5 key areas which could save your business money
It has always been beneficial for businesses to periodically undertake a cost review exercise in order to identify where potential savings can be made. But with inflation and energy bills soaring and interest rates also climbing quickly, such a task will undoubtedly be towards the top of business’s priorities.
The cost of living crisis has been well documented from a consumer perspective, but business owners will know only too well how the same issues are impacting their bottom line.
Absorbing such increases in operating costs isn’t always straightforward – especially given the pandemic – and neither is passing them onto customers.
By regularly checking and benchmarking certain internal and external costs, however, it may be possible to save your business money and improve your margins without too much effort.
Here are five key areas to focus on where potential cost savings could be made.
Where consumers are protected to an extent by the energy price cap, this isn’t the case for businesses who are seeing their energy bills skyrocket.
Taking into account water, phone and broadband, utility bills as a whole typically account for a large portion of annual operating costs, which is why it’s important to regularly review your main utility providers 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.
Additionally, it can be worth doing an audit of where usage could be reduced to translate into savings. For example, small and simple changes such as switching off equipment overnight can make a real difference to your energy bill. Over a year, a PC and monitor uses nearly £10 when left on standby, which when multiplied across a team quickly adds up.
Looking at the equipment itself could also lead to savings. Laptops use less energy than desktops. Does your equipment have an A+ energy rating? Could motion sensors on your lights or even switching light bulbs reduce your bill?
It could be beneficial to look into whether your business is eligible for tax relief or exempt from some energy taxes. Find out if more here.
Lastly, with hybrid working models coming into their own during the pandemic, retaining this way of working could provide your team with the flexibility they desire whilst also allowing the business to save on day-to-day operating costs.
From raw materials to stationery, when it comes to suppliers, it can be 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. If you are a valued customer they may want to review their pricing to retain your custom.
As well as looking at your external suppliers, it’s also important to scrutinise your business internally and consider how well the key functions of your company are performing.
Take company credit cards – what payments are going out which perhaps aren’t essential?
It’s also a good idea to review your processes and policies regularly. For example, look at your credit management policy and review whether any operational improvements could be made to encourage customers to pay faster. Can any other processes be tightened up to reduce unnecessary spend? Or could any key functions be outsourced to an external agency – not just with a view to reduce internal overheads, but also to improve performance?
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 any 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.
Regularly reviewing your existing facilities is therefore so important, in terms of the value they’re adding to the business, the level of service you’re receiving, how well it supports your business from day to day, and of course how much those facilities cost.
Just be sure not to make a decision based on cost alone when it comes to your business’s finance arrangements. A more expensive facility could add far more value to your business.
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 and how they’re used.
You may find that some subscriptions are no longer required at all. 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, though. Many of the tools your business uses will bring real value to your staff and greatly improve your procedures and productivity. 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 compromised. After all, sometimes it’s not the cost of a service but its value that is more important.