You may have heard the phrase ‘you have to spend money to make money’. While that is true, many small businesses spend more money than they need to.
It’s always a good time to check in with your finances to cut down unnecessary spending. But where should you start, and how will you know where to cut? Don’t worry: we’ve got you covered.
This guide covers tips on where to look to reduce business expenses, including:
- Supply and production expenses.
- Tools and software.
- Travel expenses.
- Electricity costs.
- Outsourcing vs insourcing.
- Financial accounting.
How to reduce business expenses
Cutting your business costs might seem like a big undertaking. But if you break it up to examine different areas of spending, it can be much easier to handle. We’ll cover some of the key areas to look for cost-cutting opportunities.
1) Supply and production expenses
First, review what you spend to provide your service or produce your product. Though your production is an essential part of your business expenses, assessing it can still help you see where you can save.
You may create your own products or use a supplier to stock them. But if you purchase supplies without taking advantage of trade discounts or wholesale prices, you could be spending unnecessary money.
For example, with a membership to Wholesale Scout, you could access up to a 95% discount on wholesale goods.
You might negotiate with your supplier to lower inventory costs or find a cheaper option altogether.
Alternatively, try streamlining your production processes to save money or ordering less inventory if you often overstock. These adjustments can help you lower the regular expenses of reordering.
2) Tools and software
You might use specific tools or business software that charge you regularly. Tools could include anything from a payment management service to a premium design platform.
So, look through these paid services that streamline and support your business. If some don’t seem to be helping your business, you could cancel them to save money.
Alternatively, you could research more affordable options that offer the same tools.
For example, say you use LinkedIn Premium to network for your business. If you notice you rarely use the premium features, consider going back to the free version.
Also, if you need to replace business equipment, consider buying it secondhand to reduce the cost.
3) Travel expenses
If you travel a lot for your business, you may spend money on fuel costs, flights, or train tickets. This is a great place to reassess and determine ways to save.
If you spend a lot of time on the road, try to map out the most efficient routes and consider traffic patterns. Cutting down your travel time will help you make the most out of your day and spend less money doing it.
Alternatively, you could look into getting an electric vehicle if you don’t have one already. This choice is both sustainable and saves you on fuel expenses.
On the other hand, say you travel by train or fly around to complete services or meet with clients. In this case, download an app like Trainline or Skyscanner to find the best deals on travel and reduce your costs.
4) Electricity and Wi-Fi costs
If you have an office or shop, you likely need to pay for electricity and Wi-Fi to run your business and serve customers.
With electricity costs rising, consider looking into cheaper plans. Plus, cut costs by setting a daily reminder to shut off lights and unplug devices. You may also want to find energy saving light bulbs, such as these.
As far as Wi-Fi goes, compare different pricing plans and consider shifting to a cheaper option if it’s sufficient for your work (check out deals from Compare the Market).
5) Outsourcing vs in-sourcing
You may pay freelancers or service companies to help you with certain tasks for your business.
If you outsource some of your work, consider whether you can or should transition to doing it yourself to reduce business expenses.
For example, instead of paying a graphic designer for your marketing materials, you might try using a free design tool like Canva.
On the other hand, some outsourcing might save you money in the long run as it will streamline the process and make it more profitable.
If you’re curious, consider checking out our article: should I outsource marketing for my small business?
6) Financial accounting
Regularly checking in with your financial accounting is another key way to reduce business expenses. For spring cleaning, look over everything you spent this month, quarter, or year.
Say you accidentally bought two business tools or were charged twice by a service. It’ll be much easier to catch this with a detailed check-in.
Plus, scanning your business expenses helps you spot unnecessary or wasteful spending that doesn’t support or improve your business.
For example, you may notice that you spent a lot of money on fuel. This could be because you failed to plan out your routes and consider traffic patterns. By doing so in the future, you can reduce these costs.
Spring cleaning for better finances
Putting these tricks to work can help you reduce your business expenses. As a result, you can clean up your finances for stronger business performance.
Plus, regularly checking in with your business spending can help you stick to your budget and make wiser decisions.
From there, you may want to consider spring cleaning projects on other aspects of your business.
For instance, you might reconsider the best way to market your business to reach your audience. If so, check out our article on how to improve your content for better marketing.
Simplify your expense tracking with Countingup
Analysing your business spending is far easier when you have organised and transparent finances. The right accounting software, like Countingup, can help you make that happen.
Countingup is the business current account and accounting software in one app. It automates time-consuming bookkeeping admin for thousands of self-employed people across the UK.
The app also has an automatic expense categorisation tool that will help you quickly find and assess your spending.
Save yourself hours of accounting admin so you can focus on growing your business.
Start your three-month free trial today.