We have entered 2023, and everyone is talking about the rise in the cost of living. It not only affects us personally but also our businesses. From rising energy bills to higher supplier costs, around the world, we are all looking for new ways to save, so what suggestions can we offer to help?
Every business is different, so there’s no single solution. But it is important for you to take the time to sit down and evaluate where you can cut costs, to help maximise budgets and prepare for the future.
Where should you start? Here are the top four areas we see potential for cost cutting.
- Stay on top of spending
- Get negotiating
- Look locally
- Eliminate waste
1)Stay on top of spending
The first stop is to make sure you’re smart with your spending. So, our first tip is simple: make sure you have complete visibility of your finances.
This way, all business outgoings can be carefully tracked, and unnecessary expenses can be identified. Getting a clear picture of your habits will help you prioritise what’s important for your business’ growth and, once you have everything laid out, you can use this to create a comprehensive roadmap to forecast upcoming expenses.
Here at PPF we provide management accounts giving you a complete run down and tracking of all your income and expenses to give you a clearer picture each month of where your business is heading, including ways to improve. We could say that running a business without management accounts is like driving your car in the dark. You can roughly guess what speed you’re driving at by the sound of the wind noise against the car and the vibrations (your sales). However, you cannot see which direction you are heading towards (your profitability), or even the upcoming obstacles that you may hit or dip into, like that massive pothole in the road (shortage in cash and liquidity)! If you can measure it you can improve it! Then, despite costs and purchases inevitably fluctuating, you will get a better idea on how to stay on top of your outgoings.
2) Get negotiating
While cutting back spending on non-essentials is the first step towards building savings, your next move should be making the most of the money you do spend.
If you are a fan of BBC’s The Apprentice, you will have seen this done really well or more often than not, really badly! Whether you shop around, try to negotiate a lower cost as a loyal customer, or get to know new suppliers who could offer you a one-off deal, it’s worth investing your time in looking for the best price.
Although, try to remember that many small businesses have small margins and more often than not are in the same boat as you are when it comes to the rising costs.
3) Look locally
Sourcing local supplies and materials can sometimes seem costly upfront, but there tends to be hidden costs when importing too. With shipping costs set to increase and unforeseen customs charges, by the time the goods arrive, you may be paying more than expected.
When looking locally, these unexpected expenses are often eliminated, while quality remains – or in some cases is even improved. It’s important to remember this isn’t always the case when sourcing overseas, taking the time to find the right supplier will be worth your time and effort, and can create a huge cost saving in the long run.
4) Eliminate waste
Big and small changes all add up, so eliminating as much waste as possible is another great way to cut costs. Think about how your business uses energy, and whether there are more economical ways of doing so.
Start small by switching off all electrical equipment and lights when not in use or at the end of each day. Switching to LED bulbs, turning down the heating, and investing in better insulation will help bring costs down too.
But it’s important to know that implementing energy saving policies in the workplace can sometimes be costly at first – especially when investing in energy-saving technologies. So, it’s important to weigh up the pros and cons to see if this is the right move for your company.
A smarter way of doing business
There are many changes you can make to manage and minimise your business’ costs. Whether you go all in or take one step at a time, what’s most important is that you sit back and think smartly about your spending – and weigh up which costs are necessary vs those you could cut back. As costs continue to creep up, more challenges will arise, but know that we’ll be on hand to help you manage change and make the best decisions for your business.
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For more tax tips and advice, check out PPF on YouTube!