BUSINESS ADVICE • 23 JULY 2021 • 4 MIN READ

Business tips – reduce expenses

SECTIONS

Use technology

Use third parties

Review three expense codes

Cut your wage bill

Example

What’s easier than increasing sales? Decreasing expenses!

Use technology

There is so much software out there now to help you be more productive so invest some time looking for technology solutions.

Your existing software may already have functions to reduce your time performing menial tasks. For example, did you know you can set a bank rule in Xero to reduce your reconciling time?

Create a bank rule
Create a bank rule (video) [2:23]

A lot of different apps communicate with Xero, MYOB, and other accounting software.

Payroll systems can tie in with your accounting system
Hubdoc can scan your invoices, “read” them, and convert to Bills to Pay in Xero (it’s free with your Xero subscription – you probably didn’t know you had it!)
Your invoicing system should have the ability generate reminders to clients
Shopify transactions can be uploaded in most accounting software systems

Use third parties

There are actually people out there who love doing the things you hate! OK – it may actually increase expenses, but the intangible benefits may outweigh the cost.

What you need to consider is the value of your time – not necessarily in dollars.

A book-keeper may spend three hours a month on things that take you six

Is it worth paying $150 for an extra six hours with your family, friends, exercise?

Debt collectors can “buy” your receivables, giving you money up-front. They can also chase your customers in exchange for a percentage of money collected.

What’s best for you – spending your time sending reminders, phone calls, letters for late payers, or paying somebody to take that stress away?

A new employee could lessen your stress and workload, even on a part-time basis.

Again – weigh up the cost against improving the quality of your own life.

Review three expense codes

Often costs just start to add up. You’re busy in your business, not watching every payment or invoice, and several things can happen:

You keep paying smaller accounts, even though you know they are not providing any great service for you, but it takes too much energy to review and cancel smaller amounts
You’re paying too much for some goods and services because you feel loyal to a supplier, or it takes too much energy to review
Better solutions have come along but inertia is keeping you with the same old solution

So, pick a rainy day and if your accounting system is reconciled and up to date, pick any three expense codes and look at all the transactions for one quarter. A good starter is examining Advertising costs. Are you getting any benefit from being in the Yellow Pages and printing flyers, or would digital be better?

Check out Account Transaction Report from Xero.

Make notes as you go about any improvements that you can see (I guarantee you will find something!)
Set aside some time to implement the changes
Do it!

Cut your wage bill

This is not an invitation to fire people or cut wages for individuals! Many businesses are constrained by how many good people they can find. This is a tip around using the good ones you have to better effect.

Inefficiencies can creep into businesses, even with the best people. We get comfortable doing the same processes and then it becomes hard to change them.

This is all about creating more productive systems for your good people to work in:

Spend time with your key people, talking about where they spend the most time, what frustrates them and if they have any suggestions for change. Usually, the people doing the work have the best idea about how to improve things
Write down the changes they have suggested and review them – do they make sense to you?
If the answer is yes, empower change in your team. Let the person who suggested a change, lead it, with your support

Set a target for improvement, say 5% less time on a task.

Make sure you have some way of measuring the improvement so that you (and your team) know when it’s achieved.

Example

In Beany, we used to have a tax summary and a management letter to our clients. Both documents took quite a bit of time to prepare and upload. We had always done two documents and we kept doing it until a new team member said “Why don’t we include the tax payments information in the management letter?” Seemed rather obvious when someone pointed it out! We amalgamated the two documents and saved 20 minutes per job.