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Small and medium-sized enterprises (SMEs) are part of every country’s business fabric. Their market entry, endurance and progress are crucial for creating jobs and wealth everywhere. Below we give cost saving tips for SMEs to keep thriving.
What do SMEs do?
SMEs have a small number of employees as well as moderate business turnover. We only need to look out of the window to see dozens of them: the bakery on the corner, our regular hairdressing salon and the engineering company remodelling our city centre.
When determining what an SME is, we must take into account the number of employees, annual turnover and balance sheet, as well as the amount of external resources available like properties and vehicles.
These companies are vital to local, national and regional economies. According to the Organisation for Economic Co-operation and Development (OECD), 99.5% of enterprises in Latin America and the Caribbean are SMEs.
This highlights the importance of SMEs’ financial health, since they are a key part of economic activity in countries and regions. They are a vast number of pieces that, when combined, account for most of the employment and social capacity of particular areas. As the International Labour Organization (ILO) underlines, they have the greatest power to create jobs and must therefore be managed properly.
Tips for managing SMEs: How to save on costs?
The financial management of SMEs bears similarities with running a household. Below are recommendations for cost savings in SMEs:
- Good financial organization
Robust financial organization helps SMEs reduce costs and increase savings. Advance planning of investments, costs, revenues and any changes that may affect the businesses of the self-employed could form the basis of invaluable savings. The first step is to assess the company and analyze its expenses and regular income to implement a tailor-made savings strategy. Recording all financial movements to expose unnecessary costs may also help. Start-ups should organize themselves from an efficient standpoint at the outset. Visit the Santander Chile Sano de Lucas website to find out more.
- Reduce administrative costs
We must scrutinize our basic costs, such as telephone bills, insurance policies and utility payments. We also need to review the agreements with these companies to make sure they closely align with our needs and budget. We can find the best rates using a comparison tool. Avoiding petty expenses (small amounts spent without realizing) also contributes to increased savings, as noted in this article by Santander Argentina. All companies, not just start-ups, should do this regularly.
- Information
It is important to keep pace with public assistance and tax benefits in the country where the company operates and to find out whether it is eligible to apply for them. There are several grants for SMEs, as well as special loans for various types of companies in many geographies. The information will enable us to choose the most suitable grants for our company.
- Reviewing vendors
We must study vendors’ prices and quotations to see if they match the quality, deadlines and service we expect, and to determine whether the costs involved are worth it or if they could be reduced to boost savings. You can follow the advice given in Finanzas para mortales to collect invoices in good time.
- Making the most of the available technology
A number of optimization tools help streamline processes and reduce costs. Digital accounting, using cloud computing tools or specialized software, facilitates management and contributes to savings.
To learn more about how to save for start-ups, visit the Santander Chile Sano de Lucas website. For further advice on SMEs, check out Santander Bank, NA's Business First website. If you want to take control of your company's cash flow, this template drawn up by Finanzas para mortales will help you prepare your SME's cash budget.