As the Australian Government leads us through COVID-19, all of us are working hard to get back to a healthier and happier business climate. Reducing business costs is part of that puzzle.
Every day we eagerly await updates on people returning to ‘normal’ activity – because with normality comes greater stability. While JobKeeper Payments are assisting many operators with nominated staff wages, other expenses continue to demand attention.
That’s why now is a great time to get a better handle over your expenses and implement cost cutting where possible. Areas that can be reviewed are plentiful, and for you could include everything from suppliers and service providers through to subscriptions and membership costs.
Even though a financial review is performed as part of the JobKeeper Payments application, it is wise to be even more vigilant in budgeting in the upcoming months. Let’s take a look at how to do this…
Review and tweak spending
When setting out to review your spending, keep an open mind. Some expenses are non-negotiable and the business could be jeopardised without them, while others may have minimal to no impact on operations and can be withheld until a future date.
Consider revisiting and finetuning your spend across these areas:
- Wages for staff not receiving JobKeeper Payments
- Leased items e.g. cars and phones
- IT and web support
- Office space rent and maintenance
- Insurance (Rapid Solutions is happy to help answer any questions about professional indemnity insurance and general liability insurance)
- Equipment purchasing and maintenance
- Professional memberships
- Sponsorships and charity donations
Asking staff for input can help make decisions clearer, particularly if they are more across the usage of or terms for particular items. Make everyone accountable for the money that goes out of the business, as well as the money that comes in.
Tips for reducing outgoing costs
According to accounting industry body CPA Australia, the following tips can help reduce outgoing costs:
- Use stock (e.g. chemicals) with the shortest expiry dates first. This will prolong the need to purchase new stock sooner.
- Follow up with all clients who have an outstanding debt. If they are unable to pay the total, consider appropriate alternatives such as a payment plan.
- Confirm upcoming jobs with clients, as this will help maintain incoming work and earnings for the business.
- Ask your suppliers for a payment extension or negotiate instalments. It’s best to provide sufficient notice for this, as they may be experiencing a downturn as well.
- Cease any non-essential spending and delay projects – one of the simplest ways to keep your cashflow strong.
- Review staff contracts and hours, after seeking professional advice.
- Speak to your bank about financial support. This could include a better interest rate on a loan, an extension on a repayment or pausing payments for the time being.
We are working through unprecedented times. You may find yourself implementing short term measures you would never have considered previously, to keep your operations and your mindset in a healthy state.
Keep customers onside
While for many of us ‘business as usual’ is more of a hope than reality at present, it’s perhaps even more crucial to be regularly engaging with customers.
We suggest you check in to ask how they are coping, even if they don’t have jobs on the horizon. Take note of ways you can help them if you are able to – this is a great way to strengthen customer loyalty.
If you are waiting for payment from them, or will expect it soon, consider offering payment instalments to those who are having difficulty managing their finances. Or, perhaps you suggest exchanging your services for a product/service they offer in their business.
A little compassion can go a long way and help strengthen your relationship into the future.
Consider: what steps can you take now to shore up your customer base ? Reducing your business costs is only part of the equation if you are planning for a more successful financial year.