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Business Advisory

The sixth cause of poor cashflow: tackling high overheads

Posted by: Ewen Fletcher on

In the journey of managing a business, one critical aspect often overlooked is overheads, which can significantly impact cashflow. While business owners tend to be vigilant about expenses, the growth of a company can sometimes lead to increased layers of management and operational inefficiencies.

high overheads concept

Regular assessment of overheads is crucial for financial health. Here’s a checklist to help:

Expense Budgets

Do your managers and key staff have clearly defined expense budgets? How are these budgets managed and monitored?

Debt Service Costs

Conduct a thorough review of all debt service costs and related fees. Are there opportunities to renegotiate terms or consolidate debt?

Sales Staff Expenses

Implement policies and cost control processes for sales staff expenses, including allowances, reimbursements, and credit card usage. Ensure these expenses are contributing to revenue generation effectively.

Marketing and Advertising

Analyse your marketing and advertising spend over the last year. Evaluate the effectiveness of each component and adjust strategies accordingly to maximise returns.

IT Support Contract

When was the last time you renewed your IT support contract? Assess the current agreement’s terms and fees. Consider migrating services to the cloud and negotiate for a fixed monthly fee if applicable.

SaaS Cloud Services

List all monthly subscriptions for Software-as-a-Service (SaaS) cloud services. Evaluate the necessity and cost-effectiveness of each subscription through a thorough cost-benefit analysis.

Accounting Fees

Are your accounting fees viewed as a cost or an investment? Assess the value received from your accounting services and consider allocating more resources if they contribute to better business outcomes.

Implementing budgets and monitoring them regularly is essential for effective cost control. By optimising your overheads, you can enhance cash flow and overall financial stability. Let us guide you through this process to achieve optimal results for your business.

For more information about overheads visit: https://www.investopedia.com/terms/o/overhead.asp

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