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Article | 2-minute read

Managing your business' overheads

Cash flow forecasting | Cash flow improvement



In the current environment, you may have had to take short-term reactive measures to cut your business’s expenses and monitor any overheads closely. It is important that you continue to monitor expenses as your business recovers from uncertain times and readjusts to reflect your operating environment.

Business expenses are usually divided into two main groups: variable expenses and fixed overheads. Variable expenses vary in proportion to your sales – so for example, the amount you spend on raw materials making tables will vary depending on the number of tables you actually make. Overheads on the other hand are the fixed costs of running your business such as phones, office supplies, salaries, leases, insurance and power.


Managing your advertising

Businesses can easily waste thousands of dollars on advertising, so make sure you monitor your spend to understand and improve what's working and imperative for your business – and stop what's not.

Scattergun advertising is usually a waste of money, so:

  • stick to your marketing plan
  • make sure your advertising is targeted
  • avoid falling for the ‘great deals’ offered by advertising reps.

For every marketing initiative, work out how many extra sales you need to get a return. Choose cost-effective advertising forms first – would a classified ad work as well as a display ad, for example? Direct marketing is often easier to monitor and refine than mass advertising.


Aim to gain as much free publicity as you can

Supplier relationships may need review from time to time. Having a long-term account with one supplier shouldn't stop you from getting other quotes, which you can then use in negotiations.


Put your insurance out to tender

If you think your insurance bill is getting high, introduce a competitive element by putting your insurance out to tender to an independent broker who is able to source cover from a range of suppliers.


Cost of leasing

If your lease creeps upwards, what can you do? If a landlord is willing to link your lease to turnover, this may be a win/win for both parties.

It removes a risk for you (if your turnover declines, so does your rent) and provides an opportunity for the landlord (if your business does well, the landlord gets a higher rent).


Technology alternatives

Technology solutions can be great for cutting overheads and may speed up your operations as well as save money. Email is much cheaper and faster than printing and posting letters or newsletters.

Online buying and selling is also much faster and less labour intensive than conventional methods.

Consider reviewing your supplier agreements annually to see if there’s room to reduce costs


Looking for sources of help


Your staff can help brainstorm ways to cut costs effectively. Encourage them to treat the company’s money as if it were their own. For example, through a profit-sharing scheme.


Accountants and professionals

Accountants and professionals typically deal with hundreds of businesses, so they’re in a good position to help you identify unusually high costs and suggest ways to reduce them.

They may also be able to:

  • benchmark your costs against industry averages
  • advise you on how your business is performing in comparison.


Cost reduction analysts

Cost reduction analysts usually work with medium to larger businesses and compare what you currently spend with the best prices they have identified.

Don’t be afraid to ask for help in areas where you believe your business needs it.



Next steps

Download our cash flow improvements checklist (PDF) for 34 ways to improve your cash flow.


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