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Five-minute money masterclass: cutting costs, not co-workers

Written by Ryan McChrystal on Thursday, 05 February 2015. Posted in Financial management, Finance

Employees needn't be the first victim of budgetary constraints

Five-minute money masterclass: cutting costs, not co-workers

Controlling costs is a major concern for any business. Tightening the belt usually means less pay, less benefits and less progression for workers. In extreme cases, it could even mean letting staff go. However, employees needn’t be the first victim of cost cutting. On a shoestring budget, there are easy ways to cut down on costs so you’re not spending where you don’t have to. In fact, with a little research, businesses may find that ‘necessary expenses’ are not really necessary at all. There are plenty of opportunities for small businesses to think outside the box and slash spending. Here are some simple tricks that could save you those precious pounds.

 Manage your cash flow

It may seem obvious but effective cashflow management can be one of the most effective ways for small businesses to reduce costs. Christoph Rieche, CEO and co-founder of iwoca, the online business lender, says: “If you can manage your cashflow more effectively and pay bills when they are due – or ideally a little bit early – you will often be able to reduce your cost base by renegotiating deals.”

While there is no secret to good cashflow, Rieche recommends being on top of everything that goes into and out of your business and trying to work out what will happen in future. “You can calculate out how much working capital – cash or short-term assets available for new investments – you will have going forward. If you are short of working capital you will need to cut costs, increase sales (e.g. by liquidating old stock) or consider external financing options.”

Take control of your energy bills 

If your business is on a shoestring budget, improving energy efficiency can be a great way of reducing costs while adding to your green credentials. Anthony Ainsworth, B2B and marketing director at E.ON UK, says: “By taking control of your energy consumption – the where, the when and the how much – you can see where savings can be made and either quantify the success when it comes or justify any capital expenditure you need.” Free help and advice is available on the E.ON website, as is information on energy monitoring gadgets such as monitors or smart meters which can talk remotely to your supplier and provide accurate, live usage data.

It’s easy to focus on the initial price or design of equipment, forgetting to think about the lifetime energy cost. “Efficient lighting, for example, can quickly make an impact in areas that see long daily use such as hotel corridors and shops with long opening hours,” says Ainsworth.

Overhaul comms infrastructure

Mark Russell is director of operations for UK and Ireland at Swyx, a unified communications vendor that provides software-based solutions specifically aimed at SMEs. “If you are a growing company with multiple offices or you support flexible working then installing technology such as unified communications can deliver immediate and on-going cost-savings,” he says. Whether or not you opt for a cloud (pay monthly) or on-premise solution, you will no longer be paying for BT line rental at each site and calls between offices are free. 

The system is completely location-independent which means that you can save office space by introducing concepts such as hot-desking, so that colleagues have the option to work from home or out of the office. Even if your existing phone system works, there are still compelling reasons to upgrade. “With unified communications your business starts to save money from day one and also benefits from a whole raft of new features such as audio conferencing or call recording that would previously have incurred hefty annual charges translating in to thousands of pounds every year.”

Give freelancers a go

Laying off staff is not an easy decision and should not be the first port of call. However, if times are tough, it may be worth looking towards hiring freelancers. Rieche believes that keeping staff costs under control is one of the most effective ways of saving money for SMEs. “Any staff recruitment is a serious financial commitment for any business. Instead of making a hire, a small business owner could use temporary or freelance staff.”

There are approximately 1.72 million freelancers in the UK, in a variety of industries. This means that SMEs could hire someone by the day – or even hour – to do pretty much any function within their business. This offers significant savings to a small business and allows them to scale up or down the freelancer’s time, depending on how busy the business is at any given time. “If someone leaves the company, then it might not be necessary to replace them immediately. You could also evaluate what that person’s workload involved and if there is any spare capacity amongst other staff, it could be put to use,” says Rieche. 

Seek out freebies

They say the best things in life are free. This rule generally doesn’t apply to the world of business but that shouldn’t stop you from accessing perfectly reliable services for no cost whatsoever. Simon Burckhardt, managing director of broadband telephone company, Vonage UK, says: “Small businesses are always looking to manage their costs, but few realise that there are many valuable services that can be accessed for free and are available through the cloud.” Storage options in the cloud offer a place to store important files and documents, as well as back-up for company data. “Typically, free allowance ranges between 2GB and 5GB. When backing up online, there are many software apps that will now do it automatically on a regular basis so that business owners do not need to worry about it,” says Burckhardt. Security is another concern for businesses and there is no shortage of good anti-virus software out there that are available for free.  

About the Author

Ryan McChrystal

Ryan McChrystal

In a previous life McChrystal wrote about asset management in the Middle East. A history and politics graduate from the north of Ireland, he now focuses his efforts a little closer to home. 

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