needs in the local community and globally. Adding eco-friendly business strategies can help you improve your business’ reputation. In addition, many modifications are inexpensive but have a big impact. Even employees have a more positive experience working for companies that strive to improve the environment. Here are some ways you can make your business more environmentally friendly.
Work with vendors that are Fair Trade Certified or are working toward certification. You can also ask suppliers to participate in specific green trade practices. Following are some policies that indicate a company acts responsibly:
- Pay employees a fair wage
- Eco-friendly manufacturing practices
- Source local and sustainable raw materials
- Use biodegradable, recyclable, or renewable materials in packaging
Create a Green Team
Ask employee volunteers to develop eco-friendly business strategies. Even small changes, such as removing disposable kitchen products, can have a large impact. All employees should be able to suggest ways to improve your company’s environmental footprint. Asking employees to create solutions increases their commitment to change.
Recreate Marketing Materials
When reordering marketing materials, try to make each product more sustainable than the last. A wheat straw coffee mug with your logo will be used longer than a mouse pad. Select tote bags that are a functional size, and customers are more likely to use them. Look for products made from sustainable materials – bamboo lip balm, recycled fleece blankets, or recycled paper journals. Take business gifting to the next level by making a cash donation to your preferred non-profit in honor of your customer. Send a simple holiday card with a note explaining the donation.
Send electronic invoices, rather than mailing paper bills. You can also save on paper and mailing costs by accepting electronic payments. They are typically less expensive to process, and you receive your funds faster. Many businesses offer discounts to customers that pay this way.
Eco-friendly business design starts with eco-friendly packaging. Compostable packaging allows the end-user to place the item in their compost bin. Use plastics made of a single material to make it easier to recycle. Branded reusable bags can leave a positive impact on your company and the environment.
Taking the time to improve your environmental footprint benefits your business on multiple levels.
The structure of your small business will play a big part in your overall success. When the time comes to pursue growth opportunities, for example, you will need to be able to rely on your organizational abilities. This means taking time to develop an airtight process for financial modeling. Typically, this process involves creating an abstract example of your company’s finances and the overall performance of your business in a fiscal sense. Take a look at these points and learn more about successfully modeling your finances.
Keep Things Simple
Right away, you want to make sure that you don’t overcomplicate the process of modeling your finances. Though there might be a number of vital moving parts involved when it comes to your company’s budget, you will find that being straightforward and simple when creating your model
is the most effective step. Practice transparency as well, ensuring that no key data is left out of the model because you are worried about how it will impact how your brand is perceived. Simplicity and transparency can make for a solid system of modeling.
Another important point to keep in mind when it comes to financial modeling is consistency. Balancing a budget can be tricky, especially when there are countless factors involved. Though you might want to try a range of formulas in your attempt to create a thorough model, you will discover that consistency helps a lot more than variety. When you use certain formulas in an even way, it makes it much easier for you to track and verify your results later. Use too many variables, however, and it can make the entire process too difficult to complete.
Consider the Layout
Since most business owners use a program like Excel to model their finances, it makes sense that you want to be familiar with how the software performs before you dive into the process. The layout of the model will play a big part in how you feel about its success. Take time to look over examples of different financial models from companies of your size. Doing this will offer greater insight into the expectations of the model’s layout, as well as provide you with a simple template that you can then work from.
While there are countless processes involved with running a successful business, you never want to overlook matters related to your cash flow. Take time to learn more about financial modeling and see how you can gain perspective on your company’s budget. If you would like to explore financing solutions for your business, reach out to the team at Kenbry Capital LLC today.