Running a business will always mean incurring certain expenses, or ‘spend’.
There are always costs, overheads and supplier bills that mount up – and these expenses will gradually chip away at your cash position. This can make it more difficult to grow and make a profit.
So, what can you do to minimise your spend levels? What impact will this have on your overall margins, profits and ability to fund the next stage in your business journey?
Getting proactive with your spending
Get in control of your expenses – where possible, aim to reduce the level of costs and overheads that your company incurs.
Why does this matter? Well, excessive spending eats into your cashflow, reduces your profit margins and stops you from achieving the profits that you’re capable of as a business. So if you can get proactive with your spending, you can actually make your company a far more financially productive enterprise.
So, what can you do to reduce spend and slim down your company expenses?
Here are some key ways to reduce expenses:
Reduce your overheads – your overheads are the unavoidable costs of running your business, producing your products or supplying your services. If you have a premises, overheads will include rental payments, utility bills and paying staff. Look and see where there are opportunities to reduce these costs. This could mean moving to smaller premises, or allowing staff to work from home.
Put limits on staff expenses – if your employees can claim expenses, or buy raw materials and equipment with the company’s money, these costs can soon start to rack up. It’s a good idea to put a spending limit in place, having a clear expenses policy helps.
Look for cheaper suppliers – if you can reduce your supplier costs, this will go a long way to bringing down your overall spend. If you’ve been with certain key suppliers for years, consider negotiating better deals, look around for new quotes, or look at current market prices. If your old suppliers aren’t flexible enough, try swapping to newer, more eager suppliers who will be willing to meet you in the middle on price.
Make your operations leaner – the bigger your operational costs are, the less margin you’ll make on your end products and services. One way to resolve this is to aim for a ‘lean approach’, reduce resources and operational complexity to the bare minimum. By making the business as lean as possible, whilst still delivering the same output, you keep your revenue stable. The smaller your COGS, the more profit you make on each unit or sale. This means better cashflow, more working capital and bigger profits.
Explore tax reliefs – you might assume that tax costs are an unavoidable expense when running your business, but it’s worth exploring which tax reliefs, grants or other business benefits you may benefit from. For example, research and development (R&D) tax credits that help cut your corporation tax expenses if you can demonstrate that you’re involved in innovation and ground breaking R&D within your industry or specialism.
Talk to us about improving your spend management
If you’d like to get in control of your expenses, we’d love to chat.
We’ll review your current costs and will highlight the key areas where expenses can be cut.
Then we’ll help you formulate a proactive spend management programme, to reduce your unnecessary spending.