5 Ways Your Small Business Can Save Money Right Now
Most of us are in business to be successful and to make money. Profits are key to enable further investment and to pay the wages of the people driving the company forward. Whether you’re concerned about the costs in your business or simply want to improve profitability, here are five easy ways to cut expenses without impacting the quality of service you provide.
1) Never pay the renewal rate for anything.
We’ve all done it. We get the renewal letter for our car insurance and simply let it rollover because the price seems reasonable. But we know deep down that with a little effort, we can find a cheaper alternative elsewhere.
SMEs don’t have the buying leverage of larger companies, so it’s down to you to find the best deal. Therefore, you’ll need to visit different comparison sites, or use a broker if you simply haven’t got the time.
All of the following costs are commodity products that you should be checking for new deals at least every 12 months. The percentage in brackets shows the estimated savings available if you’ve let your last contract renew and haven’t compared prices since then:
- a) Electricity and gas (up to 60% savings)
- b) Business insurance (15% savings)
- c) Vehicle insurance (25% savings)
- d) Water rates (6% savings)
Brokers are experts in their relevant marketplace, and often have exclusive prices not available from online comparison sites or the supplier. They’ll also undertake all the administration work thus saving your time so you can concentrate on running your business. Here are other ways to find the best energy prices for your business.
Remember that everything’s negotiable. Even costs you think are fixed, could be reduced or the terms changed to reduce the monthly charge and improve cash flow.
2) Save 15% with energy efficiency measures.
The majority of businesses are now focused on implementing measures that reduces the burden on the planet’s resources—and the savings soon mount up with minimal impact on cost. Here are a few ideas:
- Everyone knows the first thing to do is to replace old light bulbs with the modern LED equivalents. The cost has dramatically fallen in recent years, and these bulbs save 80% over their traditional counterparts.
- Keeping heating and cooling systems at optimal levels is an easy way to save 10% per year in fuel costs.
- Ensuring windows are closed, computers are turned off when not in use and all lighting gets switched off over night is another easy fix to save money.
When it’s all added up, these simple changes could save between 10—20% per year on fuel bills according to the Carbon Trust. In fact, they go further to say that these savings are the equivalent of increasing revenues by 5%!
3) Question every expense line.
It’s easy to get sucked into buying the latest gadget, upgrading equipment, refurbishing office space, buying a new line of product or upgrading your company vehicle fleet. It’s far cheaper to maintain items that have been proven to work, but might just be last year’s model.
Saving money here is about being practical and almost Scrooge-like in your outlook. Resisting the temptation to add costs to your P&L each month can bring outstanding rewards at the end of the financial year.
Look at your largest costs first and see if savings could be made or a simple renegotiation in payment terms is available. A change in financing could free up cash for other projects. For example, leasing vehicles rather than purchasing them outright could be a solution in the right circumstances.
4) Get a good tax accountant.
No one likes paying tax, so you should find a good accountant that’ll help you legally pay the right amount. There may be allowances you could claim, certain tax rebates available on development costs, allowable expenses you’ve missed or some revenue recognition changes that reduce your yearly corporation or even personal tax payments.
5) Improve productivity.
For many of us, product and employee costs are the largest expense line. Improving the productivity of employees by squeezing more from less should produce profitability increases. You can manage this in several ways:
- Invest in tools and software that assist the employee with their work so that less people are required to increase output.
- Put off hiring new people when someone leaves or retires and redistribute their workload among existing employees. This saves salary costs as well as potential recruitment fees.
- Improve working conditions to match the culture of the company. Small changes in the environment often have a dramatic effect on staff morale.
If you have a very fast-growing business, this approach might not be feasible, but it’s wise to always question the need to bring additional FTEs (Full-Time Equivalents) on board. That’s a sign of good management and cost control.
Jason Smith runs the operations at Business Electricity Prices (BEP), helping small and large businesses keep their energy costs low.