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Posted by: Charles P Myrick CPA Posted on: Sep 03 2020 Posted in: small business, cash flow management

How to Manage Small Business Variable Expenses

Are you on top of the variable expenses in your small business? Planning a budget can be difficult when some costs vary from month to month. These unforeseen expenses can eat away at profits essential for business growth and development. Here are six tips for managing small business variable expenses.

1. Negotiate Lower Variable Expenses Through Consolidation

To lower your variable expenses, review services from vendors, and see if you can consolidate them. For example, you may save thousands per year on your direct mail budget by using only one company. Review existing service contracts and renegotiate those where you think you may get a better deal. Vendors may compete for your business when you begin asking for outside bids. 

2. Pay Fixed Amounts for Utilities

Talk with your service providers about paying fixed rates for your utility services. Doing so can help reduce the uncertainty of variable expenses for your small business. You may end up paying a slightly higher fee, but in exchange, you won’t be surprised by an unexpectedly high bill during months where sales might be slower than average.

3. Invest in Tools to Lower Variable Expenses

Speak with your electricity provider about free assessments to help your small business become more energy efficient. Make sure your HVAC system is operating efficiently. Install lighting that automatically turns off at specific times. You can also invest in tools like smart thermostats to help even out spikes in recurring expenses.

4. Create a Savings Account for Small Business Variable Expenses

At the end of each month, take any extra cash you have and deposit it in a savings account. Use this account to cover variable expenses during price hikes and cash shortages. Your business will earn interest on this cash to help you pay for unexpected costs. 

5. Obtain an Emergency Business Line of Credit

An emergency business line of credit (LOC) can help you pay for large unexpected expenses. Lines of credit generally have higher limits than credit cards. Another benefit is that you only withdraw what is necessary and leave the remainder in reserve; there is no need to reapply each time you need to access funds. Since you only pay interest on what you take out, the overall cost may be more manageable. 

6. Reassess Variable Expenses Annually

While it may be tempting to use the same budget projections for variable expenses from last year to plan your current budget, it is wise to reassess all expenditures once a year. For categories of small business variable expenses where you have greater control, you can create strategic changes to reduce those expenses. For example, you could invest in new equipment or upgrades to help lower variable costs in the future.

Small Business Variable Expense Management Solutions

Planning for variable costs doesn’t have to be complicated. If you need help managing the fluctuating expenses in your small business, contact Myrick CPA for assistance. We offer small business accounting and cash flow management services to track, project, and manage your business expenses. You’ll receive expert guidance and a close analysis of your business cash flow to make every penny count. Contact us today to take control of your variable expenses.