Keeping business costs under control is essential especially when you are looking to improve the business’ financial position and cash flow.
One of the first things to look at should be your expenses. As your business grows, so will your costs but you should take steps to keep these costs down as much as possible.
This is not a once a month activity so it’s important not to rest on your laurels. As a business owner, it is necessary to continually think of ways to reduce your overheads so frequent reviews of your business expenses should be a regular task to ensure a healthy cash flow in the business.
Although costs for items such as phones, internet, power and office equipment are essential, there are ways to keep these costs to a minimum.
When reviewing these expenses, consider the following –
- Internet and mobile phone providers – there is a lot of competition in this sector so it is worth shopping around to see if you can get a better deal. Many providers also offer a cheaper more environmentally friendly option too.
Speak to your current supplier and see if there is a lower cost tariff available as they would prefer to reduce your costs and retain you as a customer.
- Energy costs – some of this is obvious, such as turning off electricals when they’re not in use is a good way to save cash. Green energy options are also worth looking into, especially if you’re shopping around for a new energy supplier.
- Office Space – with the increase in acceptance of online meetings as a result of the pandemic, consider if you need an office. More and more businesses are becoming virtual so it’s worth considering if yours can be as well as this could result in substantial savings in costs.
Another option is flexible working where staff have a mix of working from home and from the office across their working week. This would mean that you could consider moving to a smaller cheaper office or a co-working space instead, both of which could save on rental costs.
Have you thought about using an outsourced supplier to undertake some of your in-house tasks? This not only can save on the overheads associated with employing someone, but it can also free up the business owner’s time which they can then spend on activities to grow and develop the business.
Potential tasks that can be outsourced include –
- IT Support
- Human Resources
Look at Your Suppliers
It is important to consider your suppliers. If you have used the same supplier for a long period, how do you know if they are charging a premium unless you monitor your costs? There are a number of things you can look at here including –
- Benchmarking – regularly compare the costs you are charged to the costs from other suppliers and benchmark these prices. If you are paying significantly more then speak to your current suppliers and see if there are better deals available.
- Discounts – are there discounts available if you buy in bulk? If cash flow allows, bulk buying can be a good option when reducing costs as many suppliers will offer reduced prices when you buy more.
- Importing – investigate importing your business’s raw materials. It could be that they’re cheaper to buy from an overseas supplier.
- Payment terms – speak to your supplier about changing your credit terms. It is often the case that suppliers have shorter credit terms in the initial few months of trading with a new customer and this can continue if not regularly reviewed. Speak to your supplier and see if your credit terms can be extended, allowing you to hold onto your cash for longer and improving your cash flow.
It may seem obvious but when the business gets busy, it is easy to take your eye off the ball which can lead to escalating costs and cash flow problems which risks the viability of the business.
Cost control is essential in all businesses. Reviewing costs is one of the most effective ways to keep costs down and in check so ensure that you do this on a regular basis in your business.