Review your expenses - and save yourself money

Posted 23 Feb

Review your expenses - and save yourself money

Running a business will always mean incurring certain expenses, or 'spend'. 

Whether you're a large family business or a new, small startup, there will be costs, overheads and supplier bills that mount up – and these expenses will gradually chip away at your cash position, making it more difficult to grow and make a profit.

So, what can you do to reduce your spend 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 spend 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.

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 spend management, you can actually make your company a far more financially productive enterprise – and that’s great for your overall business health.

So, what can you do to reduce spend and slim down your company expenses?

Here are some keyways to reduce expenses:

1. 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 even 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.

2. Monitor 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 closely monitor spending and put limits in place, if necessary, where 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. Specialist expenses card software allows you to quickly set spend limits, track expenses, and pull your expenses data through to your cloud accounting platform for processing.

3. 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, look around for new quotes, look at 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 who will be willing to meet you in the middle on price.

4. 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’, reviewing your staff, resources and operational costs to keep expenses 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 spend 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 – and that means better cashflow, more working capital and bigger profits.

5. Explore tax reliefs – 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.

If you'd like to get in control of your expenses, we can review your current costs and help highlight key areas where expenses could be cut. Then we can help my formulating a proactive spend management program to help reduce any unnecessary spending. Get in touch with your WDF team member today on 02 6921 5444. 

WDF Accounting and Advisory | Accountants Wagga | Your partners in business

Providing carefully tailored accounting solutions in business advisory, tax compliance, bookkeeping, Self-Managed Super funds, and more.