November/December 2019

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Business Issues BUY WISELY AND CUT COSTS TO PROTECT YOUR BUSINESS Despite the economy in many parts doing better than expected – even with Brexit still rattling around – times are still hard for some. But as profit is in general terms a function of margin, one option if you can’t increase your prices is to lower your costs. Total Installer takes a look at how to do this correctly with your regular financial outgoings... Money talks In an age when cash is king, you need to see what you can do to bring your cash outflows down. This means checking and benchmarking any financial agreements that you have for insurance, bank borrowing and even card acceptance. It’s well known – and the Financial Conduct Authority started an investigation into this at the end of October 2018 – that insurance companies charge loyal customers more than those that continually shop around. Looking at card processing, alternative suppliers known as independent sales organisations buy up capacity from the organisations (not necessarily the banks) that actually provide the services and sell it on to their customers at a discount. Seek quotes from the likes of Handepay and Paymentsense – they reckon that they can save firms up to 40% on standard processing fees. Talk to your suppliers; if you’re cash positive, consider seeking discounts for paying bills early – this reduces suppliers’ risk of your non-payment and speeds up their cashflow which might get you a few extra percent off invoice values. With bank interest not worth having, this could pay dividends handsomely. Consider also taking a lead from manufacturers who operate just-in-time delivery processes aimed at keeping their stock levels to the minimum. For them it’s about less cash tied up in inventory and less storage space required. Granted firms need to hold some materials, but nevertheless, (say) 10% less stock is less working capital tied up. In bulk we trust Don’t buy-in consumables on an ad hoc basis; buy in bulk. And standardising your purchasing can save substantial amounts, not least in bulk discounts. Work out how much is being used every quarter, and order to ensure you have enough to avoid emergency re-orders. “Rethink your receipts. Can you send them by email? Not only do you save on print you’ll be building up a database that can, with consent, be marketed to” Be aware, though, that many products have a limited shelf life. Printer ink cartridges come with a use by date so keep this in mind when buying. Also, for printers that are out of warranty, it may be worth considering compatible rather than original replacements. By way of example, a full set of HP953XL CMYK cartridges will set you back around £100 on Amazon but a compatible (third party) set is just £34. Allied to this, when replacing printers, don’t just look at the cost of the printer – consider the price of the cartridges, which is far more significant over the life of the machine. Also, rethink your receipts. Can you send them by email? Not only do you save on print you’ll be building up a database that can, with consent, be marketed to. Don’t buy new Another area to make savings in is the acquisition of equipment. Take your computers – do you really need to buy new? Most manufacturers offer factory outlet products for items that have been returned as ‘faulty’ and fixed or which have been used for a short period and then returned under consumer rights law. Apple, for example, typically offers 15% off. Dell does something similar. You might also consider using open source software instead of Microsoft Office. Microsoft software does have its advantages but isn’t cheap. Open Office and Libre Office, for instance, are freely downloadable on the internet without cost, and provide word processing, spreadsheet, database and presentation functionality similar to Microsoft Office which costs £9.40/month/user for Office 365 Business Premium. They are continually being developed and upgraded, and 22 TINOV/DEC 2019 PRACTICAL CONTENT FOR THE GLAZING INSTALLER & HOME IMPROVEMENT SPECIALIST
“You may be tempted to cut down on marketing spend – don’t! While it may save cash in the short term, the reality is that if customers cannot find you because others are shouting louder, you will, in the long run, lose far more than you’ll ever save” while there’s not a paid for support desk, dedicated forums usually provide quick, useful answers. Go green Your utilities – lights, aircon and heating – are a huge expense. Invest in low energy bulbs everywhere and put those backrooms on movement detectors. Similarly, do you really need the aircon on at all times? If possible, put equipment that generates heat in places where you can turn off a radiator – don’t put it where the aircon box is. Don’t forget to power down any unnecessary equipment when you close – many have standby timers that can be set to maximum. All of these options will help lower cost. Talk can be cheap Your phone and broadband lines will be another expense, so check every year to ensure you have a competitive deal – the best deal may include both voice and broadband. One option is to move away from a standard phone line to a VOIP – voice over the internet – service. This can be a particularly good option for smaller businesses, since many VOIP providers can give you a package which includes quite sophisticated voice mail and call handling services. The same applies to company mobile phones. Benchmark providers each time a contract comes up for renewal – threaten to leave by demanding a PAC code and see what deals the network offers to keep your business; you’ll be surprised. Save on premises Some of the areas examined above may help save cash, but one of your biggest costs relates to the premises you occupy; see if your landlord will help with reduced rent or at the minimum, no “One of your biggest costs relates to the premises you occupy; see if your landlord will help with reduced rent or at the minimum, no further rent increases” further rent increases. In most towns there are enough rental voids to concentrate their mind – after all, 80% of something is better than 100% of nothing. Advice from a professional (lawyer or surveyor) is critical as you don’t want to jeopardise your position or break your lease at the wrong time. Business rates is another key cost to examine, especially after the 2017 revaluation. The rules on appeals changed at the same time as the revaluation. In essence, under Check, Challenge, Appeal, you get one go at the process and so need to put in effort in the early stages. See https://www.gov.uk/guidance/how-to-checkyour-rateable-value-is-correct for more on the process. Again, find a good ratings surveyor via https://www.ricsfirms.com to offer advice. Save money on archival space. Have a throw-out day for information you don’t need to keep. Yearsold information that has to be kept for regulatory reasons can be taken offsite and stored in selfstore. Alternatively, scan the paper and discard what you don’t need. Keep shouting! You may be tempted to cut down on marketing spend – don’t! While it may save cash in the short term, the reality is that if customers cannot find you because others are shouting louder, you will, in the long run, lose far more than you’ll ever save. Invest While it’s prudent to keep costs in check, it’s just as wise to invest in your business. Luckily, HMRC makes this a little less expensive. Take repairs or improvements to the premises for example. There are tax rules that apply to repairs (say repairing damaged doors or repainting the interior) and a different set of rules that apply to improvements (such as putting in a new stud partition). There’s also help available for expenditure on capital equipment (tills, computers etc.). In the recent budget the Chancellor increased the annual investment allowance (AIA) from £200,000 to £1m when purchases are made on or after 1 January 2019 until 31 December 2020. Granted, an independent won’t spend anything like that amount, but nevertheless, the AIA is a valuable form of tax help. Advice from an accountant will help you navigate these processes and how to make best effect of the deductions. “Your phone and broadband lines will be another expense, so check every year to ensure you have a competitive deal – the best deal may include both voice and broadband” PRACTICAL CONTENT FOR THE GLAZING INSTALLER & HOME IMPROVEMENT SPECIALIST NOV/DEC 2019 TI23
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November/December 2019

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