Sometimes business owners fall in to the habit of focusing on the day to day operation of the business, and forget to take a step back and look at the bigger picture. This may result in focusing on small daily items, when there are much bigger wins to be had. It is important to consider the ‘biggest levers to pull,’ and work in order off reducing return.
A few ideas to consider with your business to reduce costs or generate additional revenue are as follows:
- Deductions – are you capturing all expenses, and is your accountant claiming them? It is best practice to have a separate business account (even as a sole trader) to make it easier for your accountant (and any financier) to decipher). This also makes it less likely that the business account is treated as a spending account, which is commonplace amongst sole traders
- Wages – in Australia, wages make up a very large proportion of most businesses operating expenses. Understand your wage bill, and ensure it is in line with industry averages (there are accountants that can provide industry benchmarks). If in retail, consider utilising a payment terminal system that provides information on customers spending habits (amounts, times and origin) so you can staff accordingly
- Manage your advertising costs – how much do you spend? Does it generate a return? Are you utilising the correct media for your market segment? Can you partner with complimentary businesses and share the cost?
- Supplier costs – can you utilise a trade finance / supply chain finance platform to obtain early payment discounts with your suppliers? Will they provide bulk order rebates? Have you obtained comparable prices from other suppliers for your high volume / high cost items?
- Return on Assets – if you’re paying (loan repayments, registration, insurances, inspections) for an asset (vehicle, scaffolding, processing equipment, etc) is it generating a sufficient return to justify the cost? Is the utilisation high enough in order to retain an item, or would it make more sense to sell it and hire when required? Have you considered a ‘sell and lease back’ arrangement to assist with working capital?
- Rent – is your current premises ‘fit for purpose’? Do you require the level off exposure your current premises offers, or can you work from a lower cost premises (i.e. is it necessary for logistical reasons or to generate trade)? Is the premises fully utilised, or can you sub let some space?
Take some time to consider if you can make some changes and increase the bottom line of your business. Contact Flexible Capital for more innovative solutions to help your business thrive.
