Review your business expenses – and save

Running a business costs money. There are always costs, overheads and supplier bills that mount up – and these expenses will gradually chip away at your cash position, making it more challenging to grow and make a profit.

So, what can you do to reduce your spending levels? And 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 management

Spend management is all about getting in control of your expenses – and, where possible, aiming to reduce the level of costs and overheads that you incur as a company.

Excessive spending eats into your cashflow, reduces your profit margins and stops you from achieving the profits you’re capable of as a business. So, if you can get proactive with your spending management, you can actually make your company a far more financially productive enterprise – and that’s great for your overall business health.

So, how can you reduce spending 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 bricks and mortar premises, these overheads will include rental payments, utility bills and the cost of paying your staff. Drill down into the numbers and see where there are opportunities to reduce these overhead costs. That could mean moving to smaller premises or reducing the size of your workforce to reduce payroll expenditure.
• 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, so each staff member can only spend up to an agreed amount. Having a clear expenses policy helps, as will training up your staff in good spend management techniques. Expenses cards or expense management software will allow you to quickly set spend limits, track expenses, and pull your expenses data to your cloud accounting platform for processing.
• Look for cheaper suppliers – reducing your supplier costs will go a long way to bringing down your overall spending. If you’ve been with certain key suppliers for years, look around for new quotes, see current market prices and see if you can negotiate better deals. And if your old suppliers aren’t flexible enough, try swapping to newer, more eager suppliers 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’, paring back your staff, 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 but reduce the spending level that’s eating into your cost of goods sold (COGS). The smaller your COGS, the more profit you make on each unit or sale – which means better cashflow, more working capital and more significant profits.
• Explore tax reliefs – you might assume that tax costs are unavoidable when running your business. Still, 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 help cut your corporation tax expenses if you demonstrate that you’re involved in innovation and groundbreaking R&D within your industry or specialism.

Talk to us about improving your spending management

If you’d like to get in control of your expenses, we’d love to chat. We’ll review your current costs and highlight the key areas where expenses can be cut. Then, we’ll help you formulate a proactive spend management programme to reduce unnecessary spending.