How to Cut Small Business Costs & Expenses
Running a business, whether it’s online or via a brick-and-mortar establishment, isn’t cheap. When it comes to startup costs, recurring business costs and hiring employees, the profits can start to dwindle a little unless you have some cost-saving measures in place.
During this post, I look at a few ways you, as a business owner, can cut your business costs and business expenses, helping you run a leaner and more profitable business model without sacrificing quality.
- First Step: Identify what you don’t need
- Reduce your bills & shop around
- Outsource over in-house
- Reduce office space
- Bulk buy / lookout for deals
- Keep track of everything – project management / accountancy tools
- Avoid loans / payback quickly
- Get a good accountant
Identify what you don’t need
If you’ve been running a small business for a while, you’ve probably come accustomed to the way you work and the software and tools you use.
Much like any house, the attic starts to get filled up quickly as the years go on. This is the same for many businesses.
So the first steps to reducing your business costs is to take stock of:
- What you have
- What you use regularly
- What you don’t use
- What is vital for your business to run
Make a list of everything and organize it into essential elements, use often, throw. Doing this is the best way to get an idea of where you can start to cut costs and start streamlining your overall business.
Once you’ve identified areas of your business, it’s time to start cutting your bills.
Reduce your bills & shop around
Next up in our cost-cutting strategy is to reduce overhead costs.
No matter what type of business you run, there will always be some monthly costs that can quickly stack up, especially if you’re running a brick-and-mortar business.
There’s the potential you’ve got electricity costs, heating costs, software services, providers, employees, insurance, loans, equipment rentals, travel costs, and more. The list can go on and on and on.
If you’ve identified which you don’t need anymore in the first step, you can simply cut these straight out and get some instant savings.
For others, you’re going to have to take some time and shop around for a new electricity supplier, website hosting provider, business insurance plan, or software that does the same job but at a lower price.
Taking the time to shop around might seem like time away from running your business, but if you can, it’ll save you time in the long run, and you’ll be able to save more money month to month.
If you rent equipment on a month-to-month basis, you could minimize your overheads by buying the equipment. Rental costs are often higher, especially if you use items regularly, buying could be a good way to save you money, but you do have to have the space and put aside some cash for maintenance and repairs.
Other ways to reduce your business bills day to day include:
- Turn lights, computers etc… off when not in use – save electricity
- Turn heating down – save electricity / gas bills
- Reduce travel – fuel costs / travel costs
- Buy equipment rather than rent – save operating expenses
Outsource services over in-house services
Another cost-cutting measure that might seem alien to some is the idea of outsourcing services.
For some small business owners, ‘outsourcing’ is a dirty word. As some like to keep everything in-house, but depending on what it is and how regularly you need it hiring a freelancer can be a monthly expense that could be reduced and save your business money.
Here’s an example: you run a website for your business, but you only need to make changes to it once a month or on an ad-hoc basis. There’s no point in having a dedicated web-designer position who does that for you, where you’re paying a higher monthly wage and tax contributions, where you could hire a freelance web developer on UpWork to do that for you when you need it.
In this scenario, you would cut your payroll costs drastically and save a lot of cash that you can use elsewhere.
That’s just one example, but the same goes for many business processes. Outsourcing is a great way to keep your overall footprint low, operating costs down, and are available on-demand when you need them.
Reduce your space or relocate
If you have a physical business property that you lease, then a good way to cut your monthly business bills is by reducing the size of space you rent, if you can, of course.
Perhaps the rental prices in the area where your business is located have skyrocketed. At that point, it might be more affordable in the long run to relocate your business elsewhere.
Whichever you decide, it’s a great way to save some big bucks, which you can use elsewhere, like on your social media marketing strategy, to help attract more business.
Lookout for deals & bulk buy
No one likes paying full price in everyday life, and running a business is just the same.
Look out for the latest deals, whether it’s on physical products, software tools, SEO tools, website hosting, graphics design software, or yearly insurance renewals.
A great way to get good deals is by buying in bulk. If you have the space to store the items you buy, you can get some significant reductions.
The same idea goes for online services. Buying via a yearly plan at a lower cost rather than a monthly one can bring you huge savings.
Top Tip: You can get some fantastic deals on special events throughout the year like Black Friday, January Sales, Easter, and Summer savings too.
Keep track of everything – Inventory & Finances
Running a small business often means that you wear many different hats and play many different roles within a business.
Wearing so many hats can lead to forgetting things, as renewals and bills fall through the cracks leading to unnecessary cost accumulation.
One way to make sure you don’t drop the ball and keep on top of everything is to track everything that you do and everything you use as you use it through the use of small business accounting software.
Don’t wait until the end of the month to backtrack through your inventory and receipts or chase payments. By using a good online accounting software tool, you’ll be able to save yourself time, and money, keep your records up to date and identify areas of wasteful spending.
Some like Sage Accounting also come with time tracking and project tracking tools to make everything that little bit easier.
- Send & track quotes and invoices
- Keep track of receipts and expenses
- Automatic bank reconciliation
- Payroll (add-on)
Reduce the use of business loans & pay credit cards on time
If you have the capital to start your business or the cash flow to keep running your business, you’re probably not going to need to take out any business loans.
If you aren’t in that bracket and do have loans, then if you can, try and pay them back as soon as possible to help reduce the amount of interest you’re paying back.
Depending on your situation, you might even be able to combine multiple loans into one and pay it back at a reduced interest fee.
On the other hand, business credit cards are a great way to rack up cashback and rewards the more you use them. Just remember to pay back the balance each month so as not to incur interest charges, and you’ll often come out on top.
Get a good Business Accountant
Even though you keep track of your business finances, unless you’re financially trained, you will want to find yourself a good accountant or accountancy firm that will take the hassle out of filing your tax returns.
Whether that’s your yearly corporation tax, monthly VAT payments, or sales tax returns, an accountant will save you not only time but will also find you ways in which you can save money. They know the ins and outs of business finances and understand what items are tax-deductible and what is not.
Top tip: most online software, tools, and services you use for business can be deducted from your taxes.
The best ways to cut business costs and expenses
There are thousands of different types of businesses in the world. From freelancers to small business and enterprise companies, no matter how small or big you are, one thing we should all be doing is cutting costs and reducing our overall business running expenses.
Hopefully, you’ve found a few key ways in which you could cut business costs in different areas of your business.
Finding the right software and equipment at the right price and outsourcing services are great ways to make pretty instant changes to your bottom line.
Business credit cards can give you more rewards than they cost, making them a great way to help your business grow. Just remember to pay them back on time to avoid charges.
And don’t forget to keep track of your business finances and make use of the reporting tools inside a good accounting software like FreshBooks to quickly see where you are making money and where you might be losing it.
Note that reducing your overheads isn’t a do-it-and-leave-it kind of thing. You’ll need to regularly audit your processes to keep running a low-cost business with higher profit margins.
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