Time to review your expenses?
One of the most important things you can do to ensure your finances are in good shape is to review your expenses. It’s important to do this on a regular basis, not just when you’re encountering problems. And particularly at the moment, building up a cash buffer for unexpected future expenses is an important business discipline.
Here are some tips on how to review your business expenses:
- Start with the basics
The first step in reviewing your business expenses is to make sure you have all the relevant information on hand. If you don’t have clear information it’s difficult to make the right decisions! Once you have everything in one place, categorize your expenses into different buckets such as direct cost of sales, marketing and advertising and overheads (rent, utilities, and travel). Once you have categorized your expenses, start analysing them. Look for trends in your spending and identify areas where you can reduce costs. For example, where have costs started to creep up and what costs are no longer required or providing the appropriate value for your business?
- Negotiate with suppliers
Negotiating with suppliers, particularly those you spend frequently with, is an important way to reduce costs. You may be surprised at how much you can save by simply asking. This includes lenders as well as service providers. And don’t forget to shop around for the best deal on a new product or service by sourcing comparative quotes.
- Use technology to your advantage
Technology can be a powerful tool for reducing expenses and can be used in a number of ways. Online accounting software, like Xero, allows you to track your expenses quickly and easily. Time spent with your bookkeeper making sure expenses are categorised correctly at the outset can save you hours of time on the analysis. Reporting software such as Spotlight or Fathom can generate instant reports from your accounting software to visually show you trends and track key metrics.
- Review your subscriptions
You know that gym membership you bought at the beginning of the year or the streaming service you signed up to and meant to cancel after the free trial? Business subscriptions, like personal subscriptions, can really creep up if you don’t keep an eye on them. Review all of your subscriptions and memberships. Cancel any that you don’t need or aren’t using. Also, check that you are on the appropriate package for your business now. Have you signed up to a premium package and don’t use the premium features? Or have you increased your number of users and should now be taking advantage of volume discounts?
- Implement cost-saving measures
Identify areas where you can implement cost-saving measures and reduce wastage. Some examples are:
◆ Review your inventory management system to ensure that you are not overstocking or understocking products, which can lead to waste or missed sales opportunities.
◆ Review your insurance policies and contracts to ensure that you are not overpaying for coverage you don’t need or can source at a lower cost.
◆ It sounds simple but implementing energy-saving measures in the office such as turning off lights, computers, and other electrical equipment when they are not in use can go a long way – particularly at the moment!
◆ Outsourcing: Hiring freelancers or outsourcing certain tasks can be more cost-effective than hiring full-time staff, particularly if business needs are variable or uncertain at the moment.
What can you implement today to run a little leaner?
Small changes add up!