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Running a business will always mean incurring certain expenses, or ‘spend’.

 

There are always costs, overheads and supplier bills that mount up – and these expenses will gradually chip away at your cash position, making it more difficult to grow and make a profit.

 

So, what can you do to reduce your spend levels? And what impact will this have on your overall margins, profits and ability to fund the next stage in your business journey?

 

Getting proactive with your spend management

 

Spend management is all about getting in control of your expenses – and, where possible, aiming to reduce the level of costs and overheads that you incur as a company.

 

Why does this matter? Well, excessive spending eats into your cashflow, reduces your profit margins and stops you from achieving the profits that you’re capable of as a business. So if you can get proactive with your spend management, you can actually make your company a far more financially productive enterprise – and that’s great for your overall business health.

 

So, what can you do to reduce spend and slim down your company expenses?

 

Here are some key ways to reduce expenses:

 

• Reduce your overheads – your overheads are the unavoidable costs of running your business, producing your products or supplying your services. If you have bricks and mortar premises, these overheads will include rental payments, utility bills and even the cost of paying your staff. Drill down into the numbers and see where there are opportunities to reduce these overhead costs. That could mean moving to smaller premises, or reducing the size of your workforce, to reduce payroll expenditure.
• Put limits on staff expenses – if your employees can claim expenses, or buy raw materials and equipment with the company’s money, these costs can soon start to rack up. It’s a good idea to put a spending limit in place, so each staff member can only spend up to an agreed amount. Having a clear expenses policy helps, as will training up your staff in good spend management techniques. Expenses cards – such as Webexpenses, Soldo or Pleo – allow you to quickly set spend limits, track expenses and pull your expenses data through to your cloud accounting platform for processing.
• Look for cheaper suppliers – if you can reduce your supplier costs, this will go a long way to bringing down your overall spend. If you’ve been with certain key suppliers for years, look around for new quotes, look at current market prices and see if you can negotiate better deals. And if your old suppliers aren’t flexible enough, try swapping to newer, more eager suppliers who will be willing to meet you in the middle on price.
• Make your operations leaner – the bigger your operational costs are, the less margin you’ll make on your end products and services. One way to resolve this is to aim for a ‘lean approach’, paring back your staff, resources and operational complexity to the bare minimum. By making the business as lean as possible, whilst still delivering the same output, you keep your revenue stable, but reduce the spend level that’s eating into your cost of goods sold (COGS). The smaller your COGS, the more profit you make on each unit or sale – and that means better cashflow, more working capital and bigger profits.
• Explore tax reliefs – you might assume that tax costs are an unavoidable expense when running your business, but it’s worth exploring which tax reliefs, grants or other business benefits you may benefit from. For example, research and development (R&D) tax credits that help cut your corporation tax expenses if you can demonstrate that you’re involved in innovation and groundbreaking R&D within your industry or specialism.

 

Talk to us about improving your spend management

 

If you’d like to get in control of your expenses, we’d love to chat. We’ll review your current costs and will highlight the key areas where expenses can be cut. Then we’ll help you formulate a proactive spend management programme, to reduce your unnecessary spending.

 

Wage Subsidy Extension

 

Grant Robertson has announced a new round of the wage subsidy, in response to the recent lockdown restrictions.

 

The Resurgence Wage Subsidy is a 2-week payment. Businesses will need to show a 40 per cent drop during a period of at least 14 days between August 12 and September 14, when compared to last year.

 

Businesses throughout New Zealand will be able to apply. This acknowledges that the restrictions in Auckland will be having an impact on businesses across the country, especially in tourism, hospitality and for companies that supply, and trade with Auckland.

 

The associated costs of the new wage subsidy are expected to be covered by an underspend in the wage subsidy extension, which still remains open to applications until September 1.

 

The mortgage deferral scheme -The existing scheme was coming to an end on September 27 but will be extended until March 31 2021.

 

More announcements on the mortgage deferral, the small business cashflow scheme and a simplified leave support scheme are to follow. In Grant Robertson’s words ‘This means businesses with workers who have been told by health officials or their medical practitioner to self-isolate will receive the equivalent of the wage subsidy to help cover that person’s wages for the time they cannot be at work”

 

The new wage subsidy scheme will be open for applications from 1pm on Friday, 21st August 2020.

 

For more information visit the Work and Income https://www.workandincome.govt.nz/covid-19/

 

We are excited to announce that we will be offering training and implementation of MYOB Accounting Software, more on this to come soon.

 

Read more about MYOB here, they have some good deals for new startups.

Small Business Bookkeeping for beginners

 

What is bookkeeping?
Bookkeeping involves recording and classifying all the financial transactions in your business. It’s keeping track of what your business spends and what your business receives.

 

These tasks used to be managed using books and ledgers, hence the name ‘bookkeeping’. Originally the transactions would be recorded in daybooks, cashbooks, or journals and then transferred to a ledger.Bookkeeping software has now pretty much replaced the need for physical books.

Some dates to remember

 

PAYE for July is due for payment 20 August.

 

GST for June & July is due 28 August

 

Provisional Tax payment is due for payment 28 August 2020 - standard method

P O Box 49080, Himatangi Beach