HTH Accountants Managing Director Kieran Horgan shares his experience and advice in this challenging area. 

There is much attention on the rising cost of living.

As business owners, we also have the challenge of managing increased costs. I can relate to this pressure, so I thought I’d share some of the areas I continue to recommend and consider while managing costs for my business in case they help you.

1. Track your cash breakeven figure

First and foremost, I keep my eye on the cash breakeven figure for my business.

Your cash breakeven figure is the monthly sales figure required to meet the needs of all your stakeholders (including you), so it’s an important metric for you to track.

Referring to our business income forecast, I can see whether we are likely to reach this figure over the coming months. Forecast looks good. Happy days!

When we are short of the breakeven figure, I look at the impact on our marketing strategy and form a plan to bridge the gap.

There will be several areas you can ‘pedal harder’ on to increase the short, medium, and long-term income of your business.

For example, working to increase the number of recommendations your customers make to others. Increasing the level of new business leads and conversions. You’ll know what these areas are for you.

2. Regularly review your costs

A basic tip but one that bears reinforcing.

We all know costs are rising, but which of your costs are necessary to running your business? Are there any that you can stop, without it adversely affecting your business? A bit like having an unused gym membership, there can be subscriptions and so on that are no longer relevant to running your business that you can stop paying.

3. Cashflow forecasting

Cashflow issues for many businesses are being exacerbated by the current rise in business costs.

Using a 13-week rolling forecast helps you maintain control and peace of mind over your cashflow.

The accuracy of a forecast degrades the further it extends into the future. 13 weeks provides enough visibility for you to prepare for any cashflow issues before they occur and supports longer-term strategic decision making, while remaining short-term enough to be able to provide a high degree of accuracy.

If you struggle to set up your 13-week forecast, drop me an email.

4. Convert ideal work

Make sure you are converting ideal work for your business. Ideal work being work you are able to manage effectively to generate a healthy profit margin, thereby helping to increase the contribution towards your rising overhead costs.

5. Team structure

Is your team motivated and working effectively?

Checking in regularly with team members will allow you to understand how your people are feeling and whether there are any negative influences on this. Knowing allows you to act and keep the squad fit and healthy.

6. Business systemisation

Carrying out your regular working tasks in an efficient and consistent way saves your business both time and money. Not to mention providing opportunities to delegate tasks effectively and provide a more predictable experience for your customers (which saves you money as you will keep more of them and avoid the expense of replacing them with new customers).

The process of systemising your business can seem daunting and this may have led to you putting off the task and missing out on the huge number of business and personal benefits it brings.

7. Use your tax and employer allowances/grants

Your business is entitled to certain allowances. This will differ depending on your business status and circumstances, but here are few of the main ones. Make sure you use these allowances. Also keep an eye on what Grants and Allowances are available especially from your local Enterprise Board.