5 key areas to save your business money
Whether you’re under financial pressure or not, a cost cutting exercise can always be a useful process for businesses. But where do you start?
By regularly checking and benchmarking internal and external costs you can save your business money and improve your bottom line without too much effort.
Here are five key areas to focus on where potential cost savings can be made:
Utilities often account for a large portion of annual operating costs which is why it’s important to regularly review your main utility providers, such as phone, broadband, gas and electric, to make sure you’re getting the best deals.
With a lot of competition in these industries you may find switching providers can reduce your annual spend, freeing up money that could be spent on growing your business.
When it comes to suppliers, it can be really easy to find one and then just stick with it because you’re comfortable with the service. But this could be costing your business money.
When faced with problems of their own, suppliers are often quick to increase prices, but they may not be so quick to reduce them when their supply chain’s flowing again. So you could find yourself stuck with a higher cost for no extra gain.
This highlights the importance of benchmarking the cost and service against other suppliers. When doing this it is essential that any comparisons are made on a like-for-like basis and the volumes analysed are a true reflection of what you actually use, or you take into consideration the costs involved in holding stock.
Also, be sure to ask suppliers of any additional fees to avoid being caught in a trap that could end up costing you extra. Likewise, many suppliers will be able to offer discounts for early payment of invoices.
Suppliers can sometimes get complacent so if you are looking to move, it’s worth asking current suppliers if they can do a deal as if you are a valued customer they may want to review their pricing to retain your custom.
As well as looking at external providers it’s also important to benchmark your business internally and consider how well the key functions of your company are performing.
It’s also a good idea to review your processes and policies regularly. For example, look at your credit management policy and review whether improvements could be made to get your money in the door more quickly. Can any other processes be tightened up to reduce unnecessary spend?
It is also worth looking at the way you generate and convert business. If you have found yourself in a quieter period, now is a good time to look back and see if you can identify any ways to improve going forward.
If your reviews do uncover room for improvement it might be worth looking at revising current training methods to bring your staff up to date.
With the success of your business reliant on a healthy cash flow, making sure you have the most suitable funding product in place for your business’s evolving needs is crucial, and regularly reviewing your existing facilities is so important. Just remember that, when it comes to funding, the cheapest option isn’t necessarily the best option.
With dozens of options available, it can be hard to identify the right one for your business, which is where talking to a finance broker could help. Recognising that every business is different, a good broker will work with you closely to fully understand your business’s funding needs and challenges in order to identify the right facility in terms of funding level, service and cost, helping you to overcome cash flow challenges and meet objectives.
Tools and software
Just like utilities, it is all too easy to set up a subscription to a tool or software solution, and then just forget they exist.
When looking to cut costs, it’s worth going back through all the subscriptions you have for different tools and reviewing how well they work for your business. You may find some subscriptions that are no longer required at all, or in larger businesses, different departments may be using a variety of tools for functions that could be performed by one.
Remember not to cut back too far. Many of the tools your business uses will bring real value to your staff and greatly improve your procedures. Try and calculate the value in all the tools you use, and cut or replace those that aren’t giving you a good return on investment.
Looking at where you can save on costs across all aspects of your business is always worth exploring but remember to make sure that the quality and level of service is not lost. After all, sometimes it’s not the cost of a service but its value that is more important.