Running a business invariably involves incurring various expenses or 'spend'.
Regardless of whether your Gisborne or Macedon Ranges business is well-established or a burgeoning start-up, there will be costs, overheads, and supplier bills that accumulate over time.
These expenses can gradually erode your cash position, posing challenges to growth and profitability.
In the picturesque setting of the Macedon Ranges, we are urging businesses to proactively manage and reduce expenses given it is looking to be a somewhat challenging landscape with high interest rates, lower borrowing power and cashflow stresses in the year ahead.
Here are The Neill Family Groups top 5 strategies for reducing spend and optimizing business expenses:
1. Local Overheads Optimization: Evaluate and reduce unavoidable costs associated with running your business in the region. This may include reviewing rental payments for premises, utility bills, and staff salaries. Speak to your Neill Family Group accountant and they will assist with talking through options like relocating to more cost-effective premises or restructuring your workforce to minimize payroll expenditure.
2. Employee Expense Controls: Implement spending limits on staff expenses to prevent unchecked costs. If your employees can claim expenses, or go to Bunnings to buy raw materials or Officebarn and buy equipment with the company’s account, these costs can soon start to rack up. It’s a good idea to put a spending limit in place, so each staff member can only spend up to an agreed amount. Having a clear expenses policy helps, as will training up your staff in good spend management techniques. Specialist expense card software allows you to quickly set spend limits, track expenses and pull your expenses data through to your cloud accounting platform for processing. Xero and MYOB have these features already built in.
3. Local Supplier Negotiations: Explore opportunities to reduce supplier costs by seeking competitive quotes and reviewing current market prices. Engage in negotiations with existing suppliers or consider switching to more flexible and eager local suppliers. This approach can significantly contribute to lowering overall expenditure.
4. Lean Operations Approach: Embrace a 'lean approach' to streamline your operations. The bigger your operational costs are, the less margin you’re making on your end products and services. One way to resolve this is to aim for a ‘lean approach’, paring back your staff, resources and operational complexity to the bare minimum. By making the business as lean as possible, whilst still delivering the same output, you keep your revenue stable, but reduce the spend level that’s eating into your cost of goods sold (COGS). The smaller your COGS, the more profit you make on each sale – and that means better cashflow, more working capital and bigger profits.
5. Local Tax Reliefs Exploration: While tax costs are unavoidable, explore potential tax reliefs, grants, or business benefits available in the region. Investigate specific incentives such as research and development (R&D) tax credits that can help alleviate corporate tax expenses.
If you're operating a Gisborne business in Gisborne and wish to gain control over your expenses, The Neill Family Group team is here to help. We love nothing more than printing your Profit & Loss, marking any line items that could be reduced, and collaborate with you to create a proactive spend management program.
Let's work together to reduce unnecessary spending this year!