What steps should SMBs be taking to control business costs?
For small and medium-sized businesses (SMBs) in particular, there may be a relatively fine line between making a profit and a loss. Acquiring - or losing - a few customers can have a significant impact on a small company's finances, meaning it is vitally important to exercise control over costs at all times.
Essentially, SMBs are looking to maximise revenues from as low a cost base as possible. As enterprises grow, there may be more money to invest in infrastructure, more employees and new product lines - but initially it is all about generating a profit.
So where there is the potential for efficiencies, business leaders need to grab the opportunity with both hands. But what steps can they take to reduce expenditure, and keep their bottom line as healthy as possible?
Review suppliers regularly
Whenever an SMB has an opportunity to renegotiate a contract or seek a new supplier, the firm should grab it with both hands. Take gas and electricity for example; rather than simply renewing by default, a conscious effort should be made to find the best deal on the market.
With energy bills rising all the time, shopping around for cheaper fuel is becoming all the more important - switching to a new provider could save a significant amount of money. The same goes for other subscription services such as broadband and the landline, as well as the business premises themselves.
Be prepared to outsource
SMBs are rarely able to reap the benefits of economies of scale, unlike larger competitors. Sometimes it seems that everything the company does costs an arm and a leg - and the obvious solution is to do less.
Outsourcing certain business functions to a third-party specialist can alleviate the need for capital investment, and ensure SMBs have access to expertise that is not necessarily available in-house.
Take IT for example - migrating to the cloud enables firms to pay for advanced solutions on-demand, without any need to purchase up-front. And the IT tools they are able to access online are, in many cases, far superior to those historically available on an SMB budget.
Focus on core areas
Entrepreneurs, by nature, are always looking for the next big opportunity - a new market opening up, a technological innovation which promises to change the face of business. But when they are running an SMB, it is important to be selective with projects - particularly if the business owner has a heavy day-to-day involvement in operations. Diverting attention elsewhere can quickly have negative implications.
The same goes for new product lines and services within a company. Innovation is clearly important to growth, but SMBs need to be wary of taking their eye off the ball and focusing too many resources on new projects. If they fail to focus sufficiently on their most profitable offering, it's possible that they could end up with multiple lines which don’t make any money. Poorly-timed, ill-conceived diversification can easily cause costs to mount without contributing to overall revenue.
Pay tax promptly
A fairly simple point perhaps - but meeting HM Revenue & Customs deadlines for tax payment is important as SMBs look to control costs. The bottom line is that if you submit your forms late, you're going to incur a fine. And with finances already stretched for many companies, this is the last thing anyone needs.
Consult an accountant
SMBs are able to manage most financial tasks in-house using programs such as Excel. But if they do not have someone with money expertise in-house, there is a danger that potential savings could be missed.
As such, it might pay dividends to consult an accountant on financial planning matters. SMBs looking to reduce their costs in the long term should be looking to carry out effective tax planning, minimising spend or at least the amount they need to pay in one lump sum. They should also be aware of all potential tax breaks and relief payments which can ease the financial burden a little.
Posted by Steve Williams