Generating more sales is essential to keeping your business afloat during a recession – but if your bottom line is leaking money, your business may sink regardless.
During this lengthy recession businesses have had to fight harder than ever to increase their sales and remain competitive. Yet small savings in the bottom line can mean much bigger margins and allow for a bigger top line investment. So a small change could make a huge difference to your overall business strategy.
Businesses often fall into the trap of assuming they have completely streamlined their processes over years of operation to the point that no more savings could be made, but even a 0.5% saving from 10 areas still adds up to a 5% bottom line improvement!
So where can we begin to look for these little savings?
- Reduce collection time
It is not unusual to have accounts receivable items outstanding for longer than 120 days. Chasing customers for payment is time consuming, and late payments mean you forego any interest you would have earned on those payments. Make sure outstanding amounts are flagged immediately and make sure you deposit daily to maximise interest earned. And mark the bad payers – perhaps their terms should be stricter the next time?
- Accounts Payable
Where possible, extend or delay your vendor payments as long as possible. A payment that extends over a year will be classed as a long-term obligation and can be moved into the notes section of your accounts payable ledger. These steps will make your balance sheet appear healthier which will please investors and improve your working capital position.
- Increase your international rates
It can take far longer to receive payment from your international customers than your domestic clients. This is payment you are not earning interest on and more work to be done chasing and reconciling further down the line. Have you ensured these additional costs are reflected in your international pricing so you are not losing money when expanding abroad?
- Go fully digital
The computer has been such a business revelation since it is a cheap and instant way of storing, processing and communicating vast amounts of information. Yet, even with these resources at their fingertips, some companies still print out accounts, mail documents and ring suppliers/customers. If an email or some computer software would work instead, then use it over these other more costly processes.
- Reduce costs
Your main overheads will be: labour, rent, inventory, equipment and marketing. Without downsizing it is hard to reduce things like rent and inventory, especially given rising costs. However, labour can often be more efficiently used. By investing in software and processes to make efficient use of labour now, you can come out of the recession way ahead of the game!
How Adra Match Accounts can help
By automating your account reconciliation you can tighten up your account receivables and payables to help maximise your margins. The fully electronic system maps all your account details to/from your existing enterprise resource planning (ERP) system making the process seamless while minimising costs.
Finally, the amount of labour time saved by automating your account reconciliation can be more effectively used elsewhere, providing even more insight and information to your overall business strategy.
To discover more read our free guide controlling the flow of transactions in your financial close, book yourself a demo or try Adra Match accounts reconciliation software free trial!