How often do you review the costs in your business - monthly, six monthly, annually or never?
Do you know that you need and use everything you are paying for?
Bookkeeping isn't just about recording transactions but reviewing the costs in a business to ensure they are still necessary.
The costs that are frequently overlooked are the costs for software that you commit to and never use. Every month a regular payment is taken and you just get used to it going out of the bank or off your credit card. Or perhaps you don't even notice it. It is so easy to commit to monthly payments for software and then forget you have it. You try to use it, find you need more time to work out how to use it and then forget about it completely. A regular payment of say £15 or £20 may not seem much but over a year that could be £180 or more that you could spend on something else.
Accounts software is a fairly typical example where you could be paying for something you don't use.
Sage software, for example, has different levels of subscription. You can buy it for multiple companies and for multiple users. Why pay more if you only need one company and one user. Even at that level there are different options - why pay more for stock control or sales and purchase orders if you don't use them? If you have moved away from Sage software to another accounting package you will need to keep paying the subscription until you no longer need to access it but once your final accounts are complete on that software and you have exported all the reports you need you can cancel your subscription. You will no longer have access to any information but you will have downloaded everything you need and if you really wanted to access it again Sage would probably allow you to reinstate your subscription.
Xero is another example where you could be paying for a higher subscription than you need. There are 3 different subscriptions to choose from and if you start off with the trial you will have access to everything Xero offers. Once you purchase the subscription at the end of your trial you may think you have to commit to the most expensive option because that is what you have been using. You don't. The most expensive option only gives you the ability to have foreign currency bank accounts and transactions so if you don't trade in foreign currency you won't need that one. The starter option is a lot cheaper and may give you everything you need - unlimited bank transactions, quotes and up to 20 sales invoices and 5 bills per month and VAT returns. If you don't have many bills this option may suit you and will give you a considerable saving on the Standard subscription.
Xero has a number of optional add-ons and it may be that you decide to sign up for one or two when you started paying for your subscription. But are you using them or have you just accepted the monthly subscription is what it is? Don't pay for something you don't use and don't need.
It is easy to move to a lower (or higher) subscription with Xero when you need it. Just a month's notice to go lower but immediate increase to a higher subscription so it can make sense to start on the lowest one until you find you need the next one up.
The other expenses to look at on a regular basis are marketing spend. You may have signed up for something a long time ago and just forgotten about it or thought you had stopped it. Marketing is important for a business so it is not worth stopping something that keeps you front of mind but is everything you are paying for working for you? Do you know what you are getting from each thing you are paying for?
As bookkeepers we can't decide whether an expense is relevant or not - that is up to the business owner - but sometimes when we ask for some supporting paperwork it will trigger the question of whether that cost is still needed for the business. What we can do is understand what the expenses are for and when we get to know our client's business we can more easily identify whether to raise the question with them.
Review your expenses to aid cash flow
Running a business involves managing cash flow and the better understanding you have of what is going out of your business and your need for that cost the more you will be able to fine tune your finances and create more profit.
Keeping your bookkeeping up to date will enable you to see all your expenses each month and having regular reports will help identify the costs that you may not need.
Contact us if you would like your bookkeeping kept up to date with regular reports and reviews of your accounts with your bookkeeper. We can help you identify what you need and what you don't which will lead to increased profit.