There are two types of costs for businesses which are variable costs and fixed costs.
Variable costs depend on sales as well as supplies such as stock, postage, delivery costs, packaging, and others. Fixed costs are generally always the same; they have set amounts counted for by businesses such as accountancy fees, bank fees, monthly bills such as electricity and rent, etc.
To know how much you are spending, and to keep track of your costs, it is best to write them down, so you know the exact amount spent per day, week or month. After you have your list ready, go through each cost, and see if you can find possible ways to reduce them. Don’t think that any saving is ever too small, the sum of all parts can add up quite quickly your business could be saving lots of money in the long run.
Some suggestions which you could think about:
- Finding cheaper utilities providers.
- Changing bank to look for terms and offers that might be more favourable to your business.
- Think about what other providers you use – many, like AIMS, now also charge a fixed monthly fee
Reducing variable costs can be much trickier, especially where they are costs directly associated with your business:
- Try to negotiate some of your highest ones
- Find possible discounts by buying in bulk
- Always ask for a discount – what the worst that can happen?
- Scrutinize your costs and try to eliminate some which can be unnecessary
- Are there any of your variable costs you can move to fixed? at AIMS, we charge fixed fees agreed in advance for accountancy work, so what was variable can become fixed.
Why does this matter to SMEs?
Overall, reducing your costs gives you the opportunity to have more available cash at the end of the month, make more profit, and improve your business’ numbers.
For anything related to Accounting, AIMS is available locally across the nation at the same price per month paid by Direct Debit – no nasty surprises. Get in touch with your local accountant for more information.