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How to cut back your business spending

Sarah Stowe

Keeping control of the finances is important for any small business. Image: generalassemb.lyLet’s talk about tax and spending. Are we being premature? Have you checked your calendar? June 30 isn’t that far away. Clive Barrett First Class Accounts Bookkeeping executive chairman says the traditionally quieter start of the calendar year is the perfect time to begin preparing for tax time and take a hard look at expenses and devise methods to reign in over-spending.

First Class Accounts conducted research on 500 small business owners and found only 40 percent of business owners consulted finance experts like accountants and bookkeepers for money-saving advice.

“This is a troubling statistic as it shows a lot of people just relying on friends/ family (23%), the internet (18%) or no one at all (19%) to find solutions for how to better manage their finance,” Barrett says.

“There’s not much you can do about set costs such as rent and rates however, there are many areas where savings can be made. The cost of labour is one obvious area. Another is electricity and phone. Do some research and see if you can get a better deal with another provider for these necessary utilities,” he suggests.

Common mistakes among small business owners include overlooking superannuation.

“More and more I see small businesses struggle to meet their superannuation payment deadlines. This is concerning as the ATO is starting to clamp down on this area, and small business owners may find themselves facing hefty fines for not meeting deadlines.

“Heavy penalties like these are ill-afforded by small business owners, but they can be avoided by pre-planning and ensuring a little bit is put away every week to cover the obligation.”

Barrett advises investigating low-fee, interest-bearing accounts offered by some banks that are specifically designed to help small businesses save for PAYG instalments and superannuation payments.

“It can sometimes be a little too tempting to spend money that’s sitting in your everyday account. So by making regular direct deposits to a special ‘hidden’ account you will always have the money at hand to pay PAYG or super when it’s due.”

When times are tough cutting back on marketing and advertising can seem an easy way to save funds. In fact, the research revealed only 40 percent of business owners were planning to invest more into marketing.

Barrett believes slicing promotional spend is not the answer to sensible cost-cutting.

“When cash flow becomes a problem you need to increase the profile of your business to bolster sales. During slow times you should increase marketing, not decrease it, however, this of course is tricky when money is an issue.

“Instead, sit down and take a close look at where your current advertising dollars are going. Are you getting maximum bang for your buck? Look at where most of your revenue is currently coming from and concentrate your marketing endeavours there.

“Have you considered PR or social media in your activity as these can be very cost effective ways to gain further brand awareness?”

Barrett belives comparing earnings from previous years is an imperative part of the review process.

“As the end of the financial year looms we all get very busy crunching numbers and there’s very little time for analysis or reflection,” he says. “So while there’s relative calm this time of year, it pays to look back at the third and fourth quarters from previous financial years and analyse the data for trends.

“You need to look for peaks and troughs in the figures, then ask yourself, why? Is there anything you can do to mitigate those losses in the upcoming third and fourth quarter? If there’s a noticeable slump in sales in April, you could perhaps increase your marketing spend in February and March or encourage staff to take their holidays during this period.

“Are your printing and stationary costs blowing out? Could you cut vehicle numbers and reduce travel costs by performing more tasks online, over the phone, or eliminating them entirely?

“It’s not too late to make a positive difference to the bottom line for this year but if a business owner misses the opportunity to plan and assess their situation it could end up worse.”