As a small business owner, you’ll likely recognise the importance of making your finances stretch. However, it’s easy to waste budget inadvertently. Small expenses, like subscriptions, can quickly add up. Plus, inefficient processes can become costly over time.
Many founders recognise that rushing early steps after company formation can lead to higher costs in the long run. To avoid this problem, it’s important to start good habits as soon as possible and regularly review processes.
In this article, Rapid Formations outlines practical small business money-saving tips that founders can use to reduce costs, including savings on operations and overheads.
Track where your money goes
The first step in effective small business money saving is identifying outgoings.
To understand what you’re spending business funds on, you should:
- Review bank statements
- Categorise outgoings (i.e. stock, tech subscriptions, staff, etc.)
- Identify areas of wastage; you might be spending money on subscriptions you rarely use that you could cancel or renegotiate
Many small business owners find that digital accounting software helps them automate how they record their outgoings. Automation can be a powerful time-saver. However, it’s important to still manually review entries regularly to assess if your outgoings are adding value to your business.
Streamline daily operations to reduce waste
Wasted time equals wasted money. While changing processes can take a while, continual small adjustments can make everyday tasks more efficient and, therefore, more cost-effective.
By making processes more efficient, employees could do the same amount of work in fewer hours. This gives you the option of reducing the number of hours you pay people for, which could lower your wage bill. Alternatively, you could keep the same outgoings and potentially enjoy a larger profit margin thanks to increased productivity.
You may not see savings immediately if staffing hours stay the same. However, inefficient processes can still increase costs indirectly. For example, if you have a sales team that has to follow laborious admin steps, they’ll waste time doing paperwork that they could better spend generating leads. If you automate invoicing and reduce manual chasing, your team will have more time to focus on sales activity.
Reduce overheads without affecting quality
Saving money doesn’t always mean cutting corners. In lots of cases, it’s possible to reduce overheads without negatively affecting the quality of goods or services. Think about whether an existing overhead is crucial to supporting your customers. If it’s not, it may be an expense you want to review.
Some of the ways you can reduce your overheads include:
- Embracing hybrid or remote working – If you have employees, having an office for them to work in can be a major expense. By adopting a hybrid or remote working policy, you can lower your costs by moving into a smaller workspace or getting rid of it altogether. Hiring remote workers also enables you to recruit from a wider pool of people, some of whom will potentially accept lower wages.
- Increasing energy efficiency – You can reduce your bills by using energy as efficiently as possible. Turning off unnecessary equipment, lighting, and heating can lower your costs. Plus, it can help you become a greener business too.
- Sharing costs – Some business owners find that they spend large amounts of money on things that they only need for short periods or one-off occasions. To recoup costs, consider selling unused items. Alternatively, you could share expenses with other small businesses. It’s worth thinking of other local small businesses as a community, rather than your competition. So, if you attend just a couple of outdoor events a year, you might share the cost of a gazebo with another organisation that attends different events.
These examples won’t suit every business. For instance, a café can’t operate remotely, but most businesses can still review and reduce ‘nice to have’ expenses that add little value.
Making changes like this behind the scenes shouldn’t significantly affect your products or your customers’ and clients’ experiences. Many businesses find it helpful to make many adjustments here to trim their budgets while keeping their audiences happy.
Negotiate with suppliers and service providers
When you’re running a small business, it’s tempting to let long-term contracts automatically renew. However, avoiding tricky conversations surrounding renewals can be expensive. Although negotiating can feel uncomfortable at first, most people find that it becomes easier with practice. Long-term loyalty isn’t always rewarded with lower prices, so it’s worth learning how to negotiate.
To make sure you’re getting the best value out of your existing agreements, review what you’re paying for at least once a year. It’s worth taking the time to get quotes from other service providers, too. Even if you’re reluctant to switch, you may be able to use this information to renegotiate for a better price.
You may choose to stay with a supplier for consistency, but sometimes switching can offer significant savings with minimal disruption.
Build cost control into your business structure
While choosing the right structure isn’t always straightforward, early decisions can make ongoing costs easier to manage. A major part of saving money involves setting up your business in a way that costs less to run over time.
Some of the most effective cost saving decisions happen before problems arise. So, it’s worth thinking beyond reducing overspend, and instead considering how the right structure and systems can prevent wastage in the first place.
Early decisions like how your business is structured legally (i.e. sole trader or limited company) and how you handle compliance filings (such as annual accounts) and other types of record-keeping can impact long-term costs. These choices often affect how much time and money you spend on admin every year.
If you’re unclear about your admin responsibilities or overburdened with unnecessary tasks for the wrong business structure, you may end up paying more in bills (i.e. fees for external advice) and indirect expenses (i.e. wasting time). Choosing the right structure early can help reduce costs and the need for expensive changes later.
Make savings part of long-term planning
Many business owners state that they only review costs when under pressure. However, it’s worth viewing small business money saving as an ongoing process. You might find that you waste more money when your sales are high because you don’t need to account for every pound. However, any amount of money you can save during peak periods can help your business get through tough times.
To keep saving money in mind, review your budgets as part of forecasting. For example, you could schedule a quarterly review where you compare your actual spend against your forecast budget and investigate unusual increases. Forecasting can also help you understand seasonal patterns.
It’s also worth asking yourself, “Is this cost supporting the direction the business is going?”. If the answer’s no, consider cutting it. Sometimes, you may be paying for expenses that your business has outgrown. Evaluating your outgoings should form part of your growth strategy, so you can remove what you no longer need as you evolve.
Embrace your small business money-saving strategy
Constant cutbacks are not a sustainable approach to money saving. While it’s important to regularly evaluate your outgoings and remove any waste, many businesses eventually run out of expenses to reduce.
Maximising money saving is about adopting a sustainable long-term mindset focused on reducing financial waste, rather than just the short-term solution of cost-cutting. If you take the time to ensure your business is properly structured, routinely monitor your outgoings, streamline operations, reduce overheads, negotiate costs, and plan, you may be better positioned for long-term financial stability.
Rapid Formations can support those founding small businesses by advising on company registration and reducing some of the admin time spent on compliance requirements.
