As a small business owner, you are all too aware that you have a range of operational expenses you must meet. Many of these go up on a regular basis too. Even when times are good one must monitor and control costs.
When times are hard, as they are now globally due to COVID, the need to not only control but reduce overheads and running costs is greater than ever. Fortunately, there are things we can do to decrease costs.
It is usually possible to reduce your insurance contributions while remaining covered and protected against risk. Cancelling insurance, particularly business insurance such as public liability, is not an option as losses or claims could cost you your business.
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It may also reduce premiums if you take steps to reduce risks such as installing alarms, surveillance cameras, and sprinkler systems. However, avoid the temptation to accept huge excesses in exchange for reduced premiums. Ask yourself if you could really afford to cover them.
Business costs can be reduced if you are able to:
- Move your premises to less expensive ones
- Reduce the size of your premises
- Renegotiate your lease with the landlord
- Run your business from home
- Operate a mobile business using an equipped vehicle
There are factors to consider. You need to be realistic about the implications of each and the costs involved. In addition, if you decide to operate from home make sure you have the correct permissions from relevant authorities to do so (and that your family will cope!).
If you need help with running your business, there are alternatives to employing permanent staff on a full- or part-time basis. You could enlist the help of family members if they have the skills and time and children are at an appropriate age.
You could offer unpaid or low paid internships or shadowing jobs to graduates or school-leavers so they learn skills and gain work experience, or you can hire freelancers or contract workers as and when you need them.
The system of bartering has been a common practice for centuries and in many countries. It is particularly useful at times when things are tough and cash is hard to come by.
Although bartering today may not involve exchanging eggs for vegetables, one could offer a service for a product or another service such as website design for an equivalent value in tax returns. Not only do both parties gain value, but it can also create strong business relationships too.
Of course, bartering will not succeed unless both parties stick to the deal. It can help to put a value on services and products so that the deal is equitable. Agreeing to deadlines is also important. The final caution is that bartering is not necessarily free of tax obligations, so you need to check that.
Vehicles of any kind, especially those that are used a great deal like company vehicles, can cost a great deal. Business owners contend with one-off costs such as vehicle purchases, ongoing costs such as licensing, fuel, maintenance, and insurance. While costs can be addressed, it can be difficult to make savings in all these areas.
- When you need to acquire an additional vehicle, look at a good quality used ones with service histories and some form or warranty rather than a new vehicle.
- You can also decide whether to buy or lease a vehicle.
- In either event, shop around for the best financing options so the repayments are as affordable as possible.
- Insurance can be reduced by shopping around to see if other insurers offer suitable insurance for less.
- Buying a vehicle with good fuel consumption will also save you in the medium- and long-term. Fuel costs can also be reduced by only doing essential travelling.
- Maintenance services are lower or non-existent on some lease plans.
All of these can help to reduce running and initial outlay expenses.
Today there are far more low cost and free sales and marketing channels and options that there used to be. While there may be initial costs such as paying someone to design a website and register a domain name, many activities thereafter are free.
For example, you can create pages and accounts on social media, send out bulk emails, and keep your website fresh and appealing by sharing news, giving relevant information and tips, offering discounts or special deals and publishing case studies with customer reviews or testimonials. These things all promote your brand, keep it in the customer’s mind, and build relationships and loyalty.
If there are goods or supplies that you buy regularly there are things you can do to decrease these expenses. You need to be prepared to approach suppliers about discounts, investigate to see if there are other suppliers you could use and perhaps talk to other businesses like yours in your area.
- Approach your supplier for a discount, especially if you purchase regularly or in large volumes. You are also more likely to get a positive response if you have a good relationship and pay your account promptly.
- Find out if there are other suppliers that are more competitive than your current one. If there are, either change suppliers or ask your current one if they are prepared to match the lower rate.
- Speak to other businesses in your area that use the same supplies to find out if they are interested in combining orders so you can place bulk orders and both benefit from discounts.
Negotiating discounts or changing suppliers should not be a source of embarrassment or awkwardness. It is good business to reduce costs where you can, and suppliers know and understand that.
You cannot, of course, avoid tax. However, you can minimize the amount of tax you must pay at year-end through effective financial planning and management. Part of control is ensuring that you keep accurate records such as logbooks for vehicles, receipts of expenditure, copies of invoices and full staffing details.
If you are not confident about tax, deductions and returns, consult a tax advisor who can help you plan your annual finances so that you legally and effectively reduce your tax liability.
9. Time Management
We can forget that our time is also a cost and should be spent on activities where we offer the greatest value. Your time and that of your staff should be used wisely and effectively.
For instance, should you spend part of your day making deliveries? Think about the value of your time, fuel and vehicle wear and tear against the cost of using a delivery service which would allow you to stay in the office generating sales, planning or developing new services or products.
10. Data Storage
Small businesses are unlikely to have the amount of data to require a server to store it. This usually means cloud storage is also not necessary. However, making a move to the cloud offers benefits including reduced IT costs.
In addition, the cloud offers bandwidth flexibility, access to a range of business applications, data protection, the ability to use company data on all platforms such as laptops and tablets, share data with team members, and data recovery. All of these can save you money.
Most, if not all, of these ten areas, can be utilised to reduce one-off, monthly, and annual expenses for your business. Savings are valuable at any time, but every dollar counts even more when times are difficult and unpredictable. Take steps now to do all you can to control your business expenses.