20 February 2012

Reduce your costs

Jan 2012 cash

Industry expert Adam Bernstein provides some tips on tightening up your finances...    

Banking and finance
First, take a look at your banking arrangements - can you get a better deal? Use the British Bankers Association bank account finder at http://bba.moneyfacts.co.uk/ to make instant comparisons. It's quite simple to use and you'll see a huge spread in the prices charged by the banks. You'll also notice that it's quite possible to get free banking with products such as HSBC's Business Direct account.

Interest rates are low with some deposit accounts paying at best 2.5%, but as inflation (at the time of writing) is 4.8% and some credit cards are charging 25% or more, cash may not be working for you. Sure, cash in the bank is necessary for a rainy day or to pay tax bills, but having too much cash on deposit is going to sting if your business has debt. So can you use cash to reduce your indebtedness? If you do have to keep money on deposit, make sure that you regularly check for the best rates on websites such as www.moneyfacts.co.uk and www.moneysupermarket.com.

Also look the cost of any merchant services (credit cards) you use. Take a look at http://www.theukcardsassociation.org.uk to find a (different) merchant acquirer.

None of us can live with out a telephone, fixed or mobile. Similarly, we all rely upon broadband. Take time to check your contract for the rates you are being charged, looking especially at the termination period you need to observe. As you look for savings consider not only alternative technologies such as VoIP (think Skype) where the internet becomes your phone line, but also the deal you sign up to. Don't just examine the headline charging rate, look also at whether calls have a connection fee; are billed to the nearest penny, tenth of a penny, minute or second; or if there is a 'free' call allowance - some BT products will let you talk for up to an hour, free of any additional charge, to any standard geographical number as well as 0870 and 0845 numbers. Also look at using your mobile, with its inclusive allowance, to make calls to another mobile. Why pay for a call twice? Consultancies such as www.utility-options.co.uk can help with deals.

One of the biggest fixed costs a business may have is its premises. Examine a lease, before you sign, looking carefully for terms that cover dilapidations (where you, the tenant, could end up almost rebuilding the premises at the start and the finish of a lease - at your expense), subletting so that you can offload part of the premises should your space needs shrink, and how rent reviews are conducted.

If you do find yourself in a spot of bother, see if your landlord will agree to either a rent reduction or monthly instead of quarterly payments so that at least the peaks and troughs in your cashflow are evened out. The threat of empty premises may help.

Check that you paying the right amount in business rates on the VOA website at www.voa.gov.uk.  You'll find information on how to appeal, and the grounds, if you think the value is wrong. Appeals are free.

Office costs
Turning to your 'office' and equipment costs, think about buying less expensive 'own brand' stationery, but be careful as presentation is everything. If you're in the market for equipment think about buying refurbished - you'll invariably be able to get a current (or a very recent) product with a standard warranty and huge savings. Dell - http://www.dell.co.uk/outlet - and Apple - http://store.apple.com/uk/browse/home/specialdeals - for example, have plenty of discounted devices on offer through their outlet websites.

You can go further. Whilst you may need to invest in bespoke design software, you can make savings with open source office software. As an example, whilst OpenOffice is free it'll do most of the things that Microsoft will charge £340 for when you buy a one user copy of Office Professional 2010.

Look also at your print costs. Don't just look at the cost of a printer, look at the long term running costs of the toner, imaging drums or the ink cartridges. Compatible, rather than original, consumables can sometimes offer twice the ink or toner for half the price of the original.

You can't have failed to notice the prices of gas, electricity and heating oil rising. Whilst there isn't a huge amount you can do about the cost of heating oil, you can take steps to minimise the impact of gas and electricity price rises. Unlike domestic users, businesses have annual contracts with no escape apart from a short notice period. But the notice period comes sometimes between 120 and 90 days before the contract ends. Failure to give notice means being rolled into a new contract with higher prices. Diarise when your notice period is due. Also look at using energy consultants (say www.utility-options.co.uk) to check out the market for a better rate on your behalf; business users cannot use the likes of uswitch.com in the same way as domestic users as the rates are dependent on a multitude of factors including the business itself. Consider switching supplier every year to take advantage of introductory pricing; suppliers use these to tempt and trap forgetful business customers.

There's no doubt that insurance rates have risen too, but their effects can be reduced if you regularly take time to shop around. Inertia will hurt your bank balance. Either find a good broker who will trawl the insurance market for you or search the web yourself - a quick search of Google for 'business insurance deals' returns plenty of companies who can help. As you review your insurance needs, look further beyond vehicle, buildings, contents and public liability policies. Consider keyman insurance (pays out a survivor where a 'partner' dies or is incapacitated), critical illness (pays out where someone is diagnosed with a serious illness) and income protection insurance (pays a regular income following incapacitation). They're small extras that may just help should disaster strike.

What do you think? Email the editor