As a business owner just starting out, you’re no stranger to cashflow management struggles in the first year. More often than not, profit margins tend to be thin, almost non-existent: any funds diverted from running your business can feel like one snip in a death of a thousand cuts. You’re likely on your toes managing costs at all times, with the looming thought that the next unexpected expense or global event such as a pandemic, could shut your business down for good especially since it’s also a higher possibility for smaller businesses. The Singapore Department of Statistics found that business closures1 have risen in number since 2017, reaching 50,423 in 2022.
Considering everything you’ve done to get your business off the ground, we know that’s the last thing you’d want to happen. How can you manage costs and avoid joining those numbers – keeping your cash flow positive and your small business on the path to profitability? Here are a few ways to how you can control costs.
First, identify cost drivers.
Especially with runaway costs – the top worry for small and medium-sized businesses (SMEs) in Singapore – according to a recent Sleek study2 . These are anything within your company’s operations and activities that cause costs to be incurred. And finding them is the first step to controlling your business expenses.
For example – if you’re running a home-based bakery, the rising cost of flour may increase your production cost of your pandan kaya rolls. Find cost drivers like these in your business operations, so you can target areas where expenses urgently need to be controlled; you can then start thinking of ways to fix those cost drivers and manage overall costs.
Second, optimise your business expenses.
Now that you’ve identified and analysed your existing cost drivers, you can use this information to make strategic business decisions. Back to those delicious (but increasingly pricey) pandan kaya rolls: can you use a cheaper type of flour that won’t affect the taste? Or buy flour at wholesale prices? Once you understand which activities drive costs, you can more accurately control expenses based on how you change or replace those activities.
Don’t forget your monthly cost drivers such as rental fees if you have an outlet, or storage units, manpower and business management costs such as accounting and banking fees! Find ways to reduce these fees that that entrepreneurs might think are the unavoidable price of starting a business. For example, with the ANEXT Business Account it reduces – and even removes – many of the requirements and charges that drive up banking costs. For starters, you won’t be charged account opening fees, nor annual or fall-below fees. You are also not required to maintain a minimum balance. Sending local payments and receiving overseas payments are also free. Plus, enjoy flat, pocket-friendly fees for sending payment overseas starting from S$15.
Lastly, look for alternative revenue streams.
Having multiple sources of income reduces your vulnerability to market fluctuations by spreading the risk and reducing the effects of unpredictable market forces. However, it’s important to approach this strategically. Diversifying your revenue doesn’t mean blindly adding as many income streams as possible, as these can also turn into additional liabilities.
Instead, you should look at opportunities that align with your brand, resources, and expertise. If you’re a home baker, for instance, can you expand your product line? Offer baking classes? Look at other online sales channels? No opportunity is too small. Another simple way to start is to look at your existing revenue stream and explore ways to grow your monthly funds.
For instance, you can portion out your funds for a source of stable income with fixed deposits. With the ANEXT Fixed Deposit, you’ll get guaranteed, higher yield returns, compared to a standard business account that may or may not be interest-bearing. Unlike conventional banks’ fixed deposit products, where your money might be locked up for years, the ANEXT Fixed Deposit lets you commit your cash for as little as one month, so you can withdraw in case of a business emergency. Plus keeping in mind the importance of having healthy cashflow for SMEs, the minimum placement amount starts from as little as US$5,000!
Banking where every dollar counts.
Your small business takes up a lot of your time and mental space to run. That’s why, as a digital wholesale bank, we’ve tossed out a lot of those banking distractions that can seriously cramp the way you run your business. Every dollar counts, for a small business owner. The last thing you need is a bank that adds to the burden of running a business.
So why not go with a bank that takes away many of the constraints that might hold you back? Start your journey with us; apply for an ANEXT Business Account today.
