Efficiency savings – 5 ways to cut your business costs

At a time when the cost of living crisis is affecting businesses as much as households, this is a good time for small business owners to see if there are ways to reduce their outgoings.

Here are some ways to cut down on your business expenditure, which won’t involve you having to increase your sales!

1. Are you paying too much for your services?

In our personal lives, we often stick with the same insurance providers, banks, mortgage companies, and utility companies, for no other reason that it’s easier than moving and it’s hard to find the time to research the market.

The same is true in business. The chances are, you can find the same service for less by shopping around.

Think of all the things your business pays for on a regular basis – utilities, broadband, telephony, storage, printing services, your insurer, your web designer, and even your accountant.

Your existing suppliers may even be happy to provide you with a discount if you just ask for it.

Unfortunately, there is one cost that is largely out of our control.

The cost of energy has risen so dramatically for business users over the past year, and Government support has been nowhere near as generous for businesses as it has been for individuals.

With the wholesale price of gas back down to mid-2021 levels, let’s hope that energy costs fall sharply too over the next year.

2. Avoid HMRC penalties

In recent years, HMRC has stepped up its efforts to clamp down on tax avoidance, but also rigorously enforces its system of penalties for those who fail to file or pay on time.

Not only can you receive a penalty for late submission of your Self Assessment and/or Corporation Tax return, but further penalties also exist for late payment of tax.

If you make a mistake on your tax return, further penalties may be applied, particularly if any mistakes are deemed to be careless or even fraudulent.

Although a lack of time can legitimately be blamed for a number of other mistakes in business, this can never be used as an excuse for paying your tax late.

As a business owner, you are ultimately responsible for ensuring that you submit all your statutory paperwork online and accurately, not your accountant.

3. Have a separate savings business bank account

Over the past decade, we have witnessed the lowest BoE base rate for centuries. Now, with the official bank rate rising rapidly, you no longer need to suffer zero or minimal interest on your business bank balance.

If you have spare funds, why not transfer them into a higher interest bearing deposit account? It is worth comparing bank accounts, as the difference in interest paid can be dramatic between providers.

Banks always pay lower rates of interest on business deposits compared to individual bank accounts, however you can achieve rates of 2.5% or more via banks such as Aldermore or Virgin Money (May 2023).

Rates are higher for fixed-term and notice business savings accounts, compared to easy access accounts.

4. Claim tax relief

Many businesses are unaware of the amount of tax reliefs they are eligible to claim.

A good accountant should understand the business you are in, and which reliefs you can legitimately apply for.

Just a few examples of tax reliefs include Business Asset Disposal Relief (CGT relief on business assets you sell), R&D (relief for the costs of research and development), the Enterprise Investment Scheme (EIS), and Capital Allowances.

5. Tax planning

You can legitimately reduce the amount of tax by planning carefully. Once again, this is something a decent accountant should be able to advise you over.

Limited company owners, in particular, have a number of options to plan the payment of dividends, for example, to distribute their profits evenly in order to minimise their personal tax liability.

The way your share capital is structured will also impact how much personal tax you pay.

You may also benefit by moving to a different VAT scheme depending on your personal circumstances, and by taking a good look at the tax reliefs you currently claim.