When was the last time you reviewed your business spending?
In the current economic climate, covering your operational costs and overheads can be a major challenge. Higher running costs are affecting all businesses, from large down to small.
In Australia, a recent survey from Prospa shows that nearly half (46%) of SMEs have raised prices over the past three months to offset rising costs. And stats from the UK’s Federation of Small Businesses show that 85% of small businesses have reported that costs were rising.
So, costs are a major issue worldwide! But what are you doing to manage these costs?
We’ve highlighted five ways to review and mitigate your operational costs.
1. Review your current spending
Carry out an audit of your current spending across the whole business. Categorise all your day-to-day outgoings and review exactly where your cash is going. Focus on areas like recurring software subscriptions, energy and utility expenses, and insurance costs to check for areas where you could negotiate lower monthly costs, or even drop the service completely.
2. Renegotiate your terms with suppliers
If you have a deep and trusted relationship with your supplier networks, you may be able to negotiate better terms. Talk to your vendors about discounts, longer payment terms or even offering supplier credit where it’s appropriate. Anything you can do to lower your monthly outgoings will help to stabilise your cashflow and boost profit margins.
3. Make the business more energy-efficient
Energy costs are a major drain on your cashflow. One way to reduce your utility overheads is to make your energy usage more efficient. Think about fitting improved insulation for the cold winter months, installing energy-efficient LED lighting and reviewing any hidden operational energy wastage during non-trading hours.
4. Use automation to improve your efficiency
Labour-intensive tasks require a bigger workforce, leading to higher payroll costs. A review of your manual workflows can often reveal areas where low-level tasks can be automated, freeing up time and reducing your need for labour. AI-driven software can automate routine administrative, invoicing and scheduling tasks, making the whole business more effective and cutting down on labour costs as a result.
5. Make your inventory management work harder
Overstocking your inventory can lead to working capital being tied up on warehouse shelves, gathering dust. Switch to a just-in-time inventory strategy to minimise costly storage fees and eliminate slow-moving stock. This makes your spending on inventory items more focused and less of a drain on your current cashflow position.
If your operational costs and overheads are mounting and putting pressure on your cash position, come and talk to our team.
We’ll work with you to review your current spending and find the opportunities to cut costs and reduce your cash and margin pressures.
