The John Lewis advert has hit the screens, supermarket shelves are starting to fill up with Christmas goodies and probably somewhere there’s a radio station already adding Mariah Carey into their playlist.
While the festive season brings joy to many, there is a darker side which sees some people falling into debt as they join in with the ‘spend, spend, spend’ ethos that will be pushed at us over weeks ahead. Businesses are not immune to this either and can, in fact, stumble into overspending habits at any time of the year. With this in mind, our blog this week focuses on some simple ideas for avoiding overspending.
The modern world encourages us to spend money almost continually. Most of us are doing it right now even while seemingly doing something else. You might think you’re hard at work and not doing any shopping but what about that money which is leaving your pocket on streaming or gym subscriptions? Then there’s the nudge to spend that comes in the form of emails from any retailer you’ve ever bought from and of course, we’ve all fallen victim to impulse buys at the supermarket!
Giving out spending or money-related advice at the personal level is not something we want to go into too much detail about here, particularly as there are lots of other experts who can give much better advice than we’d dare to offer. So, if you are finding it difficult to manage your finances and would like help cutting those personal overspends, take a look at these tips from Money Saving Expert here.
Down to business
When it comes to business, even seasoned entrepreneurs and managers can fall victim to overspending and/or fail to account for budget-draining factors such as sticking with pricey suppliers or unnecessary software subscriptions.
In the current landscape of supply chain challenges and price rises, many businesses will naturally want to improve profitability by finding cost cutting solutions. Whilst every organisation is different, there are some common areas where businesses have a tendency to overspend so, when looking to make changes, these can be good places to start.
Five overspends to avoid
1. Failing to negotiate with the supply chain
If you accept the prices given to you by your service or materials suppliers without any kind of negotiation, then it’s likely you’re missing out on some cost saving opportunities. Quite often, suppliers will build some wiggle room into their initial prices so it never hurts to ask if a better deal can be struck. While you may want to stick with a trusted provider, it’s also useful to shop around so as to identify comparative market prices.
Make sure especially to do this with the telecoms and utility providers used by the business. For example, a review of telecoms might identify a discounted bundle deal for the office broadband and staff phone plans.
2. Paying for unnecessary software subscriptions
Managing software subscriptions is another way in which businesses can avoid overspending. A good strategy is to conduct regular reviews of all existing subscriptions so as to identify potential cost savings. This involves looking carefully at each software service, generally checking for three things:
- Is there any duplication of function across multiple subscriptions?
- Are there subscriptions that are not being used (or used rarely)?
- Have any of the subscriptions lost their relevance to the company?
Once you’ve done this, it should be easy to identify which tools are unnecessary and the best thing is that eliminating them not only reduces costs but also leaves you with a more efficient software ecosystem that makes your operations run smoother.
3. Wasting physical resources
Excessive material waste in a business not only leads to overspending but also has detrimental environmental impacts. For instance, in an office setting, the misuse of office supplies such as paper, ink cartridges, and stationery contributes to unnecessary expenses and uses up natural resources. Implementing a culture where employees are encouraged to be more conscious about the resources they use can help to minimise such waste (e.g. encouraging practices like double-sided printing, adopting efficient inventory management systems, and taking a digital first approach to documentation).
On a construction site, over-ordering or improper storage of materials can also lead to substantial financial losses. Regular assessments of project needs, proper inventory tracking, and careful planning can prevent the unnecessary purchase (and expense) of excess construction materials.
4. Resisting automation
Repetitive manual tasks can drain valuable time from your workforce, diverting them from more strategic and impactful aspects of your business. These tasks are also often prone to human errors, leading to costly disruptions and the need for additional resources to rectify mistakes. Implementing automation into such processes not only reduces the risk of errors but also frees up your employees to focus on tasks that require creativity, problem-solving, and critical thinking.
While the idea of changing established procedures may seem daunting, the long-term benefits of automation in terms of cost savings and increased productivity can be significant. To do this, you’ll need to look at time-consuming processes and pinpoint areas where errors commonly occur. Automation can then be introduced gradually, starting with relatively simple tasks such as generating templates for reports or newsletters. As your business becomes more comfortable with automation, you can expand its scope to encompass more complex processes like data entry and project management.
5. A lack of opportunities for employees
Neglecting to provide training and development opportunities for staff can prove to be a costly oversight for businesses, as it often leads to employee dissatisfaction and increased turnover rates (as those employees seek opportunities elsewhere).
The process of hiring new talent incurs significant expenses in terms of recruitment, onboarding, and the time it takes for the new employee to reach full productivity. By contrast, investing in the training and development of existing staff not only helps retain valuable talent but is generally more cost-effective than the continuous cycle of recruiting and training new employees.
Businesses should look to implement various career development practices (e.g. ongoing training programmes, mentorship initiatives and skills-building workshops) and create clear career advancement pathways within the company that gives employees a sense of purpose and direction. Doing this will reduce the likelihood of them leaving while also cultivating a skilled and motivated workforce that contributes positively to the company’s success.
Take a new approach
While these five areas have been identified as common causes of overspend in companies, every business is different and will need to take an approach that works for them. At Sheriff Construction, for instance, we’ve been keen to adopt digital/ automated solutions into our working practices so as to avoid unnecessary waste or duplication and are working hard to ensure this policy is implemented wherever it is appropriate for our business.
The key takeaway is that, if you think you might be overspending, make a change. Start auditing each aspect of your organisation’s day-to-day work and take appropriate action to bring that overspend down.
Feature image: Freepik