Business cost saving tips
Cost savings for businesses
If there is one thing that the recent pandemic has done, (other than cause a huge headache for many business owners) it’s firmly put the focus on cost savings for businesses. This is good right? Well yes and it’s something I spoke to business owners emphatically about when I was working as a business advisor. Overheads for a business particularly a start-up or SME can be a huge burden, so it makes sense to keep them low!
In the wake of a pandemic it seemed as though businesses acknowledged that there could be changes in processes, procedures and strategies moving forward and I think it’s fair to say that business as we know it has changed and most likely will continue to adapt moving forward in order to survive the challenges presented.
It’s a well known fact that many companies that tie businesses into contracts and standing orders rely on the fact that when it comes to renewal the customer either forgets to shop around, hasn’t got time to look at alternatives or simply ‘can’t be bothered to shop around’. It happens with domestic insurance policies, mobile phone contracts, T.V packages and gas and electric contracts all the time. Most people stick with their current provider out of a misplaced loyalty while new customers enjoy the best rates. Sadly, the only time most people shop around is when they are dissatisfied with the service or have a complaint.
This shouldn’t be the case. As businesses ourselves we have to continue to provide the best service to our customers. It doesn’t necessarily have to be the cheapest but it’s about delivering true value and high standards. Without those we lose our customers. Covid-19 has prompted people to shop around simply because tightening our belts whether in the domestic markets or commercial markets makes sense with such uncertainty.
So here are 5 business cost saving tips that still enable you to continue to provide the best services and products to your customers…(in no particular order)
I have been an advocate of remote working for many years. Yes, it requires a huge amount of trust in the workforce (but if you don’t trust your team it doesn’t say a lot in the first place). For companies, with teams working at home it was interesting to see that so many recorded more productivity and even more interesting how many were surprised by that! For a start, there is no stressful commute through painful traffic, less pressure on the working parents dropping their kids into schools, more trust and empowerment given to the team to deliver results and no long gossip sessions at the photocopier or in the kitchen making 15 cups of coffee, 3 reboils of the kettle and a good chin wag with the lady from accounts.
But from a commercial perspective it begs the question: do you need the huge workspace?
For start-ups and sole traders it’s always made sense to keep overheads down and while it’s good to have an office space from the angle that your business might look more professional there are other options. These were a couple I would suggest to start-ups because it is important in the early days to have a social element to working otherwise it can feel very isolated at home.
Shared workspaces – Many councils have start-up hubs. In my area they are called enterprise centres. What’s great about these is that in most cases you might get the FSB, Chamber of Commerce, Growth Hub or other business support groups also located within the premises. They often have their own networking meetings and it gives you a sense of being part of the business community at a fraction of the cost of some of the better known shared workspace companies.
Virtual offices – Virtual offices come in a couple of guises. It could simply be a postal address to give the impression of having business premises but there are often add on packages for those that want a small office or access to meeting rooms. It’s a great way of keeping overheads down but giving the right impression.
Gas, Electric & Water Bills
I mentioned this example earlier from the domestic viewpoint but it is a huge expense for businesses and shopping around is more important than ever. Many utility brokers have seen a rise in businesses shopping around on gas and electric rates during the pandemic and this is music to my ears. It’s a buyers market. At this point in time utility costs are at an all time low. So there is no better time to shop around than now! The best part about this one is even if you are still under contract you can lock in a reduced price up to 12 months ahead of renewal!
With utilities being one of the biggest overheads for businesses it is an absolute must to investigate options to reduce business utilities costs and it is worth noting that you might even be able to lower your costs with your existing providers without needing to change suppliers.
Regarding water bills a change in legislation meant that companies can also now choose which water company they use for their water supply costs. This has presented large commercial benefits for many businesses with high water usage who previously had to accept the often high costs presented. Previously they have also by default had no choice but to accept water price increases often without the option to negotiate or move supplier.
Leasing rather than buying. This isn’t just on company vehicles but could be on equipment in the office like photocopiers and phone systems. Just like vehicles depreciating in value so does office equipment so if you buy from new you lose value straight away. In the same way looking to buy second hand office furniture and equipment could be a great cost saving tip for start-ups or SME’s. Looking at second hand desks, chairs or other items is a bargain hunters dream- it gives you access to a higher standard of equipment which might otherwise be too expensive to buy outright and for the leasing option you don’t have to pay the full cost of the asset up front, so you don’t use cash or have to borrow money for the purchase.
For technology, leasing is a great option as it is ever evolving, this means that every couple of years you get to upgrade the machinery and keep up to date with the latest features and upgrades.
With a lease arrangement if something goes wrong, you can go straight back to the company you have the contract with for maintenance rather than finding additional funds to fix any problems should they arise.
One of the biggest advantages is the tax benefits- A business who chooses to lease equipment can claim 100% tax relief on rentals. This means you are not only saving money from the outset but you are saving it in the form of a tax relief.
As above tax relief is a great cost saving tip for businesses to consider. R&D tax credits are a great example of businesses using tax deduction schemes for cost saving. Obviously, in most cases accountants are the best fountain of information for capital allowances and businesses expenses which are tax deductible and then there are tax specialists who focus on the more indepth areas like R&D (research and development). There are many sectors of business this applies to and while many businesses take advantage of this HMRC benefit, there are many more who simply aren’t claiming! With the average UK claim being approximately £50k, it’s nothing to be sniffed at! With R&D even if you aren’t sure if it applies to you it costs nothing to find out. A brief 5 min conversation with an expert might unlock valuable financial rewards you didn’t even know you could claim. Again, in most cases the R&D tax relief can be claimed back up to 2 tax years and can be taken as a cash injection into the business or tax relief against corporation tax. Many accountants can make the claims on their clients behalf but from our experience it’s the accountants who are LLP who are better equipped to do so, in most cases tax specialists can uplift approx 200% on claims made previously by companies who do R&D claims themselves or via their accountant. The rule of thumb here is if you are in an industry where you encounter problems which involve improving existing systems, require technical experts to solve the problems presented or change in processes to meet the expectation of the work, you could be eligible to claim. With many tax specialists offering a ‘no win, no fee’ business model there is nothing to lose by asking the question and if successful can be a huge asset.
Membership vs. free networking
I have worked for a membership organisation and I have joined a couple since starting my own business. I have also participated in free networking, seminars and courses. There is no right or wrong answer here, its very personal to the business person, the sector or industry you are in and what you are looking to achieve.
What I do think is important is to question every decision you make when it comes to paying out money in the early days particularly but even during the later stages of the business.
Regarding memberships-weigh up the overall cost, is there a staggered payment option? How many events are there across the year, how many realistically can you attend or are relevant or of interest to yourself. Are all the subsequent events included in the membership or is there add on costs? We all have the best of intentions when we become a member of a group or a business ( I should know I paid plenty of monthly gym fees and never attended) but exactly like the gym. You get out of it, what you put in. So if it makes more sense to pay for ad hoc events rather than pay the full membership fee and not attend many events make the decision based on your own circumstances and be honest with yourself.
Some membership groups are better suited to the pre-starts, start-up and SMEs than others so look at the demographics and who your target audience is.
Another movement in the covid-19 pandemic was the increase in virtual events and free networking via zoom meetings (love them or hate them). It is a great way of raising your brand awareness and growing your network all in the comfort of your own home. It is a great way of saving costs and for those who are self employed, sole trader or start-up a really good introduction into the world of networking which isn’t too intimidating and those connections made will be the face to face meeting in the future.
Businesses cost control is more critical than ever
Having observed the trends happening in the current climate I thought it would be good to focus on sharing some cost saving tips for business. This is only a small example of some of the changes businesses can make to save money, contact us today to find out how we can help you and your business.
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