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In a quest to cut costs, many businesses inadvertently leave money on the table by overlooking legitimate savings or chasing false economies.
From paying more than necessary to cutting budgets on activities that bring home the bacon, here are some of the most commonly overlooked savings in business to look out for in 2021.
1. Marketing waste
Advisors warn against cutting marketing budgets at the risk of plunging into obscurity. However, that spend should deliver a decent return on investment (ROI).
Giving into Facebook’s prompts to boost a post might seem harmless, but it’s an easy way to burn through cash.
Not targeting ads effectively is akin to pouring good money down the drain. Determine who your ideal customer is, which media they consume and when they’re most likely to buy. Then tailor your ads accordingly.
2. In-house efficiencies
Efficiencies are the holy grail in business – doing the same thing (or better) for less money. Yet, some are less obvious than others.
Improving employee welfare and workplace culture can reduce staff turnover – saving on recruitment, training and exit payouts while stemming the loss of skills, experience and intellectual property.
Don’t confuse busyness with productivity: teams should work on revenue-driving activities, not administration. Look for ways to simplify operations, freeing staff to work on core tasks.
Avoid sacrificing existing clients for new ones. It’s more expensive to attract new customers than to give existing ones more attention and value.
Automate inventory control and staff rosters to reduce errors. Running out of stock or being short-staffed ultimately means lost sales.
Streamline business finances and develop strong financial foundations. Invoicing promptly means money coming in sooner, while paying bills and taxes on-time eliminates interest and penalties.
3. Risk mitigation
“Prevention is better than cure” typically applies to health, but the same goes in business.
Review your risk mitigation strategies and stress test them for weaknesses. Risk mitigation includes:
- insurance against business interruption and loss/damage/theft
- contingency plans for key staff absences
- automatic back-ups of essential software and data
- security protocols, password management and staff cyber training to avoid fraud and hacks
- work-from-home capabilities should staff be unable to attend the business premises (as COVID-19 has demonstrated)
Insurances and staff hours spent on these are up-front costs, but they’ll save big bucks should disaster strike.
4. Misplaced cost-cutting
Why slash the stationery budget only to blow those savings elsewhere? It sounds silly, yet many businesses fall into this trap. It’s important to deliver real savings.
For instance, stop paying rent on unused space – downsize to smaller premises or sub-let surplus space to subsidise the cost.
Upskill employees in revenue-generating activities to boost income, rather than fire them and face hefty exit payouts.
Don’t overlook taxes when looking for cost savings. Claim legitimate depreciation of business fit-outs, office furniture, vehicles and equipment. Update vehicle logbooks to claim eligible mileage allowances. Apply for relevant tax concessions and COVID stimulus.
“It’s cheaper to do it myself”, many business leaders claim. But are you sacrificing your ability to earn more in the process?
Weigh up the cost of outsourcing against the additional revenues and cost-savings you could generate by spending your time elsewhere.
Outsourcing could involve delegating tasks to new or existing employees, hiring contractors or implementing new technologies.
6. Buying power
Consider how to get the best value for your money.
Interest rates are at record lows, making money cheaper to borrow to upgrade equipment or expand. Refinancing debts could also slash repayments. However, plan your finance needs ahead of time – cash flow quick-fixes like short-term loans typically cost more.
Could you buy the business premises in a self-managed super fund (SMSF)? That way, your retirement fund receives the rent rather than a third-party.
And avoid the “lazy tax”: annually reviewing subscriptions, utilities, loans and insurances can net substantial savings. Often, you don’t even need to change providers – just ask for a better rate or get them to price-match a competitor!
Note this is general advice only and you should seek advice specific to your circumstances.