Simple steps you can take to cut business costs and maximise profits

Cost-saving will be key for many businesses struggling to get back up to speed after the pandemic.

Many small and medium-sized enterprises (SMEs) were hit hard and now face higher inflation, skills shortages and rising wages.

The Bank of England says the inflation figure could even hit four per cent by December. So, cutting costs can help get thousands of UK firms through these challenging times.

There are many options for businesses to cut costs, including:

Review your suppliers

Make sure you are getting the best value for money. Get a minimum of three quotes for your supplies, particularly in areas like communication, where there are often better deals to be had.

You should also give existing suppliers the chance to review their prices.

Your business is important to them, but don’t be afraid to walk away for a better deal.

Innovate

Sometimes to you need to spend a little to save a lot. If you are operating on older systems or software, it may make sense to upgrade now so that you are more efficient as a business.

An example of this is digital invoicing and bill payments. These techniques could help to reduce administration costs and postage, while also helping you to avoid piles of paperwork – saving you time and money.

Many of the latest cloud accounting platforms allow you to digitise these processes, while also offering you many other benefits, including the option to go paperless.

Assess your workspaces

The requirements for your business premises may have changed during the last year, especially if many of your staff have moved to hybrid or remote working.

Assess whether your current commercial property still meets your needs or whether there could be cheaper alternatives elsewhere.

If you have moved entirely to remote working, you could do away with business premises altogether.

Go second-hand

Quite often refurbished equipment can perform just as well as new and allow for considerable savings. This does not just apply to office furniture.

Properly refurbished computer equipment can also result in big savings as can equipment like copiers.

Be aware, some capital allowance tax schemes won’t allow claims made on second-hand machinery or equipment.

Use an accountant

It may seem obvious, but using our expertise could help you cut your costs considerably.

We can look through your books and spot cost-saving opportunities that you may have missed and make a detailed analysis of the day-to-day running costs of your business.

We can also help you find reliefs and allowances that help you reduce the costs you already have by offsetting them against tax.

If you are struggling with a cost crisis, act now. Cash flow issues are one of the most common reasons for business failure.

Is your business struggling with debt? Regain control today

Many small and medium-sized enterprises (SMEs) were hit hardest at the beginning of the pandemic.

They had access to support, like the Bounce Back Loan, which was easier to access and had lower interest rates, but those only helped during the short term.

Now a growing number of SMEs are struggling with debt. The latest Bank of England Credit Conditions Survey shows that the majority of banks (44 per cent) reported an increase in loan defaults by small companies in the third quarter of this year.

This is twice the levels seen during the height of the pandemic.

There are options for businesses that have got into a debt spiral, including:

Deal with priority debts first, including:

• Business rates
• Utility bills
• Mortgage and rent payments
• Outstanding tax payments
• Payments to strategic suppliers
• Bank loans
• Any form of borrowing with a personal guarantee

Consolidate or refinance loans

It may make sense to consolidate several loans into a single payment or refinance an existing loan.

With inflation increasing, businesses should take advantage of the historically low interest rates that currently exist.

You should seek independent advice before doing anything around consolidating or refinancing loans.

Tackle late-paying customers

Late payments are the bane of most small businesses. Despite Government efforts to tackle this issue, it continues to be a problem for many.

Challenging customers about their debts can be difficult. However, businesses should strengthen their credit control processes so they are paid on time.

Focus on cash flow

Cash flow is the lifeblood of your business and there are some simple measures you can put in place to help keep it healthy.

For example:

• Improve your process for chasing up debtors
• Agree on payment terms in advance
• Lease rather than buy equipment or vehicles
• Review and reduce business costs.

Boost your revenue

As well as cutting costs, you can also tackle a cash flow crisis and pay off your debts by improving your turnover.

This can be achieved by:

• Increasing leads to attract more customers
• Raising your prices
• Finding more ways to cross-sell or upsell your services or products
• Engage your staff and seek their input. They may well have ideas that are well worth putting into action.

Managing your income and cash flow can be challenging so seeking professional advice and insights could pay dividends.

Avoid debt in favour of other forms of finance

You could explore the following:

• Liquidating assets – Creditors may gain more than if a business is wound-up.
• Look for new investors – Can you generate income through the sale of shares? Have you considered the tax-efficient Enterprise Investment Scheme?
• Peer-to-peer lending or equity crowdfunding – These alternative forms of finance are great for businesses that can’t obtain traditional finance.
• Invoice financing – If you have a large number of late payments, you could finance the invoices and get paid sooner.
• Borrowing from friends or family – Beware, this can put a strain on relationships.

Make sure you’re getting fair treatment from lenders

You’re entitled to be treated fairly by your bank or building society.

The Lending Standards Board operates as an independent body (albeit one funded by its registered financial firms), with an independent board made up of non-executive directors.

Link: Small business loan defaults rise substantially