Most businesspeople will know that the easiest way to increase profits in business is to cut your outgoings, which involves looking very closely at these outgoings in your record of accounts and working out what can be cut and where. But what are the sorts of things that businesses should be looking to cut down on, and what are some common areas that often go unnoticed?
When buying equipment for your firm, don’t always turn to your usual channels to buy brand new. For certain types of equipment in certain industries, secondhand equipment can be just as suitable, but you should always makes sure, particularly with expensive goods and heavy machinery, that a full service history and proof of age/use is included. On cars, one would turn to the mileage and log book for this info, but often this type of info is overlooked on other equipment, despite the fact that it might be just as, if not more, expensive than a vehicle.
There is also the option to rent equipment if you know for certain that it’s for a one-off use. This will be particularly applicable to building and construction firms that might not have a significant cash flow but have jobs that require specialist equipment.
2. Office Space
One of the biggest outgoings for modern businesses is office and working space. This is a necessary cost for some of them, particularly those with clients who need to meet regularly in a suitably professional environment and also provide a constant base for contact and for employees to work from. For smaller companies – particularly start-ups in certain sectors – it’s a redundant expense. Temporary office space is available for a very small cost, whilst virtual offices can now provide things like a receptionist and PO Box number, to give a respectable front to customers and clients whilst cutting down on unneeded outgoings.
Depending on your locality, this will also mean you avoid paying the higher local government tax on the property you are working from for things like refuse collection and emergency services, but remember that if you are running a business from your home, then it should be registered as such and the appropriate taxes paid.
Staff costs will be one of the next biggest costs for a firm, and while for cash-strapped companies this can mean that the dreaded term “streamlining” rears its ugly head far too often, firms that plan their growth and work demand properly can offer temporary, student and graduate staff great opportunities. If demand for your firm’s goods or services is seasonal, for instance, it’s no use offering full-time work during the summer then having a round of redundancies over Christmas. For graduates and interns, this sort of work is a good chance to gain experience (paid or otherwise), while also allowing you to train the next generation of skilled workers who might shortly become a very useful asset to your company.
One last area which many companies will look to trim their outgoings is in their stock. For firms that sell palpable physical goods, a certain level of stock control is required. This will involve juggling many variable factors, which if done incorrectly can mean that cash is tied up in stock that isn’t needed or not enough stock is ordered, resulting in lost custom. One way to get around this common problem is to invest in software that will help you with your WSSI (weekly stock and sales intake) activities. Programs designed to help with these activities should ensure that demand is predicted effectively, keeping as much of your assets “liquid” as possible.
Daniel N is a UK blogger who writes on a wide range of topics including business and marketing. He is currently working on behalf of leading tool hire company, Hire Station.