3 Ways To Save Money Now: Business Financial Management
While the media reports our economy is improving, business owners still must exercise sound business financial management. Businesses still operating after the recession find themselves experts at cost cutting and measuring return on investment for continuing expenses. Still, there are always places to find additional money. I share three below.
Insurance renewal dates often creep up on me. It’s been more than once where my agent has contacted me ready to renew the policy for the next week. This is a commitment to one of our largest line item expenses each year – sometimes more than some salaries. It can be easily managed in two steps:
#1. Policy Renewal Date
Keep track of your policy renewal date and focus on your policy 60 days in advance of renewal.
Action: Enter your policy renewal date in your scheduling program as well as a reminder to check your policy 60 days before that date.
#2. Compare Prices
Shop your policy to your current agent, an independent representative at another insurance brokerage, and through an industry group that advertises to companies like yours. You may need to go to organizations such as the National Federation of Independent Business (NFIB) if you don’t know any industry groups.
Action: Edit your reminder to include a list of the three companies you will contact.
If you are not organized, you can contact the three companies now, tell them what you are doing, and have them contact you 60 days in advance. It is one way of testing their desire to earn your business. What’s the net effect? In one of our businesses, we pay around $28,000 per year. By asking for referrals to insurance agents from other business owners we were able to reduce our premium by 25%. Yes, $7,000.
I pride myself on running tight operations. This came into question when I looked at one manager’s accounts receivables. Some customers were billed irregularly, others wrote non-sufficient funds (NSF) checks that were not pursued, and some payments were misapplied to the wrong service date. I realized that while I looked at aging regularly, I did not have strong controls on some of the gaps in the billing process. A recent review in one business uncovered over $4,300 of unresolved issues. Here are some ways you can improve your operation:
#1. Weekly check
Make sure you look at your accounts receivable on a weekly basis.
Action: Have your bookkeeper or person responsible for collecting revenue send you an ageing report each week.
#2. Monitor NSF checks
Create a process to monitor NSF checks and their collection.
Action: See if your bank can send you an alert whenever a deposit is reversed for NSF. Reverse the customer payment at the time of the alert.
Vacation Balance and Accruals
When is the last time you reviewed a vacation balance report? I rarely do; this has been a set and forget part of my business. I rely too much on the accuracy of our payroll processor. That’s a mistake as the processor doesn’t know my business as well as I do. I conducted a review recently because of the amount of vacation time being taken. I found some immediate opportunities:
#1. Check vacation balances
Check vacation balances to see if they make sense with your view of vacation taken. In one example, we found an employee with a negative balance – she had received a huge advance a year ago due to a data entry error. It was processing fine, but it would be two years before she would receive more vacation.
Action: Get a vacation balance report from your payroll processor.
#2. Vacation accrual rates
Verify vacation accrual rates. They sometimes need adjusting as your position on benefits changes. In one business we realized we made a significant change in policy but had not carried through completely with the payroll processor.
Action: Confirm the accrual rate for vacation, sick time, or paid time off with your payroll processor.
These few actions should help to save you more money as the economy continues to improve. Let me know other great suggestions you have for sound business financial management.