V4B Business Finance

Overhead costs – How to cut yours and reduce business spend

One of the first areas business assess when looking to reduce costs are overheads. Representing several different areas, overheads don’t just cover the obvious premises.

Any expense which isn’t related to labour is classed as an overhead. Which means a range of expenses such as utility or telecoms bills, fees for advertising, accounting or legalities, insurance, rent, repairs or additional travel costs are classed as overheads.

Employees’ salary costs do not fall under the overhead category along with the manufacture or delivery of products.

The range of categories under the overhead title are far-reaching which means there are several ways for businesses to reduce costs. We look at some of the ways you can cut your overhead spend:

Review the business – run a tight ship

The first step should be a full business review. Analyse all overhead costs and pinpoint potential areas where cost savings can be made. For more information on calculating your overhead costs click here

Employ an accountant

Despite the initial outlay an accountant will be able to spot deductions that you may have missed. It would be an investment to hire an accountant and despite the up front costs a review of your book-keeping could produce long-term savings.

Review suppliers

Is it time to refresh your suppliers? Times change, and costs can vary hugely between different suppliers. Utility and telecoms providers should be assessed on an annual basis as switching provider is a simple way to reduce costs.

Complete an equipment audit

Complete a full equipment audit and assess whether every piece of equipment is still being used. Redundant overheads can be re-sold or discarded. Many companies lease equipment which can prove to be more cost effective in some cases.

Move to paperless

Many companies have already switched to a paperless culture. If you’re not one of them make it a priority, if not for the cost savings there are also the environmental benefits. Scan and email documents, use webinars and reduce the amount of time spent on the printer and photocopier. Reducing the amount of paper used could eventually lead to reduction in the number of machines needed.

Assess premises

Is downsizing an option? Many companies now promote home working to reduce overheads, with some providing a fewer number of desks than employees to force a work-at-home culture. If this isn’t possible could you relocate to a less expensive area?

 

 

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