1. Review your existing loans and policies
Marketplace lender HashChing suggests that self-employed borrowers are paying up to 1 per cent more on their home loans.
“This is due to a misconception that they aren’t able to negotiate a better rate,” says Mandeep Sodhi, CEO of HashChing.
The same could be said for business loans and even insurance policies, whereby business owners fail to shop around for better deals or ask their existing provider to reward their loyalty with a discount.
This is where seeking out the services of a finance broker can be useful. Alternatively, you can turn to one of the many comparison sites online.
“Savings can be substantial. Clients often tell us they have saved hundreds or even thousands of dollars,” says Michael Gottlieb, founder and managing director at specialist SME insurance platform BizCover.
“We’ve recently helped a bar owner save $1,600 on their business packaged insurance, a marketing consultant save $800 on her professional indemnity insurance and an IT consultant save over $200 on his professional indemnity and public liability insurance.”
According to Michael, another benefit of using such platforms is cutting the time it takes to sort through policy Ts&Cs, product disclosure statements and quotes.
“It can be quite painstaking if you are getting individual quotes and reviewing the individual product disclosure statements. However, the beauty of using a comparison service like BizCover is that we do all of that for you,” he says.
“We provide a comparison table of the products available, detailing all the important information such as inclusions and exclusions, as well as limits, excesses, extensions and endorsements, so when you are reviewing policies, you can see what is and what isn’t included in the price and make an informed decision.”
2. Explore different postage/courier options
Traditionally, businesses relied on the national postal service, Australia Post, to ship goods.
However, as the internet of things makes online and remote purchases the norm, the logistics sector has been forced to dramatically change its service offering to deliver their customers and end users more efficient, timely and favourable delivery options.
Danielle Sweeney, who started calligraphy business Design in Words in 2011, relies on the shipment of completed works and supplies.
For items that needed to be shipped to customers quickly, she found that traditional postal services and couriers weren’t fast enough or downright unreliable.
“I'm constantly shipping around the country, and for that I use Australia Post. But I do ship a few time-sensitive parcels a week within Melbourne … one or two a week; sometimes it can be as many as five. For those within Melbourne, I use Zoom2u,” explains Danielle.
“I was having a really hard time working with couriers for same-day work because they simply weren't interested in picking up maybe one parcel a week, or up to five parcels a week. In order to get that, I had to pay much higher freight rates.”
Not only is the service convenient, says Danielle, but her shipping costs have been cut by as much as half.
“It was costing me at a minimum, I would say, about $45 previously to have anything delivered on the same day, and that can run as high as $90 or $100 to have it pretty quickly,” she says.
“[Using Zoom2u has] cut out my time commitment greatly, and … I would say it's cut down on my courier costs by about 50 per cent.”
With such savings available, it definitely pays to shop around and find a postal or courier service that offers the best value for money.
3. Consider process automation
Automating some or all of your business processes can be a nifty means of reducing your overall expenses bill, while simultaneously delivering a boost in productivity.
Credit Union Australia (CUA) revealed to My Business that it is expecting to slash an impressive $300,000 from its annual travel bill this financial year – a saving of nearly 30 per cent. The cuts are being achieved after it began using travel management platform Travelport Locomote.
“Previously at CUA, we were using a very old method of approvals, if any, and there were a number of different ways to book [travel]: phone, email, and through a slow, clunky system,” says CUA contract specialist Kathryn Crooks.
The new system allows CUA to centralise all staff travel bookings, enabling it to track spending more efficiently and identify opportunities to reduce wastage.
“Within the first month we saw a huge drop in spend. This was to be expected, but then month two and three also saw considerable decreases,” says Kathryn.
“We estimate to save at least $300,000 this year.”
Such have been the benefits of the new management platform that CUA is now exploring other areas where similar efficiencies could be made.
“At this stage, CUA are looking at a number of digital solutions, organisation-wide,” says Kathryn.
4. Do away with ‘bricks and mortar’
To think a little more drastically, consider whether you need commercial premises at all. Some businesses have found that they can eliminate the need for workspace entirely.
Digital development firm reinteractive is one such example, operating with a 100 per cent virtual workforce. Its staff work from their home and are scattered Australia-wide. Its founder, Mikel Lindsaar, says that having your staff work remotely adds an extra challenge to your operations initially, but in his experience the benefits far outweigh any preliminary headaches.
“With remote work, it adds a layer of complexity to that,” Mikel says.
“[But] it was a really conscious choice to do that, because I don’t like working in an office, so we just made it work, and [there’s been] a lot of different learnings along the way.”
Part of that learning curve has been ensuring that all of his employees – who number just under 30 – are kept on the same page.
“The way we handle it is pretty simple – we use online tools such as Flowdock,” explains Mikel.
“A lot of people might have heard of something called Slack, which is an online chat collaboration tool, and we have a different room for every project that we are working on. In fact, we have two rooms for every project we are working on: we have an internal room and a client room, and we invite our clients into that room, we talk to them and they are involved in the process.”
This process of documentation, according to Mikel, has delivered some unintended benefits.
“Because we can’t just lean across the table and talk to a staff member, we have to document what we are doing. By being remote, it means we have to document more, which actually makes us more transparent to the customer … and they actually really like that,” he says.
“One of the most common compliments we get from a software development point of view is, ‘You’re so transparent – for the first time, we can actually understand what you’re doing!’”
Mikel also says that working remotely has enhanced the productivity of his employees – particularly for people in the creative fields.
“What I’ve really found is that it’s forced us to treat our staff like adults. Our development team also like that they can disconnect [to focus on a task],” he says.
5. Take a look at managed services
Managed services may seem like yet another expense rather than a cost-saving, but if tailored to the needs of your business, you could pocket a tidy saving.
Managed print services are one such example. Research conducted by imaging company Photizo Group suggests that businesses using a managed print service can reduce printing costs by close to a third (30 per cent).
Benton Johnson, the product marketing manager for optimised print services at Konica Minolta, has previously told My Business that the cost-saving potential is often lost on SME owners.
“What we see, especially in the SME space, is that a lot of businesses don’t understand the true cost of their printing environment,” he explains.
“I see managed print services as being the active management and optimisation of a client’s printing environment.”
Benton adds, “Managed print services [are] moving from a device focus to a user-based focus; so not just looking at the printing equipment, but also looking at the people who are using that equipment and how they’re using it.”
6. Take advantage of ways to minimise your tax
Many tax experts agree that SMEs often get caught paying more tax than they need to.
According to one of Australia’s largest providers of tax depreciation schedules, SMEs may be missing out on valuable opportunities to reduce their tax bills by not maximising legitimate depreciation deductions on the commercial property they own or rent.
ATO rules permit commercial property owners and tenants to simultaneously claim for two categories of deductions: a capital works allowance for structural features, and plant and equipment items, which are removable assets.
Bradley Beer, CEO of BMT Tax Depreciation, believes a better understanding of commercial depreciation rules is invaluable to SMEs of all types, as deductions and their value can differ from industry to industry.
“Many SMEs may be missing out on increased cash flow through a lack of understanding about all the legitimate tax deductions they can claim for many things in their working environment,” says Bradley.
“For example, business owners may need to fit out premises with assets such as air conditioning, security systems, telephone systems and furniture such as desks, chairs and kitchen facilities.
“Security systems may cost around $6,100, attracting a first financial year deduction of $2,440, and telephone systems may attract a $454 first-year deduction.”
According to Bradley, BMT most commonly completes depreciation schedules for office spaces. However, during the 2015-16 financial year, the company witnessed a 51 per cent increase in requests for agricultural depreciation schedules, a 67 per cent increase for childcare centres and a 32 per cent increase for hotels and motels.
“Farming equipment can attract some unique, big-ticket deductions for agricultural business owners,” he explains.
“In terms of first-year deductions, tractors may attract $13,800, livestock grids may attract $4,140 and grain storage silos around $2,295.
“Play equipment is essential for a childcare facility and can be valued at around $92,183, which may amount to a deduction of $36,873 in the first financial year.”
Deductions that may be found in hotels include beds, which can have a depreciable value of around $62,500 and a claim of $17,857 in the first year, and commercial washing machines, which can be valued at $67,500 and allow a first-year claim of $13,500.
“Whether you own or rent your premises, or even if you work from home, there may be a wealth of unexpected and value-laden deductions you are entitled to,” says Bradley.
Of course, this is just one of many types of deductions to which businesses are entitled. As such, it pays to have full and frank discussions with your accountant about what you can and can’t claim.
7. Don't overlook the importance of budgeting
The most basic of all cost-cutting exercises is to draw up a budget. Yet according to business accountant Alexander Laureti, the humble budget is all too often overlooked.
“I really think it's important to have whatever money that you're collecting form part of a budget for the business,” he says.
“It can really help you plan for whatever it is you want to do in your business, but also not to be caught by surprise. I don't think any business owner wants to be caught by surprise.”
According to Alexander, not having a working budget in place can cause a lot of uncertainty, stress and added costs should payments be missed.
“I think that a lot of business owners don't budget. They know roughly what has to happen, but a lot of them get caught by surprise when, for example, the superannuation bill becomes due and payable: they know roughly that super is due at this time, but they're not quite sure how much it is,” he points out.
“The hardest thing for business owners is to have time to plan out what their upcoming obligations are weekly, monthly, fortnightly going ahead. If you don't have an idea of what your superannuation obligations are, and you realise on the day it's due that you need to come up with the money to pay for that, then obviously that gives a much more likelihood of not having enough money at that time to pay that bill.”
Alexander has these tips for business owners to set a working budget:
• Calculate your budget however you feel most comfortable, whether that be on your own, with family members or at least once a year with your accountant.
• Look at patterns over the past year to see when things are due.
• Take note of where your biggest expenses are – it may surprise you to see how much money you are spending on certain things over the course of a year. “You'll start to then realise how much you paid on certain expenses and it gives you the ability to then say 'is this the best spend of my business' money? Should I make some different decisions going forward?’”
• Don’t wait until the new financial year to start budgeting – start as soon as you can. “Whenever you choose to start budgeting for your business, whatever time that you choose to start is better than not starting at all.”
• Look back over your incomings and outgoings over the past six months at least, though 12 months is best to give you a full picture.
• Factor in your most expensive debts first. “Pay the ATO first, because they are the most expensive debt you'll have. At 9.5 per cent interest if you pay late, it is a costly yet avoidable debt to have on your ledger.”
TIP: BEWARE THE DIY DISASTER
Think very carefully before deciding to stop paying for something and take it on yourself in a bid to save money. Three all-too- common outcomes of this approach are:
• You learn that you can’t do it yourself after all, and you’ve simply increased your stress levels.
• It takes time away from your money-making activities, reducing your productivity.
• You make a mess of it, which ends up costing you a lot more to fix than you saved in the first place.
That’s not to say that you can’t look to do things yourself. It simply means that before doing so, factor in the skills and experience of yourself and your employees, the risks associated with bringing the task in-house and whether it is a burden on your time to do so.