1. Cost Savings Ideas to Improve Cash Flow
Cost Savings
Ideas to
Improve Cash
Flow

2. Cost Savings Ideas to Improve Cash Flow
Turnaround your business with a strategic business plan. Improve cash flow
and revenue, cut business costs and ultimately increase revenue. Click here.
Sales are important in any business but a good cash flow is even
more important and improving cash flow is one of the most
powerful things that a business owner can do to create a more
successful business. Exploring ways to increase cash flow will
force a business owner to look not only at inflows, but also
outflows of cash.
For many businesses the top expense categories are cost of
sales, inventory, wages, employee benefits, taxes, energy and
rent. By finding savings in these high value categories, a
company can see their bottom line grow and their cash flow
improve.
In order to highlight opportunities for savings in the cost of sales,
conduct a spend analysis and review your current supplier
contracts. A spend analysis monitored over time will illuminate
high dollar expenses and provide a starting point to attack some
cost reductions. Next, review your contracts with suppliers and
negotiate cost reductions. Part of this review could entail working
with suppliers on programs to identify cost improvement
initiatives. These negotiations could also include having suppliers
perform more services for you so that you lessen costs in your
own business. In addition, process improvement initiatives and
technological efficiencies have produced cost savings in many

3. Cost Savings Ideas to Improve Cash Flow
supplier companies that can be extended to your business in the
form of price reductions.
The Periodic Review of inventory, period end counts, traditionally
has been one of the main ways companies have identified excess
costs such as obsolete or slow moving inventory. While this
method continues to be important, it is routine and other methods
can be used to complement the periodic review. Many small and
medium sized businesses can use inventory ratios to monitor and
benchmark their inventory control practices. By monitoring
inventory turnover, the owner can identify areas where cost can
be managed more effectively. Slower turnover may reveal that
there are slow-moving or obsolete items in inventory. It may
further reveal that inventory order quantities are not correct and
goods are sitting on the shelf too long. With this knowledge, the
owner can act and create systems design to effectively manage
things like economic order quantity, usage rates, lead times and
obsolete items.
Wages and benefits are another large expenditure in many
businesses as we have moved to a service oriented economy.
For a business to compete for good quality personnel, the owner
should have a firm understanding of the market for salaries in his
industry and in the region where the business in located. Since
certain job skills become hot while still others become a
commodity, salaries in the market place change over time and
business owner must adjust. Understanding the market for the
types of employees utilized in your business will help to ensure

4. Cost Savings Ideas to Improve Cash Flow
that you are not over or under paying for the skills that are
required to run your business. In addition, a business should also
define its own pay philosophy which describes how employees
are paid and what types on benefits or incentives employees are
offered. As pay for performance has come into vogue, businesses
need to determine if that is right for their business and incent the
desired performance of their employees in order to get the best
return on the payroll expenditure.
Budget planning is a tool that businesses use to control and
anticipate expenditures as well as select from the best
alternatives for cost effective solutions. Tax planning can perform
the same function for tax expenditures in a business. Surveys
have shown that companies who actively plan and manage their
decisions while taking into account the tax impacts have more
effectively kept their tax costs lower than companies that did not.
Larger companies can hire people in-house that are specialists in
this area but a small business must use his own outside tax
accountant to perform this function. Keep in mind, your outside
accountant can help in the planning and execution stages.
However, your accountant's hands are tied after the transaction is
complete, so involve them early in the planning and decision-
making process.
Energy savings and going green are hot topics in the news and
whether its skyrocketing gas prices, or new computer equipment
that uses more power to operate, companies must consistently
look for ways to save cash in this category. Fortunately, there

5. Cost Savings Ideas to Improve Cash Flow
have been innovations in these areas that help businesses bring
down these costs. Business owners should review their energy
expenditures and put in place programs to control and manage
their energy use. It may involve simple solutions for a small
business like using programmable thermostats, turning off
computers when not in use or using occupancy sensors in certain
areas so that the lights are turned off when the room is not in use.
Larger companies may need to combine the efforts of their facility
and IT teams to research better energy efficient options to run the
company's infrastructure. Here businesses may consider
solutions that include smart technologies that control the cooling
of systems and servers, utilizing the internet for meetings to avoid
travel costs or even installing solar panels to generate your own
power. With the rising costs of energy and the additional power
requirements of computer equipment, it is necessary for
companies to continuously explore solutions to achieve savings.
A sometimes overlooked, but large, recurring cost for a business
is rent. Many businesses sign long term lease agreements and
then forget about them until the agreement nears the end of its
term. Changes in real estate values and occupancy rates can
alter the going rate for commercial rentals. Periodically, a
business owner can explore the alternatives and work with their
landlord to obtain potential savings or additional rental perks for
their business.
We have only touched the surface. This article was meant to get
business owners to begin to think about some of the ways to

6. Cost Savings Ideas to Improve Cash Flow
explore savings in areas that carry large costs for a business. By
cutting costs in these high expenditure areas, a business owner
has the opportunity to greatly enhance his cash flow and create
savings to fund investment for the future.
Turnaround your business with a strategic business plan. Improve cash flow
and revenue, cut business costs and ultimately increase revenue. Click here.

7. Cost Savings Ideas to Improve Cash Flow
Ms. Roberts is the owner of Business Rx, LLC. She works with business owners who
are passionate about improving their business in pursuit of their vision, goals and
business success. For more information please visit her website @ http://www.bizrx-
advisors.com
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