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9 ways to cut costs for your business

Thursday, 7 November 2019 11:20 AM | Finance for founders

cost cutting for businesses

Cutting costs isn't always about saving money but learning how to keep a track of things, particularly when you're scaling. Follow these tips to stay on top of things.

Often some of the biggest challenges you will face as your business grows is keeping costs down, monitoring your outgoings, and being lean. Initially reducing costs is half the battle - ensuring you have a great strategy in place and can easily analyse the situation is the other.

Cost savings analysis and strategy
  • Create a spreadsheet with every contract the company has, when it's due for renewal, and what the existing cost is.
  • Reduce spend on low performing areas
  • Focus on projects with revenue earning potential only
  • Review business processes, streamline them, then reduce manpower
  • Use Companies House to review your competitors financials and use this to benchmark
  • Ensure the right people are looking after the budgets and hold them accountable
Costs vs revenue 
  • Should you invest in sales staff? Consider the impact and contribution they can make against the risk. Is it better to take risks and increase pressure on yourself and management team
  • Consider the balance between having cash in the bank that is attractive to investors and proving it works by investing that money in growth
Reducing costs
  • Look at expenses, including staff and external entertainment, and update policy
  • Look at mail and postage. If posting anything, use second class instead of first
  • Do you print a lot of invoices, can you do it electronically instead? 

In-office

  • Reduce cleaning costs: one or two bin stations, not bins at every desk.
  • Equipment: Look at auction houses, eBay, recycled furniture
  • Employee benefits
  • When renegotiating the healthcare policy, go through line by line and see how the premium changes if you take out certain things

Phones

  • Review mobile phones contracts globally.
  • Pay for work calls only
  • Assess land line contracts and renegotiate.
  • Consider Aurora or VOiP instead
  • If using VoIP consider getting a bigger pipe, and sectioning part of bandwidth dedicated for phones
  • Does everyone need a desk phone if they have mobiles? Ensure you have a good contract with mobile service provider

Travel

  • Have a policy that everyone adheres to.
  • Having an on line booking system allows you to set rules and monitor everyone's behaviour
  • Always book trains at least 2 days in advance as often ¼ of the price
  • Use a broker who can reduce costs and get commission from the supplier
Offices
  • Break clause: before signing on property, get qualified lawyer to check terms of break clause, it might be 3 months' notice but if you miss that, it rolls on which might tie you in to 2 more years. They make it very hard to break even at break clause
  • Don't accept their cost on dilapidations, go round item by item and use a professional to negotiate your lease terms
Insurance and banking
  • Review your professional indemnity. If you have reduced in size or reduced IT, your insurance should come down
  • Merchant bank charges-compare banks
  • Review credit card use - can purchases for stationery, printing etc. go through a company card {controlled by 1 person) so you gather points?
Staff
  • lncentivise all staff to come up with their own cost saving ideas, and give them a percentage of what they save. Define what you m ean by "savings" e.g. if costs go up by 10% but they agree to a 5% increase, that's not a 5% saving
  • Maybe consider an annual bonus based on savings {if it's relevant to that persons j o b): if you save £25k over the year, you'll get f Sk bonus {NOT for sales peoples as they'll get distracted!)
  • Use a consultant to come in for 1 day and find cost savings. lncentivise them on results e.g. if you pay them 1 k they have to find 2k of savings
  • Procurement departments that tend to buy commodity products don't understand the value when buying marketing/digital. This area is fundamentally at odd with other departments in the business due to the way that they are incentivised. Bring a procurement expert into your business to train you and your team on how to work with these people
  • Ensure PR/marketing teams are focusing on revenue and customer acquisition
  • Consultants - can you reduce the amount of days they do?
  • Can you ask staff to go part time?

Bonus and commissions

  • Review partners' commissions
  • Replace vouchers or cash with recognition system: gold stars, names on board etc.
  • Look at commissions and increase thresholds based on breakeven analysis
  • Ensure a greater consistency of deals per sales person by requiring a minimum before any commission kicks

Hiring

  • Negotiate a rebate with agencies if you take on a lot.
  • Call it a kick back after x placements
Rates and tax
  • Look at PAYE and NI -is there a possible delay on that?
  • VAT -if you're holding stock, can you reduce the VAT you pay by shipping from abroad?
  • Talk to Royal Mail about bonded off shore warehousing
Renegotiate with suppliers
  • Renegotiate payment terms with every supplier. Ask them to bear with you for 2 months
  • Get figures of work you've put their way over last year, there's plenty more if you're more generous ...
  • Say what the extra money is going towards, e.g. more market to get more work
  • Be fair and tell them that you think it's more than fair
  • Be careful who you negotiate hard with. If it's a spot purchase, go at the end of a quarter, have cash and be willing to walk away, you'll get a good deal if you push hard. If it's someone you have to work with for a long time, you want t hem to "want" to work with you on an ongoing basis, so make it worth their while
  • If you've been buying the same thing for years and price is going up, break down the commodity costs going in, i.e. plastics, metal etc. Does the increase in the commodities cost match the price increase? Gives you a more powerful negotiation point if you can say " is this a fair price hike -look at the figures?"
  • Offer something of value in return e.g. consumer purchasing data / research / cross promotion
  • Look at stock rotation, can you order more last minute? Order on 1 stand pay on 30th?
Professional services

Accountants

  • Find out when their busy period is. If you had your year-end outside of that could you get a discount
  • They often say "it's fx for an audit" - ask them to descope what they're going t o do, ask what grade of person is doing each stage of the audit and the cost per line
  • Threaten to change auditors every 3-5 years and be prepared to do it. It's a pain t o change but you can get great rate reductions

Lawyers

  • For Legals always fix the price for a job, don't ever go hourly
  • Use out of town firms. They can be 1 /3 of the cost
Recommendations
  • Xero -affordable, links with DD software and HSBC, great for reporting
  • Chaser -Links into Xero and automatically chases debtors
  • Stripe - enables businesses to accept and manage on line payments -cheaper than PayPal
  • World pay -no fees, good for foreign exchange transfers
  • Klana -Online payment system
  • Receiptbank -logs expenses
  • 10 000ft - resource planning software
  • Dynistics - Business data dashboard
  • Satago - cash flow tool
  • Rydoo - expense management system

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