Operating a business can be challenging, and especially with all of the negative impacts from the pandemic, many companies are still struggling to stay afloat. Since many retailers are experiencing an inventory bloat at the moment, it is crucial for wholesale suppliers to figure out ways to save money wherever they can.
With the new year quickly approaching, it is a wise idea for business owners and managers to set some new year’s resolutions and review the different ways you can cut costs. If you need help figuring out where to start, here are six tried and true money-saving tips for wholesale businesses:
- Enhance Workforce Productivity
- Automate Employees’ Repetitive Tasks with Software
- Review Business-Related Expenses
- Create a Budget & Stick to It
- Ensure Customers Pay On Time
- Cut Production Costs
1. Enhance Workforce Productivity
By far, the greatest expense category of nearly every business is labor, specifically the costs of payroll, benefits, and associated taxes. When combined, they can exceed 70% of the operating costs of a business, according to Bill Catlette, Partner at Contented Cow Partners and Executive Coach.
Rather than attempting to save money by slashing payroll expenses, which can be self-defeating, wise business leaders should search for ways to optimize their payroll dollar, specifically by enhancing workforce productivity. Catlette offers three different ways to do this:
- The lowest hanging fruit on this ‘savings tree’ pertains to policies, procedures, and methods that frustrate rather than enable employees’ best efforts.
What are the things that slow them down, reward unproductive behavior, and in general, make them crazy? Go ask, and they will tell you, at which point it becomes your job to bring about systemic change.
- Look for ways to use your compensation programs to incentivize performance.
Rather than paying workers according to how long it takes them to get a job done, try looking through the other end of the telescope. Pay them for how long it is scheduled to take, and if they finish early, they can go home and ‘keep the change.’ Generally, there is a significant delta between how we typically perform and how well we are able to perform when we really want to, which is commonly 30% or better. Look hard for other performance-based rewards, as well.
- Better leadership. Simply put, there are bosses, and there are leaders.
The inspiration shows up in both the quantity and quality of their work — so it is your job to find, inspire, and coach the very best leadership team you can get.
2. Automate Employees’ Repetitive Tasks with Software
In today’s digital era, technology has helped businesses run more efficiently than ever. One instance of this is in how restaurants use software platforms to allow patrons to place pickup orders and book reservations online, rather than paying staff to man the phones to do this job.
You can also use software to automate repetitive tasks to allow employees to focus on revenue-generating duties and decrease costs across your company, according to Nathan Liao, founder of the CMA Exam Academy. So much time is wasted on recurring tasks that can easily be done by efficient software platforms.
Here are some different technologies that can help automate repetitive tasks:
- If your sales team members spend hours sending every single customer lead a check-in email each month to see if they have any questions and offer an exclusive introductory discount, all of the time spent doing this task could be put towards initiatives to scout out even more leads (like cold-calling or attending trade shows). Adopt the use of an advanced CRM that allows your sales team to automate these email check-ins.
- One of the most important things a business can do is invest in a solid networking infrastructure.
A good network can help companies keep up with their customers as well as improve their own efficiency and organization.
- Training programs for new hires and current employees alike.
This can help make sure that everyone has access to the information they need at any given time, and it also gives them opportunities to learn new skills that may be necessary for their job growth or advancement within the company itself.
3. Review Business-Related Expenses
Hector Ruiz, President and Founder at BBQ Grill Academy, says that often overlooked is the fact that businesses can save money on business-related operational and utility expenses. For instance, many of us use fresh drinking water delivery services, janitorial services, and other office-related services, such as phone and internet. Despite the fact that many of these expenses are often required to run the business, it does not mean that companies cannot still save in these areas.
“Often the thought is ‘Well, we need this service,’ and many wholesale businesses neglect to scrutinize the fees and charges of many office services. Every day, new services, competitors, and prices emerge. In many cases, taking the time to look through these expenses and making a few changes can bring substantial savings to a company,” Ruiz said.
Here are some ways to easily review what you are spending on certain services and see where you can cut back:
- Have a clear understanding of your costs.
Know what each service is costing your business, so when new promotions or deals emerge, you can jump right on them.
- Look at their credit cards allocated for various expenses each month.
As you pay each card off, look to see how much you are spending in key areas to see if any services you are still paying for no longer serve your company.
- Talk with your service providers, especially ones that you have been working with for years.
Sometimes loyalty can pay off, and they can give you a discount for being a long-term client.
4. Create a Budget & Stick to It
Budgeting is a vital tool that helps businesses smooth out any of the cash flow shortages you may face. Revenued.com suggests that companies make sure their goals are crystal clear and try to plan three-to-five years out, so you are better prepared for anything unexpected. Effective cash flow forecasting and budgeting are essential to any enterprise, and with it, you can ensure working capital is available throughout the year when you need it.
When forecasting, it is important to pay attention to the times of year when you have the most fixed and variable expenses.
Fixed expenses are what you pay every month and do not change no matter how many retailers you serve. Examples include:
- Long-term lease payments
- Salaried payroll
You can create a budget baseline by accounting for your fixed expenses. Once you have these established, you can begin planning your variable expenses.
Variable costs rise and fall along with cash flow because they typically do not happen unless sales are made. Examples of this include:
- Hourly wages for temporary help
- Material costs
In the winter, your payroll may be more costly because you bring on extra team members — or in the summer, your electricity and air conditioning costs may be higher. By planning your entire year, you can create a framework to build on if you ever need to reallocate funds for unanticipated expenditures.
5. Ensure Customers Pay On Time
It can be really annoying when your customers do not pay their monthly invoices on time. This can greatly disrupt working capital, as your wholesale business’s operations still need to be moving forward while you are waiting on certain payments. Liao advises wholesalers to give their customers an incentive to pay their invoices on time or even early.
Here are some different incentives Liao says you can offer:
- Let your customers know they will receive a 5% discount on their invoice if they pay the day it is due or a 7% discount if they pay a week early.
- Let your customers know they can receive an additional case of product if they pay early.
6. Cut Business Production Costs
American Express suggests that business owners can easily look for ways to cut costs on materials and optimize their resources. Here are a few suggestions:
- Try selling leftover cardboard, paper, and metal instead of sending it to the recycling center. Also, consider ways to use your waste to create another product.
- Make sure you are getting the most out of your production real estate.
Centralize or consolidate the space necessary for production. Lease unused space to another business or individual — it can be as small as an office or as big as a warehouse space.
- Track and measure the operational efficiency of your business to adjust and optimize the use of available resources. Set performance parameters that reflect your efficiency goals and offer incentives when those goals are met.
“The most important thing that small businesses can do as we head into a period of economic turbulence is to maintain tight control over cash flow,” Ben Johnston, Chief Operating Officer at Kapitus, said. “This means exploring improved payment terms with vendors, working with financing companies to understand what options are available, and looking closely at ways to turn fixed expenses into variable ones.”