Whether it’s at home or at work, the reality is everything costs more. For business owners, higher costs mean lower profits unless you keep careful watch over your expenses. But how do you do that?
Simply follow our 5 tips or get in touch with us and we’ll help you.
Tip 1: Getting started
No-one can predict how much your costs will increase. But we can look at what you have paid in the past. So begin by collecting past invoices for things like materials, utilities, deliveries, equipment or vehicle leases and rent. This should be easy to find using your bookkeeping software system.
Now calculate last financial year’s expenses as a percentage of turnover. Do the same thing for the first 6 months of this financial year. Has the percentage increased? If so, you now know your profit margins and cashflow have reduced too.
Tip 2: Look for spikes
Investigate any large increases in your expenses between last financial year and this financial year. They need to get your urgent attention.
Could a different provider offer you a better deal? Or was it a once-off spike and things will settle down in the coming months? Don’t ignore spikes in your expenses. They could be important indicators that you need to do things differently.
Tip 3: Look for opportunities to save
Never under-estimate your ability to reduce overheads and expenses. Even a 1% saving can yield significant results. Don’t forget to ask your staff and management team about any ideas they have. Their firsthand perspective may identify potential operational efficiencies that could save you money.
Tip 4: Check your cash reserves
Now that you understand your expenses, check your cash reserves. Having good cashflow can take the stress out of running a business. Having business savings can also help you take advantage of early payment discounts from suppliers or bulk purchasing opportunities for essential materials.
Tip 5: Identify areas of your business that are under-performing
If you drill into your costs and sales by product or service area, you may find parts of your business are performing badly. This could be the time to remove them from your portfolio so you can focus resources on more profitable areas of your business.
Here to help
When the cost of everything is constantly rising, you need to keep a careful eye on your budget to ensure your business remains profitable and sustainable. That’s how we can help. Our clients confidently focus on running their business because they know we are in the background, watching their budgets and expenses.
They tell us, it’s a huge relief.
If you are looking for an accountant who will help you navigate the uncertainties of inflation, get in touch with us.