Critical part of cultivation is careful cutting

There are always more ways to prune expenditure, writes Nina Hendy.

There are always more ways to prune expenditure, writes Nina Hendy.

Slashing costs is a favourite pastime of business owners as the new financial year rolls around, with most businesses able to reduce costs by about 18 per cent, according to Expense Reduction Analysts.

Immediate savings are commonly found in electricity, insurance, telecommunications, office supplies and recruitment, ERA general manager Brett Coulston says.

Here are five tips for cost cutting.

Make sure everyone wants to save money

Introducing capital expenditure forms can be a great move for a small business. A capital expenditure form that must be signed by the business owner before any purchases over a certain amount are made can limit spending greatly.

Overseeing travel costs is important, as even costs on interstate trips can vary greatly.

Oscar de Vries, founder of natural shaving range Oscar Natural, began exporting his products to Europe last year, which means regular travel. But he has found a way to keep costs down. "Return airfares out of London or Amsterdam can be 30 to 40 per cent cheaper than buying return originating in Australia."

Control the supply chain

Dean Ramler operates in the furniture industry and managed to cut costs by eliminating most of the traditional middlemen in the supply chain. The founder and chief executive of Milan Direct delivers furniture direct from the manufacturing floor to the customer. "As such, we have tight control over all stages of the supply chain. It's also a very efficient way to do business."

Shane and Eugenie Pepper also reassessed the supply chain, negotiating better prices with manufacturers when taking over the family business, Plum baby and children's fashion, two years ago. The business was no longer profitable, so slashing costs was the only way, Shane Pepper says.

"We also negotiated better rates with the freight company and switched many suppliers. We are now profitable and our sales have doubled in the past year," he says.

Go paperless

There's a whole host of tools, apps and software hitting the market to keep the transition to a paperless business smoother than ever before. The move can also save a business a surprising amount of money.

The owner of national online retailer Cheap Sheds, Krisztian Panczel, says he would never go back after converting to paperless in 2008. Employees aren't required to print documents and everything is done and stored in the cloud.

Panczel says being paperless saves thousands of dollars - but there are other advantages.

"Being a paperless company also improves your standing with customers concerned about the environment. It's a way to connect with them and show that we're also working towards a brighter future."

Outsource

Outsourcing back-office processes to the Philippines was the only way to keep moving firm MiniMovers out of financial strife. The company was struggling after the global financial crisis as people stayed put in growing numbers.

Business founder Mike O'Hagan says big changes were the only way, and set about outsourcing marketing, some general administration and customer service roles to Manila.

"Outsourcing meant we could offer better customer service and improve our marketing plans. By doing this, we restored profit and in turn saved hundreds of jobs here in Australia."

Question everything

Having already organised office space in swanky Darlinghurst, Rohan Gamble was keen to do the office fitout as cheaply as he could for his business, financial information site Mozo. He turned to eBay and used office furniture stores.

"We fitted out Mozo so cheaply our auditors queried the amount. We had a fully furnished office, including the boardroom, for $1100."

Ask questions of all suppliers, because prices are often set based on what the market will pay, as opposed to what a product is actually worth, Coulston says.

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