How can we bring down our expenses?

Question: Myself and my partner own and run a small business alongside our farm to supplement our income, and it’s something we really enjoy. However, each year, the costs of running the business appear to be increasing. We seem to be constantly paying more and more for insurance, electricity, phone, gas and other expenses.

Is there anything we can do to stop these creeping up each year, or is it just the way it has gone with inflation?

Answer: Without a doubt, the cost of doing business has increased significantly in recent times. Quite often, we see businesses focus on the cost of sales and maintaining a strong gross profit margin.

However, overhead cost control is crucial. Let’s tease out the steps you can take to reduce your business costs.

Managing bills

When you first enter into a contract for services, such as electricity, gas, landline and broadband, the offers from every provider are usually quite attractive.

However, the cost after the contract period is often much less attractive! If you haven’t switched in a while, compare last years bill to that of the year in which you switched and it is likely you will see a noticeable difference. You can see as much as double the price. It is important to constantly switch providers or negotiate a new contract.

Today, many people in rural Ireland – although not all – enjoy access to super-fast broadband. If you have multiple landlines in your business, now may be the time to consider the switch to an internet-based service (VoIP). It is often at a lower cost than traditional landlines and offers more flexibility in terms of adding or removing a line.

Trying to stay on top of contracts for multiple utilities can be a pain. There is help with this, however, and a quick Google search will provide multiple providers who get you the best deals. You simply provide them with some recent bills, and they get to work on finding you the best options. What’s more, it is in their interest to follow up prior to the expiration of your contract in 12 months’ time, so it is less likely that you will end up being out of contract and paying those higher charges.

Insurance

Everyone can be guilty of sticking with the same insurance provider as it is convenient, and it seems like a hassle to have to dig out the cover schedule and send it to other providers for quotes. The reality is that insurance should be reviewed annually, not just from a cost point of view, but to ensure that your level of cover reflects your business needs.

In terms of managing the cost of insurance, there are multiple online and locally based insurance brokers who you can provide your current cover information to, and they will seek the best premiums for you. Even more importantly, they will assess the level of coverage that you have and ensure that you are not under or over-insured.

Other steps you can take

There are multiple options available that could help you significantly reduce some of your overhead costs.

In terms of the light and heating of your business, you could avail of various SEAI grants, including solar panel installation, a solar thermal hot water grant, wall and roof fabric upgrade grants, as well as the installation of new heat pumps, AI handling units and efficient control units. Access to these grants is not as complicated as you might think, either.

A €2,000 grant is available to get a professional energy audit carried out on your business, and they will advise you on the best actions to take and how much they should cost.

Aside from the obvious benefits of a more energy-efficient business and the savings to be made, is the fact that you can claim accelerated capital allowances also, which would allow you to deduct the full cost of the equipment (after grants) from your profits in the year of purchase rather than over a period of eight years for example. This tax saving could be significant for sole traders who are paying tax at the higher rate of 40%.

Andrew Brolly is a senior accountant with ifac.