Business expenses – when to spend and when to save
Running a profitable business is a balancing act. You need to decide where to spend and where to save in order to get the best long-term return for your business.
But are there some areas where it’s not a good idea to lower your spending? Definitely.
Here are some areas where it may be tempting to cut costs, but skimping now may end up causing you a lot of stress in the long term.
Under-insuring (or not insuring at all) the key assets of your business may work out for you – provided nothing ever goes wrong. But if things do go wrong, it could mean the end for your business, as well as a great deal of personal stress.
There are a lot of different types of insurance, and every business is going to have different needs. Getting a professional to look at your business and outline an appropriate insurance plan is a good idea to help you make informed decisions. And if you’re still not convinced that paying for appropriate insurance cover is a good idea, consider the impact on your business if any of the following occur:
- a key piece of manufacturing machinery breaks down and a replacement part cannot be sourced for several months;
- an unexpected health condition results in you being unable to work for 6 months;
- a staff member has an accident in the company car resulting in a third-party vehicle being written off – and is found to be at fault; or
- a customer has a fall at your premises and requires hospital treatment
Any of these things can happen easily and with little, or no, notice. And without insurance they could see the end of your business success.
Repairs and maintenance
We all know the old adage “an ounce of prevention is worth a pound of cure” – and those ounces and pounds are dollars when it comes to keeping your equipment functioning. Additionally, a well-maintained machine will generally last a lot longer than one that is neglected.
As a business owner you should also be especially careful if maintenance requirements are required by law for health or safety reasons – being shut down by the health department or having your vehicles deregistered or grounded is never good for business.
This may seem like a strange one, and for certain types of businesses type of the software they are using (and how old it is) may not make a big difference. However, technology is constantly changing, and there are software packages out there that can save you a lot of time by automating functions that previously you (or your staff) would have to do manually.
If you spend several hours every month entering bank statements into your software, this is time you could spend more productively working on your business strategy or building relationships with new clients. Or perhaps even having a holiday to recharge! If you pay wages, keeping software up-to-date also means you are more likely to keep up with legislation and award changes, meaning you’re less likely to have a nasty surprise where Fair Work or the ATO come asking about your lack of compliance.
Considering staff costs isn’t just about deciding whether you should pay your employees more money, although how much you pay can certainly be a factor in overall staff satisfaction and retention.
You need to think about what will make your employees more productive which in turn brings better results for your business. You also need to consider what will make good staff stay in the team. Replacing staff costs money – in advertising, in training – and keeping good staff may be a matter of spending a little bit more to save a lot. Happy staff are more productive, friendlier with customers, and less likely to move to greener pastures. Consider some of the following expenses and the potential pay-offs for both your business and your staff:
- providing coffee and tea making facilities for when staff are on break
- celebrating milestones and achievements with small gifts (or cake!)
- sending staff to training sessions to help them upskill
- with casual and part-time staff, rostering extra hours to those who will be most productive or better with customer service, rather than those on the lowest pay rate
- acknowledging outstanding workers via bonuses, pay rises or promotion
All businesses have expenses – the trick is not to spend the least, but to get the most out of every dollar you do spend.
Need advice on insurance, software or any other aspect of running a business? Give us a call and we’ll help you move forward.