‘Where are we spending money we don’t need to?’
Many smaller businesses struggle to answer this question. Without the details about where your money goes it’s logical that you can’t reliably identify where to make significant savings.
When your business was small, cost lines were easier to track. A bit of inefficiency here and there probably wasn’t that significant in cash terms. But with size comes complexity. More places for inefficiencies to hide.
We’re also talking about percentages of much bigger numbers. So there’s the potential to return significant sums to your bottom line when you bring expenses under better control.
Trust Your Data
When we start working with a business we often find that costs go into large generic ‘buckets.’ Or that costs aren’t coded and recorded accurately. A business may know how much it’s spending, but it’s a bit vague about where and how.
You need trustworthy data before you benchmark your costs against those of similar businesses. And you need detail before you can start taking a scalpel to your business costs.
We’ve listed below a few areas where businesses typically spend more than they need to. But the first step is always to bring accounting data under control. Wielding a cost-cutting knife in the dark is risky.
Typical business inefficiencies include:
- Supplies and equipment
- Expenses
- Energy
- Insurance
- Holding too much inventory
- Paying more tax than you need (another big topic on its own).
- Staff
To analyse staff costs you have to understand what people do and how much time they spend on certain tasks. This can reveal potential areas of process waste, such as doing things manually that should be automated or digitised. Waste can be something as simple as still issuing paper payslips.
Perhaps there are admin tasks that could be outsourced more cheaply? With an accurate picture of what each activity really costs you today you can make a meaningful comparison.
Who knows what the business environment holds in store in 2024? Taking immediate steps to bring financial data and costs under control is a wise investment. You can read more about this in our resource centre.
Make your numbers make sense. Contact us at Rosy Jeffery Chartered Accountants on 01297 639 457.
