Quick, easy steps to optimise overheads

We’re going to look at one of the Key Business Drivers that is within your total control and it’s one that you can change the fastest, your overheads.

Almost every time we analyse the overheads of a business, we find lots of opportunities for quick win cost savings or strategies to improve return on investment and typically we find ‘money leaks’ which result in lost profit.

Reducing expenses

~ Check for money leaks – If you’re like most businesses, you’ll find a range of recurring payments for things you don’t use, don’t need or simply just didn’t know you had. They’ll be for small sums of money, typically paid for by direct debit or credit card, but they quickly add up to a significant sum of money so if you don’t use or need them, cancel the payments as quickly as you can.

~ Review/renegotiate with your suppliers – Consider splitting your purchases across more suppliers. Without mentioning names, make sure each is aware of the other. There is a high probability that both suppliers are going to work just that little bit harder to minimise price increases for you and deliver an excellent service.

~ Utilities – Work with a good utilities broker to help secure the best possible terms to mitigate the inevitable price rises. 80% of businesses don’t check prices when offered a renewal by their current supplier but even though utilities are going up at a rapid rate at the moment, there is still scope to make savings.

Savings

~ Business taxes – If you invest time and money innovating and developing new products, services, systems or processes then there is a chance that you are investing in Research and Development activity that would qualify for R&D Tax Credits. This gives you the potential to reduce your tax liability and it can be a substantial saving.

~ Systems – Having out of date and hard to use systems could be negatively affecting staff morale and decreasing productivity. If you’re not getting the most out of systems such as Microsoft 365, Teams and SharePoint, the likelihood is you could make material cost savings on other apps, get more out of your existing team, boost morale and overall productivity. You could potentially postpone that next hire for a few more months due to increased efficiency and hence become more profitable.

Before you start

We’ve given you some practical advice above to help you optimise your overheads but we recommend the first thing to do is look at your bookkeeping. Make sure your bookkeeping is accurate because if you don’t allocate fixed costs to overheads and variable costs to cost of sales, there is no way you can understand or project your future sales and profit. Well you can give it a go but it’ll be a total stab in the dark!

With accurate bookkeeping we can look for movements and trends in different time periods to understand seasonality and ideally confirm that overheads are continually reducing as a percentage of revenue.

We can quickly drill down to highlight variances line by line across the different time periods. Ideally we would be reporting variances against a budget but even without that in place, we can understand a great deal by comparing line by line this year Vs the same period last year and highlight any adverse variances for further investigation.