Some business expenses, such as rent and salaries, remain fixed throughout the year. Yet others can be scaled-up or down by month and season. Knowing which expenses to cut – and when to do so – means that you’re always operating as efficiently as you can.
For a small business owner, managing expenses through the year is crucial for maintaining a healthy cashflow. This means forecasting your outgoings and knowing when and where you can make cuts. We've put together a useful guide on what expenses you can scale down at different points of year, so you can fully optimise your budget.
Peak sales season
Your peak sales season is unique to your company. For ecommerce businesses, it’s typically Christmas. Yet for accountants, it’s often fiscal year-end. Whenever it is, it’s a good time to focus on reducing the costs associated with volume.
- Packaging – the key to cutting packaging costs is to calculate what you actually need to protect your stock and the size and weight of the packages you're sending. Use a CAD system, such as Solidworks, to accurately calculate the dimensions and strength needed for your packaging and see where you can trim down. You can use a sample of Solidworks for free as a trial, too.
- Shipping – negotiate with your current carrier and see if there’s any scope to lower your shipping rates on bulk orders. Similarly using a service like Parcel2Go is a great way to easily compare all couriers and is cheaper than going direct too. If you're set up on Shopify as an e-commerce site, it's worth also exploring their Shopify Shipping service, as they claim to be able to save 90% on usual costs. If you're not a member, you can still sign up for a free trial and see for yourself.
- Graphic design – to save money on the POS, promotional materials, and web designs that you'll likely have a larger appetite for in peak sales times, look into online marketplaces for freelance creative talent, such as Crowdspring, Fiverr, and 99 Designs.
The summer season typically sees a decline in demand in most industries, as your customers, clients and employees enjoy a break. Use this time to plan ahead and cut-back on several expenses.
- Try a four-day work week – Henley Business School estimates that there have been £92 billion in savings made by businesses who have implemented a four-day working week. And with summer on everyone's minds, there's no better time to experiment this philosophy. With people spending less time at work, you'd be able to cut back on expenses such as stationery and utility bills. Read more in our guide to the benefits of the four-day work week.
The end of the year often sees people more likely to be away on holiday, whether that’s your clients, customers or employees.
- Recruitment – given the reason above, it’s not the best time to spend on long-term recruitment. The year-end is, however, a good time to look into hiring interns, as many soon-to-be graduates will be looking into work experience for their last semester. According to a report published by the University of Birmingham, interns can effectively reduce recruitment and training costs if an offer is made to them after the completion of the internship.¹ Just make sure your internship programme is compliant with Government regulations.
- Sustainability practices – as you wrap up the year, this is a good time to think about how sustainable your business is. Consider using more local suppliers to reduce shipping costs, limiting your office's paper supply, and donating underused office furniture and equipment to charitable organisations. It's worth noting that donations can also help cut down your corporation tax bill.
This is the time to scrutinise every outgoing and question the value it brings to your business – with the aim of cutting down your corporation tax bill.
- Contract and subscription renewals – many of these are likely to renew around this period, so it’s the ideal time for price comparisons. See if you can get a better deal for your business insurance, monthly utility bills, rent, and any software subscriptions.
- Business expense claims – claiming all your expenses will keep your corporation tax bill down. This includes office equipment, phone bills, mileage on your car, books or magazines you use for work and even events. If you work from home full-time or part-time, you can also claim this against your tax bill, too.
- Pay yourself – Salaries of business owners is considered a business expense. Setting aside your own compensation before the end of the accounting year can cut down your profit, and therefore your corporation tax bill.
With an American Express® Corporate Card, you can manage your business's expense payments from one central hub, while having complete visibility and control over your employees’ expenses – so you can keep a close watch on what other business costs you might be able to scale down. On top of that, you’ll earn Membership Rewards® points every time you spend. ²
- Ismail, Z. (2018). Benefits of Internships for Interns and Host Organisations. K4D Helpdesk Report. Birmingham UK: University of Birmingham.
- Membership Rewards points are earned on every full £1 spent and charged, per transaction. Terms and conditions apply.