Categories
9 Ways to Significantly Reduce Business Costs
At Clifton Private Finance, we are dedicated to supporting businesses through financial management, experienced consultancy, and access to funding. Our expertise gives our clients the freedom to grow confidently, minimising risk and maximising opportunity at every junction.
One area that all successful businesses regularly review is that of their costs: improving efficiciency, and increasing profits.
From switching energy providers to restructuring your company debt, we cover the 9 most effective ways to actually reduce costs in your business and boost your bottom line.
Plugging Leaks
Every business has subtle financial leaks, overlooked costs that have crept up over time without oversight: subscriptions that no one remembers signing up for, insurance premiums that have been renewed without market comparison, energy tariffs that have rolled over once fixed terms end.
These leaks may not seem significant in of themselves, but they put an unnecessary drain on cash flow like a series of puncture holes. Plugging these leaks can be often be completed quickly and easily. It doesn’t need a deep change or lengthy overhaul - just a minor amount of attention.
An annual audit is enough to cut back on waste and free funds, turning your business into a lean entity running on solid ground.
Reduction 1 - Switch Energy Suppliers
Energy costs are often ignored. Despite headline levels of news regarding energy in recent years, many businesses are still content to skip over a regular review of their energy expenditure, allowing contracts to roll over automatically.
Selecting the right energy supplier isn’t just about cost savings, either. With a country-wide focus on sustainability and environmental responsibility, ensuring that your energy comes from a supplier with a strong green focus is essential for business decarbonisation.
Electricity providers who use renewable sources, such as wind power or hydroelectric, meet emissions guidelines for your ESG (Environmental, Social, and Governance) targets - a vital part of modern business compliancy.
How Clifton Helps
Our sister arm, Clifton Business Energy, offers multiple levels of support for energy switching. If your business is small, with only a single meter and simple needs, then our fast comparison site will enable you to smoothly switch to a greener and more cost-effective supplier with just a few clicks.
For larger businesses with more complex requirements, Clifton offers a comprehensive consultancy service that will assess your energy usage and, through partnership with trusted green energy suppliers, create a tailored energy plan that saves you money and meets all ESG guidelines.
Reduction 2 - Review and Renegotiate Supplier Contracts
Every business forms part of a supply chain, whether overtly or less obviously. When you first order goods or services from another business, you typically analyse the costs and negotiate a price that meets your needs - but how often do you review those agreements and make the most of your developed business relationship?
Many suppliers, especially subscription services that work with automatically renewed contracts, will increase prices year-on-year with only minor communication, such as a single email to inform. In most cases, it’s possible to improve your financial position with your suppliers, lowering your costs and improving your cash flow. Options include:
Simple online assessment
Companies providing a continuous service that’s managed online, such as SaaS (Software as a Service) subscriptions, website hosting, online advertising, utility providers, and much more, can typically be audited through their online platform.
A few minutes of administration can lead to decisive savings on contract price or, in many cases, the realisation that the service is no longer required and can be cancelled or dropped to a lower tier product.
Service consolidation
Many providers offer multiple services that includes a discount if options are combined, for example, getting web hosting and broadband from the same supplier, or multiple software solutions that can be combined into a single platform.
Consolidation in this way not only results in immediate savings, but will also lower the number of payments being made each month, making cash flow administration easier and mistakes less likely.
Market comparison
Shopping around by regularly looking at your suppliers’ offerings and taking the time to re-evaluate them against the wider market will often yield positive results.
Depending on your reliance and relationship with your current supplier, switching to a new provider based on cost alone may not be the best move; however, when properly considered and with the pros and cons evaluated, benefits can often be found.
The threat of switching supply
Many companies will offer significant discounts if you show that you are considering cancelling and moving to another provider, giving you the power to negotiate a better price.
The threat of leaving should be used sparingly, especially if done in person with a supplier you have a solid relationship with, but it remains a powerful negotiating position that can be used to leverage significant discounts.
Improving supplier relationships
A range of funding and financial solutions can greatly improve your customer-supplier relationships. Supplier and trade finance products include several customised solutions for speeding up payment for your suppliers, helping them solve their cash flow problems and improving your position. Consider products such as:
- Invoice finance
- Trade credit
- B2B Buy-now-pay-later
- Supply chain finance / reverse factoring
- Purchase order finance
Where the threat of leaving can be seen as a ‘stick’ approach to negotiating a superior contract with a supplier, these funding solutions provide appropriate ‘carrot’ options, similarly improving your negotiating position to help you achieve a better deal.
How Clifton Helps
With access to a huge range of funding options, Clifton Private Finance’s business advisory teams can help you with both short-term and longer-term financing solutions to improve your supplier relationships, or get you the capital needed to move to a new supplier.
Supplier-customer negotiations are improved when made from a flexible and cash-confident standing. Clifton Private Finance can ensure that your business works from this powerful footing whenever negotiating supplier contracts.
Reduction 3 - Review Insurance Policies
Business insurance is an unavoidable and vital expense for businesses, however it can also be complex with unchecked policies often doubling up cover, or not insuring value accurately.
Undertaking an annual insurance audit becomes more important as your business grows, with two separate financial impacts. The first is in the ongoing cost of premiums - reviewing your policies and making sure you are only paying for the insurance you need is an obvious cost-saving activity; but the second occurs should you need to claim on any of your insurance policies - poorly defined cover can lead to claims being rejected, for which the cost implication may be extremely significant.
Start your audit by listing all current policies - property, public liability, professional indemnity, vehicle, specialist - and review the level of cover, your renewal dates, and any policies that cross over with each other. Savings can be made by checking you are not insuring the same asset twice, or paying for costly extras that you do not use.
If your insurance needs are complex, it is worth working with an independent commercial insurance broker. They will cross-check your policies, explore the marketplace for competitive options, and build a comprehensive insurance plan that is tailored to your business and its unique risk profile.
How Clifton Helps
With an expert understanding of risk assessment, our partners can help you understand the insurance that your company will need. Discuss your insurance and greater financial requirements with our business team to clarify the best path forward.
Financial Restructuring
Once the holes have been plugged, it is time to turn your attention to strategic financial review. When you analyse your cash flow, capital investments, and debt management, you strengthen the foundation of your business, providing a stable ground from which to expand without waste.
Here, partnering with Clifton Private Finance has impressive value. Working together, we can put into place long-term plans that reduce the cost of debt, increase your available capital, and smooth cash flow for a stable day-to-day.
Reduction 4 - Consolidate and Refinance Business Debt
The power of debt-based products to provide the capital you need to purchase essential vehicles, tools, equipment is undeniable. Similarly, cash flow solutions that have smoothed over difficult periods and dryer seasons will have made sure your business keeps running when times are tight.
Business debt consolidation brings all those debts together into one clear monthly repayment. By strategic refinancing, you can reduce your monthly outgoings, slim your interest rates, and gain control over your debt situation.
Administrative benefits
The overhead of managing several debt payments each month is considerable. Many business owners and CFOs spend many hours juggling existing debt obligations, leading to a drain on personnel resources as well as an increase in stress. Complaining that managing the finances is ‘a headache’ is a dismissive comment that hides a greater underlying problem that impacts mental health and business efficiency.
When your business finances are in control, with a single monthly payment that covers all obligations, you can relax enough to do what your business is for - making money.
Releasing even just a few hours of mental load each month can make the difference between a successful business that you want to be part of, and a stressful burden that is impacting every facet of your life.
Not only that, but a single monthly payment is far easier to plan for and meet, making it far less likely that you will incur additional charges and late fees. Your cash flow will be smoother, providing the clarity you need for increased flexibility when considering new opportunities.
Reducing interest
Interest rates change regularly, with multiple factors involved in their levels. Loan options that were good at the time may be superseded with far better rates, while lines of credit that have had their interest rates creep up year-on-year can be refinanced to far lower levels.
New circumstances can also play a significant part in reducing interest. If the business has grown in asset equity, for example, then refinancing to secured loans with lower loan-to-value levels will provide beneficial rates; while the improvement in credit rating that will be gained through financial restructuring can open up new financing options.
Improving cash flow
Cash flow is the lifeblood of your business. When cash flow is tight, tension is high and opportunities cannot be easily considered; growth becomes difficult with the focus simply on getting by.
Debt repayments can be a large part of cash flow struggles. When too many different debts have been taken on, meeting obligations each month becomes a primary focus. The balance between debt power and burden has shifted too far in the wrong direction and the business is suffering.
Refinancing can help restore that balance. When the debt is properly restructured, monthly payments can be brought down to a more manageable level and cash flow flexibility is restored. The extra financial headroom will breathe new life into your business, allowing you to make the best use of your operational income to grow your business.
How Clifton Helps
Managing the power of debt finance is where Clifton Private Finance shines.
Our business finance team are seasoned experts in financial restructuring with a view to reducing your business costs. We work with specialist lenders who understand the complicated nature of business debt and can offer refinancing solutions that are tailored to your business’s need.
The result is lowered costs, increased flexibility, and repayment terms that best serve your company’s long-term goals. For debt consolidation and refinancing options, speak to Clifton Private Finance without delay.
Case Studies
Reduction 5 - Leverage Equity in Property and Business Assets
One common oversight that businesses suffer is to sit on asset equity, treating property and valuable business equipment merely as ‘something owned’, rather than a powerful business tool that can be leveraged to improve your financial position.
Unlocking equity is an extremely powerful financial tool that will provide capital at low rates. While this may not directly lead to reduced business costs, it prevents poorer funding options being used and thus proactively ensures costs remain low.
Leveraging equity can mean:
- Improved interest rates for debt consolidation and refinancing (see reduction 4).
- Greater buying power to command lower supplier rates and improve supplier-customer relations (see reduction 2).
- Provide expansion capital to take the business to the next level.
- Avoid unnecessary higher-rate debt finance in the future.
- Seize opportunities with rapid equity-leveraged bridging finance.
Asset equity can often be found across many business areas. It may include:
- Property - Commercial property, such as your business office, factories, or warehouses can all be leveraged to provide low-cost funding. Landlords with buy-to-let portfolios can also release equity in these investments for immediate use. Even if mortgages are in place, second-charge loans can be obtained with low long- and short-term rates.
- Business machinery - Specialist machinery is often high-value and can be used as security for competitive-rate asset-based lending.
- Vehicles - Your business fleet can easily be used to secure flexible asset-based commercial vehicle funding.
- Technology - Computers and other company-wide technology can be used as collateral.
- Accounts receivable - Not all assets are tangible. Money owed to your business in the form of unpaid invoices can be used as a guarantee for low-cost finance.
- Income forecasts - In some cases, such as with Merchant Cash Advance, reliable future income can be tapped into, providing capital today based on the forecast of the future.
How Clifton Helps
If you are looking to release equity in your business assets, speak to one of our asset finance team at Clifton Private Finance.
We will evaluate your equity with you before reaching out to lenders who are specialised in providing leveraged loans at low rates. With a boost to your working capital, you can solve a range of financial problems and reduce other costs across the board, taking your business to a new stage of financial stability.
Case Studies
Reduction 6 - Work With the Right Accountancy Firm
Your accountant isn’t just there to make sure your tax returns are filed on time - properly used, they are a partner in your business’s financial health. The right accountancy firm will spot inefficiencies in your financial planning, suggest improvements, and reduce your tax burden while keeping you compliant with all government regulations.
When looking to your greater financial structure to reduce business costs, ensuring you have a competent account on board is vital.
Conversely, the wrong accountant will simply be an additional burden on your financial resources, costing you thousands of pounds in unjustified fees, missed opportunities, poor advice, or just laziness.
Many business make the mistake of sticking with their first accountant, even once they’ve grown beyond that firm’s ability.
Loyalty to those people who were with you during the early days is morally admirable, but doesn’t always make for the best business decisions. It’s important to properly evaluate your accountancy firm, making sure they are a true strategic partner and not simply a monthly fee for little true service.
Consider reviewing your accountancy service from a neutral standpoint, asking questions like:
- Are they proactive, advising you on potential opportunities, or do they simply react, doing the minimum to meet compliance?
- Do they truly understand your industry sector, able to suggest relevant areas for growth?
- Are they giving your business the time and expertise it needs to expand or have they become part of the background?
- Are you paying more in fees than you are getting in terms of service value?
- Are you still receiving personal attention, or has your partnership become little more than outsourced bookkeeping?
The right accountancy firm will discuss tax efficiencies, guide your financial structure, and provide ongoing financial updates that reflect changes in the wider landscape. If you are not receiving a proactive level of professional support, it may be time to switch.
How Clifton Helps
Our teams at Clifton Private Finance work alongside accountants every day, and witness firsthand the difference between the top-quality firms and those who have little input into their client’s financial world.
Systemisation
Reducing business costs isn’t just about the pure finances within your business - it is also about how your operation runs.
If your business is poorly structured and chaotic, you will spend a considerable amount of money and time just keeping it on track. When your systems are tight, your team well-organised, and your processes well-defined, your costs will naturally decrease.
These final three ways to reduce your business costs represent long-term strategic investments, moving your company from unstable beginnings to a well-defined structure on solid foundations.
Reduction 7 - Strategically Outsource
Growing a modern business doesn’t simply mean employing more people. Hiring full-time staff isn’t always cost-effective, with salary obligations, team training, and ongoing overheads adding additional costs to your business that you simply do not need.
When you outsource, you work in partnership with professionals dedicated to their fields with no need to spend the resources developing a team to reach the necessary standard. While the fee for outsourced services may seem significant at first glance, once the numbers have been properly evaluated, it can be quickly seen that there are savings to be made.
An outsourced professional or team will:
- Be able to start on the project immediately, with no lead in time for training.
- Bring extensive experience to the project, seeing potential pitfalls early and with tried-and-tested solutions.
- Take on much of the administrative burden of running the team.
- Require payment for the project or hours only, with no additional costs for holiday pay, sick leave, pension contributions or National Insurance.
- Work in their own workspace with their own transportation, saving on office costs, vehicle finance, and other expenses.
- Have access to specialised role-specific equipment without need for additional investment.
- Work faster and deliver results quicker than many in-house teams.
- Come with no long-term commitment, making it easy to change direction if needed.
There are many business roles and departments that can be effectively outsourced.
These include:
- Marketing services, social media, and content creation
- IT support and website management
- Human resources
- Accountancy and bookkeeping
- Branding and design
- Logistics and shipping
- Cleaning services and waste management
- Property maintenance
- Construction work
Researching the business, reading reviews and testimonials, and asking to see portfolio work are all part of the administration of selecting valued outsources. In the long term, this time and financial investment will pay dividends as you work with efficient experts who will deliver exactly what you need, when you need it.
It is important to balance the pros and cons of outsourcing work - if you plan to permanently expand into an area with full-time requirements, then hiring in-house and developing a team may be the better option, perhaps moving from existing freelancers to a fully-fledged department as you grow.
As with all cost-saving exercises, balance and understanding are important. Done strategically as part of a comprehensive business expansion plan, however, outsourcing will lead to massive cost savings and increased flexibility.
How Clifton Helps
When you partner with Clifton Private Finance, you are outsourcing some of your funding research and responsibilities to us. We are a specialised business broker with years of experience serving our clients with the best financial advice in the UK.
Our experts don’t work in isolation, but discuss our clients' needs interdepartmentally as appropriate, gaining a holistic viewpoint that results in the best available answer to any financial problem.
Reduction 8 - Create Standard Operating Procedures (SOPs)
Ensuring that your business runs smoothly requires that things are done the same way - the right way - every single time.
Whether that means the script that your sales team use to present your business to a potential customer, the way your files are stored for easy access by the team, or the routines you have for placing orders with suppliers - everything your company does should be clearly laid out and documented. These are your Standard Operating Procedures, or SOPs.
Without standard procedures, your business is chaotic. Mistakes are easily made, and time and money are lost. SOPs will revolutionise your company, plugging expensive holes in your operations and making things run smoothly - and profitably.
When it comes to the financial impact, SOPs:
- Eliminate costly mistakes in operations, ensuring that if an error is made, it is learned from and not repeated.
- Greatly reduce training time and costs for new employees, who can quickly catch up on the way things are done.
- Provide a clear chain of command, freeing up business owners and top-level staff to drive the business rather than repeatedly and unnecessarily support team members.
- Improve customer communications through scripts and processes that increase sales, improve customer retention, and drive profits.
- Lower stress for all staff members, boosting efficiency and improving the workplace environment.
- Avoid the huge cost of lost knowledge when a high-value team member leaves, as their specialist understanding will have been documented for future use.
- Make the business scalable for potential multi-site growth, franchising opportunities, and more.
- Present the business in a structured and professional way, opening the doors to investment, greater levels of debt finance, and a higher-value for any eventual sale.
The investment in creating SOPs for your business will result in some of the largest long-term cost savings possible, giving your business stability, flexibility, and a forward-looking outlook that presents you well for both investors and customers.
How Clifton Helps
When seeking funding, our team work with you to present your business to lenders in the best possible light. Confident and comprehensive SOP documentation gives you a far stronger position that can result in lower rates, larger loan values, and more flexible loan terms. We can advise you on the areas of your business that could benefit from focus, allowing you to develop and cement your processes in the right way to secure superior funding options as well as investment.
Whether you are a small business looking for early funding to bring your business to life, or a large company seeking managed finance for an IPO offering, working with Clifton to develop and make the most of your SOPs will greatly increase your chance of success.
Reduction 9 - Streamline Your Financial Infrastructure
When you are looking to take control and manage your money, it is essential that you invest in the accounting systems that underpin the whole operation. If you are unaware of the finer nuances of your business accounting, then you cannot possibly control it.
Outdated banking, poor accounting system, substandard reports and similar issues will hold your business back from its true potential, leading to ill-informed decisions and missed opportunities. By reviewing these core systems, you put the whole puzzle of how to reduce business costs together.
There have been many improvements in banking apps and online account controls over the past few years, with the challenger banks driving the arena with powerful tools.
Some of the most simple additions can make a huge impact and save you on unnecessary costs. Consider:
- Alerts for transactions over a certain amount, to keep a constant eye on the money moving in your accounts.
- Integrated ‘pots’ or savings systems to allow you to allocate money appropriately as it comes in.
- Usage tracking to categorise outgoing payments and track your expenditure.
- Direct in-app control over credit limits for overdrafts and credit cards.
- Instant payments that improve your standing with both staff and suppliers.
- Additional security of layers to help avoid fraud and scams.
- Easy-to-use interfaces to see your financial situation at a glance.
If your banking interfaces are missing these increasingly standard options, consider making a switch.
Your financial infrastructure doesn’t end with banking, however. The same level of diligence should be applied to your accounting software.
Work with your accountant to make sure you have an up-to-date accounting platform that provides direct digital integration with other systems, such as your banking or HMRC for corporation tax and VAT returns. With the power of modern technology, reports should be comprehensive and streamlined, with functionality for KPIs (Key Performance Indicators) that help you see exactly what you want to see, when you want to see it, to keep on top of every aspect of your business finances.
In a world of cloud-based accounting systems, rapid app-based online banking, and immediate money transfers, there is no reason to ever fall behind in understanding your business financials.
With your eye on the money as it moves into and out of your business, you will be able to keep costs low, increase profit, and run a slender business with no waste.
Reducing Your Business Costs with Clifton Private Finance
When you lower your costs, you do more than just keep your business growing - you open up to the many opportunities for expansion that will take your business forward. Making those savings means your cash flow improves, your capital grows, and you have the money you need to reinvest into your business.
When you have the systems in place to view your financial standing at a moment’s glance, and a strong partner in Clifton Private Finance by your side, you give your business the best possible foundation for a thriving and profitable future.
Whether you are tightening up to gain some control over current chaos, or are looking to unlock your asset equity for a complete debt restructuring that’ll lead to expansion, Clifton Private Finance are the partner of choice.
Contact us today to discuss your business’s unique situation and discover how our expertise can be used to enter the next stage of business stability and growth.
