From the costs of materials to staffing and leases, every small-business owner has to deal with overhead costs. That said, streamlining tasks and finding cost efficiencies can give you more breathing room to focus on other parts of your business.
You can take several steps to improve how you manage your business finances. Technology solutions with reporting and data analytics capabilities, in particular, can be useful tools to help you accomplish this.
Tackling overhead as a small-business owner.
As a small-business owner, you often have to navigate both fixed and variable costs. This can include things like the variable cost of utilities, the fixed cost to rent or own a brick-and-mortar location for your business, and monthly subscription or retainer fees for third-party services, such as accounting and bookkeeping. However, payroll expenses, taxes, and the cost of materials are often some of the biggest line items.
You might use accounting or bookkeeping services to track all these expenses or handle them yourself using a spreadsheet, depending on the size of your business. This can give you some visibility into revenue, sales, and spending patterns and allow you to identify areas where you may be able to cut costs. For example, if you see that your materials costs keep climbing every month, it may lead you to renegotiate contracts with certain suppliers with whom you have a longstanding relationship. If you notice that your utility bills and cost of paper goods increase month after month, you may decide to transition to paperless receipts or switch to LED lighting or other energy-efficient equipment.
Tracking your income and expenses is a baseline for better financial management. While you can outsource this task or take a manual approach to budgeting, automating this process using reporting and analytics technologies can lead to several benefits for your business.
How technology can improve your budgeting and financial management.
Data has become a critical tool that business owners can use to improve their operations and better manage their overhead costs—but to fully take advantage of this valuable asset, your business data must be actionable.
That means it can't live in spreadsheets or paper files. Custom tech solutions with reporting capabilities can provide helpful data and analytics for your business to capitalize on. By using this technology, you can access insights like the percentage of monthly sales that come from online orders, your labor and materials costs, and the performance of your marketing campaigns. These insights can help you make more informed decisions about where you devote your resources and where you should invest going forward to improve sales, revenue, and customer retention. For example, if you see that a specific Twitter campaign isn't performing as well as you had hoped and you have data showing previous marketing campaigns on Instagram converted more customers, you may decide to shift some of those resources.
By making the most of technology and automation, budgeting and financial management processes can thrive. You won't have to worry about manually inputting data into a spreadsheet or doing complex financial analysis to understand patterns in your business. The right tech solution for your business should be user-friendly, and it should aim to bring you closer to your data instead of relying on an outside accountant to handle the financial part of your business. Being able to connect your payroll processes and inventory management systems will also give you a more holistic view of your business overhead. Additionally, you can access historical data that gives you a full picture of the financial trends that might impact your cash flow.
As a business owner, it's important to find every opportunity possible to streamline your operations and increase your bottom line. Improving how you manage overhead costs is one of the most effective ways to boost your business's financial performance and make it more resilient for years to come.