Cash flow management

Ideas to help manage your costs

Good business management means keeping an eye on your costs, because a blow-out can seriously erode your profits. This guide has tips on what to look for, and how to manage your operating expenses to help keep your bottom line healthy.

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Reduce your costs to increase your profit

In business, there are generally two basic ways to increase your profits:

  1. The most obvious – bring in more money. This could mean selling more of your products or services, or increasing your prices (and your mark-up). 
  2. The less obvious – spend less. Many business owners focus on the first option, but reducing your costs is often a quicker and easier way to lift your profits. 

Here are some ideas to help you keep costs under control.

Monitor your overheads

Make it a habit to regularly review your ratio of overheads to sales. Overheads are the ongoing expenses of running your business, such as rent, power, and advertising. You can learn more about overheads in our guide to direct and fixed costs.

Keep an eye out for any changes over time. If costs are increasing in certain areas, find out why – and take action if needed. Your profit and loss statement (P&L) will list out expenses by different categories so you can identify specific trends. 

Identify opportunities

There are many ways to reduce costs without impacting the quality of your products or customer service. Identifying them may require you to think outside the box and be willing to consider changing the way you do things.

Get started by reviewing these areas to see if there are any opportunities to trim your expenses.


Yes, technology can cost money. But it can also help you cut down on everyday business expenses. For example, using a cloud-based service for your IT infrastructure or software could be cheaper than buying and maintaining your own.

Automating time-consuming manual systems (such as switching to accounting software) can save you considerable time and effort. Digital tools like bank feeds for accounting software link your bank records with your online accounting software to make reconciliation easier.

There are also plenty of free apps that make doing business more cost-effective. You could use Zoom, Skype, FaceTime, or MS Teams instead of paying for phone calls, teleconferencing services, or expensive flights. Use Google Analytics to help manage your digital and social media activities, and investigate free versions of email marketing software. You might not need the bells and whistles.

Identify inefficiencies

Many businesses waste a lot of time and effort doing things they don’t really need to do, or doing things in inefficient ways. Improving the efficiency of your business gives you more time and resources to focus on important tasks, without increasing your costs. Make it a habit to regularly review the way things are done in your business, so you can identify inefficiencies. 

For example, are you having a lot of meetings? Meetings can chew up time and don’t always achieve much. When you do need to have a meeting, make sure it’s really necessary. Set a strict time limit, always have an agenda, and make sure any actions or decisions are clearly documented.

Poorly trained staff can increase errors and inefficiencies. So it’s also a good idea to make sure you and your staff have the right training for your jobs. Investing in training and development could save you money down the track.

Assess your products

Do you need to trim your product range? Consider getting rid of poorly performing products or services. For the ones that are performing well, look at increasing production runs or allocating resource for greater efficiency.

Assess your suppliers

It’s important to maintain good relationships with your suppliers, but it’s wise to make sure you’re getting the best value from them.

Test the market by getting quotes from different providers for things you buy for your business. You could also consolidate your purchasing so you buy from fewer suppliers. The more you buy, the better the discounts you may be able to negotiate – just make sure you don't over-depend on one supplier.

Review your overhead costs

Do you really need all the things you’re paying for? Ongoing expenses like phone contracts, always-on advertising, sponsorships, subscriptions, and software licenses can all bleed money from your business. Review them regularly to make sure you still need them – and if you don’t, stop them as soon as possible. 

In particular, look at these areas to see where you could manage costs:


A company car can be handy, but it comes with a lot of ongoing costs such as insurance, fuel, and registration. So make sure you really need it.

Business travel can also chew up a lot of cash, so make sure any travel is really necessary or will deliver tangible returns for your business. Could the same outcome be achieved over a video call?


Finding, employing, and training staff can be a major expense (and take up a lot of your time and attention). Rather than hiring your own staff, consider whether you can outsource certain tasks such as administration, accounting, or manufacturing. 


Is your marketing working as hard as it could? You’ll likely need marketing to reach your customers, but it can also be a major expense. Consider reducing spend in areas that don’t perform. 


If your rent is creeping up, talk to your landlord. They may be willing to review your rent, or perhaps link the rent to your turnover – so if the business does well, they get a higher rent, while if your turnover declines, so does your rent.

Depending on your business, you may also want to consider moving to a more cost-effective location.

Power and waste

Whether you use a lot of power or a little, or make a lot of waste or not, reducing these amounts is good for business and good for the planet. Shop around to see whether you can get a better deal on your power.

Make sure you’re taking advantage of ‘easy wins’, for example:

  • Buying energy-efficient appliances and equipment
  • Investing in recycle bins for the office
  • Buying used equipment instead of new
  • Switching off computers and lights when not in use.

The little things add up.

Ask for help

If you have staff, get them involved. They often have a closer understanding of where you can save money than you do.

Your accountant will typically have experience with businesses in many different industries so should be able to help you identify opportunities to reduce costs as well. 

Striking the right balance

Managing costs carefully is good, but it’s a balancing act. Make sure any initiatives don’t damage the long-term health of your business. Here are some things to be wary of.

Over-dependence on one supplier

Reducing the number of suppliers can save time and deliver more bargaining power, but depending on one supplier puts you at risk if they fail.

Controlling finances too tightly

Obsessing over every penny can leave you without a safety margin, and can be bad for morale.

Not investing for the future

Make sure you continue to invest in important areas like training, advertising, and new product development. Failure to invest can weaken the long-term viability of your business.

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