At Accounting Clarkes, we find it a privilege to work closely with business owners. We’re there to help them celebrate the good days and weather the difficult ones. We recognise that one of the biggest challenges that business owners face today is managing increasing costs. With the soaring impact of inflation increasing the cost of raw materials and overheads such as rent rates insurance and IT/ telecoms, there is a significant strain on business finances and the constant consideration of whether to pass these costs onto customers.
In this article, we share practical advice to help you review your budget and tackle those increased costs.
Step one – Identify where you are wasting money.
When you’re conscious of increased costs eroding your profit, it can be tempting to focus on big figures. In reality, it’s the smaller costs that go unnoticed which do more damage. If you pay attention to the smaller values and find several to reduce or cancel altogether, those small savings will soon add up. With these simple tips, you might spot some great savings and move into 2025 knowing you aren’t wasting a penny!
Review the costs coming out of your account regularly – go through your bank statements line by line. For each cost, ask yourself:
- Do you know exactly what that cost is for?
- Is it necessary?
- Is there a contract renewal date to consider? More about to follow.
- If a subscription has continued longer than you thought, could you apply for a refund?
Once you’ve identified the subscriptions you no longer need, it’s time to see if you can reduce the ones you do:
- Review the benefits/features of what you are getting for your money. Is there a lower-priced package that covers your needs?
- Are you out of contract? Speak to your supplier and try to negotiate a better (cheaper) deal.
- If the supplier won’t budge, it’s time to shop around to see what other deals are available. It’s a sad reality these days, but loyalty isn’t often rewarded financially.
Step two – plan ahead for the bigger costs.
Budgeting isn’t just about reducing costs. When running a business, you will have operating costs that you simply cannot avoid or reduce – they are what they are! We’re referring to things such as your utility bills, insurance and of course tax. It is also wise to plan for a financial buffer to cover times when you aren’t working like taking a holiday or when you are sick.
- Calculate what these big bills add up to and what you need to put aside each month to contribute towards them.
- It’s easy to build up a buffer by putting small amounts aside each month. Opening a second bank account means the money is kept separate from your daily business finances.
- Diarise when bigger costs are due – remember that late payment of taxes can incur penalty fees and interest!
How close are you to the numbers in your business?
It’s not uncommon for business owners to estimate their costs – they just simply aren’t close enough to the numbers! We recommend that you review your costs each quarter (ideally monthly). It’s so easy to do! Use the pre-defined reports in your accounting software and get an accurate view at the click of a button.
If you aren’t confident enough with the numbers, or you want to get better at understanding how to accurately forecast and budget in your business, call 01252 612484 to speak to Gillian or Chris. We’d be happy to help you build a profitable business.
