Short on Cash? 25 Cost-Cutting Strategies for Small Businesses

If you want to see more profit on the profit and loss (P&L) statement, you face two options: increasing sales and cutting costs. Both are solid choices and can produce desired margins. Because of that, you will want to use both options to ensure consistent cash flow.


But when a cash flow crunch hits, you need to cut costs, now. You can if you know these 25 cost reduction strategies.


    1. Audit monthly expenses. You can’t fix what you don’t know, so you’ll need to assess your expenses. Look at standard operating expenses, marketing costs, utilities, rent, product development and so on.
    2. Create a cost reduction goal. Once you know the problem to solve for, detail how you will overcome it. You should set an overarching goal and surround it with several cost reduction strategies.
    3. Create a cash-flow response plan. The time to plan for cash flow crunches is now. You should assess your expenses, develop cost reduction strategies and outline financing options such as small-business loans, lines of credit and merchant cash advances (MCAs).
    4. Look to the cloud. Cloud-based technologies often are more affordable than legacy applications. Plus, they give you minute-by-minute reports that can be used to mitigate cash flow crunches.
    5. Purchase in bulk when it makes sense. It might not be a strategic move to purchase an actual boatload of inventory, but it could be strategic to bundle telecommunications services or subscription fees.
    6. Compare vendors. You sometimes get locked into certain services, but if you can, compare vendors, suppliers and utility providers. You often can get a better deal on services or supplies, resulting in cost savings.
    7. Cancel unused services. Get rid of the small-business bloat by cutting unused services and subscriptions.
    8. Review your bills. Regularly review your bills to make sure that you aren’t paying more than you should be or getting hit with a hidden fee.
    9. Get smart. With your utilities, that is. Smart thermostats and lighting systems can save money over the long haul.
    10. Embrace your inner environmentalist. Besides investing in smart office technology, go green. Reducing paper waste and turning off lights in empty rooms will cut cost and save money over time.
    11. Buy refurbished equipment. If you don’t need the latest and greatest manufacturing equipment, purchase last year’s model. The equipment will still get the work done at a price point your small business can afford.
    12. Pool your local resources. Your local community can be a great resource. Look for other small-business owners, cooperatives and other entities. Many times you can share the costs of equipment or services to save a bit of money.
    13. Renegotiate your APR. Many times, your credit card provider will renegotiate a better rate. This can minimize processing fees over time.
    14. Negotiate payments and schedules. Cash flow crunches often arise when outgoing expenses don’t match up with incoming payments. Work with vendors and suppliers to sync the two.
    15. Pay invoices on time or early. Some vendors and suppliers reward on-time and early payments with cash and other perks. Take advantage of them! These rewards put money back into your small business’s wallet.
    16. Avoid ongoing expenses. If possible, get rid of perpetual payments for office and machine equipment by purchasing them outright. The purchase could cost you some money now, but you should see a return within a few months.
    17. Barter. No one said you had to pay off a bill with money, so see if there’s a way to barter in-kind services. It could cut some costs now and lead to a lucrative sales opportunity in the future.
    18. Collect cash in advance. When offering credit to customers, collect cash in advance. It’ll keep you in the black when customers are slow to pay.
    19. Ditch unprofitable customers. Categorize customers: profitable, semi-profitable and sieves. You spend more time and money on the final group than you could ever hope to recoup. Minimize the damage by ditching the unprofitable customers.
    20. Visit with existing customers. This cost reduction idea aids both sides of the profit and loss equation. It cuts costs by focusing on customers who already purchase from you and grows profits through either repeat sales or referrals.
    21. Invest in employee satisfaction. When money’s tight, you might be tempted to skimp on your employees. Don’t! You’ll always pay more to hire and train new employees than to keep current ones.
    22. Empower your employees. You could try to reduce costs by yourself, but you’re doing yourself and your employees a disservice. Ask your employees for their input. They could have the cost reduction idea you need.
    23. Maximize skill sets. You save money when employees use their unique skills and talents. They’re happier and more productive, producing cost savings that often translate into larger net profits.
    24. Outsource nonessential activities. To cut costs further, offload non-essential business activities to contractors, freelancers, interns and third-party services. Getting rid of such activities reduces overhead and keeps you focused on actions with demonstrated monetary impact.
    25. Trim your products and services. The step seems counterintuitive, but focusing on core products and services gets rid of the dross — the products that are nice to have but loom large on inventory records and cash flow statements.



Cash flow crunches are no joke, but you can weather them with the 25 cost reduction ideas shared here. And, if you need a small-business loan to ensure stable cash flow, we can help with that, too. Fill out our online application today to start the process.


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