Simple Ways To Reduce Business Expenditure
Your business is doing OK. Sales are coming in and you’re sort of profitable, but maybe not as profitable as you’d like. Certainly not to a level that means you can increase your pay to what you should be getting or take a dividend to reward you for investing in your own business.
So, are there any simple ways to make the business more profitable? How can you reduce business expenses without the business suffering? It’s time to grasp the expenditure nettle and see how you can control your business expenditure without impacting how it operates!
Endless Cycle of Business Expenses
I bet I can guess what you’re thinking right now!
“But I need to spend, to get all the essential services to help my business run smoothly! I have to have a mobile, a subscription to the accounting software and a host of other things.”
You were careful and made sure that when you organised them you only took on costs that you thought you would really need, there’s nothing that you can do without. Despite that, the costs are always there, every month, no matter what the business is doing and it’s hard to get any surplus cash. It’s relentless.
Running a business is hard work, there are always costs but there is never ‘always income’, at least it seems that way. It would be nice if the business could survive (and thrive) without all these costs!
The Truth About Expenses
In July 2019 savings.com.au reported that 62% of Australians were wasting money on subscriptions that they weren’t using, at a cost of nearly $4bn per year!
Businesses are no different and this occurs because when you have monthly (or even annual) subscriptions that automatically renew it’s just too easy to forget about them.
Maybe you actually use the service, but should it really be costing you as much as it does? Subscription costs often go up, but a lot of the time the extent or value of the service changes, so you could be wasting thousands of dollars on subscriptions and other costs because you’re paying for something that you don’t use.
At Refresh Accounting, we know that many business owners start out by keeping a tight rein on their costs, only buying and spending on what they need. Often though we start to increase costs as the business takes on more work and we as business owners, stressed by a lack of time, focus on doing the work and not on the background costs of the business. It happens to all of us!
If there is one overriding thing that we’ve learnt in all our years working in and helping wineries, breweries, distilleries and other businesses with their profitability, it’s that it’s easier to cut costs than it is to increase sales!
Read our article on documented processes next to learn how they can help streamline your business and keep expenses down!
5 Step Plan to Decrease Costs
Reducing your business expenses doesn’t have to be a headache. If you approach the job in a systematic way and work through these 5 easy steps, you might be surprised by how easy it is to reduce expenses.
Getting started couldn’t be easier – all it takes is a phone call or e-mail then someone else can do most of the work….
Call up your bookkeeper and get them to list all your periodic costs (monthly, quarterly or annual subscriptions etc.), detailing the cost, period covered, next renewal date, contract end date and services covered.
Review everything that is not on a contract, or the contract is due to be renewed and check to see if those services are being duplicated by another supplier. For example, your email system now incorporates a CRM and you’re paying for a different CRM.
Make sure to also check if your actual usage is lower than the service you are paying for. For example, your mobile phone contract may give you 50Gb per month in data, but you only use 20Gb.
Cancel anything that you can where the services are being duplicated (or you realise you don’t use or really need them!) and reduce plans to the levels that you actually use, not what you thought you would use.
Try to be ruthless with this step. Generally, the worst that will happen is after a month you will realise you actually do need the service and you just sign back up for it!
Once you’ve cleared out the subscriptions, it’s time to tackle contracts. Obviously, these can’t be tackled all at once and need to be reviewed throughout the year. The best way to make sure they don’t fall through the cracks when you get busy is to diarise to review contracts before they renew!
Now that you’ve made the change, you can’t just rest on your laurels though. It’s all too easy for those unnecessary expenses to creep back in throughout the year. The final thing you need to do to make sure you’re always on top of your costs is to diarise a meeting with yourself in one year to do this exercise again!
If you’ve found this helpful take a look at our article on business size next and see how understanding your lifestyle costs can help you determine the optimal size for your business.
Keeping control of your business is hard work. It’s easy to waste money, but if you implement this easy 5 step process, that’s not going to be the case in your business! It will have everything that it needs to function and you’ll have more cash to reward yourself or invest in your next growth opportunity.
Are you ready to commit to working on your expenditure? Complete the first 3 steps and book a call to talk about your results!