Use your advisors wisely.

Keep your accountant, banker, insurance agent, and lawyer informed about your business. These professionals consult regularly with many other businesses and can help you avoid pitfalls in making business decisions.

Use prior financial statements as a guide to prepare budgets and long-range projections.

Actual results should be compared to these projections to highlight areas needing attention before major problems develop.

Watch those numbers.

Use your financial statement to give you important management information. Compare inventory turnover (cost of sales divided by average inventory) year by year. If turnover drops, consider it a warning sign and investigate further.

Keep payroll costs under control.

Payroll costs are a major item in most businesses. Perhaps a more efficient plant layout or work schedule would result in reduced labor needs. Consider the use of temporary employees and subcontractors if your business is subject to seasonal variations. Review employee classifications for workers’
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Learn from other small businesspeople.

Don’t be one of the many businesses that overpay vendors due to sloppy accounts payable procedures.

Collect past-due receivables.

Almost every business has past-due receivables. Phone the people who owe you the most money, and try to resolve the problem on the spot. If you can’t collect the total immediately, try to negotiate a payment schedule, or schedule a follow-up call.

Develop tight controls over billing and collections.

To speed up cash flow, reduce the time between shipping your product and sending and invoice. Consider semimonthly instead of monthly billing, and send second notices more quickly.

Make costs everyone’s concern.

Motivate your employees to be concerned about net profit. They should be as concerned with controlling costs as with generating sales. To encourage participation, consider implementing a bonus program based on a percentage of costs saved.

Ask your employees.

Companies that ask employees for suggestions get good results. Your employees are directly involved with both you customers and your product and are in a good position to suggest improvements.

Try new ideas.

Be innovative and unconventional when necessary. The fact that something isn’t currently being done in your industry or in your area shouldn’t keep you from trying something different if it will give you a better product or better service for your customers.