1. Update your business plan and forecasts
When you’re focused on delivering for your customers, it can be hard to find time to revisit your business plan. That’s why it’s important to schedule a formal review of your plan and financial forecasts at least once a year (or more frequently if the environment is changing rapidly).
Here are some key questions to ask during your review:
- Have any customer segments reduced or changed their spending? Are some products or services selling better than others? If so, how should your forecasts change in response?
- How might rising interest rates affect your financing costs? By stress-testing your forecasts for a 2–3% interest rate increase, you can ensure your business is well positioned to operate successfully throughout the cycle.
- With inflation elevated, what other costs might increase and how could they affect your forecasts? For example, could a tightening labour market and heightened inflation lead to higher salary costs?
Learn more about how forecasting cash flow can help you prepare your business for rate rises >
2. Review your suppliers
This is also a good time to review your relationships with key suppliers, especially as they’re likely to be examining their own pricing and contracts. Here’s how:
- Review your supplier portfolio and recent purchase data. Have costs been changing? How do different suppliers compare?
- Consider reducing the number of suppliers you work with and consolidating orders to reduce administration and increase your bargaining power.
- Test the market to confirm you’re still receiving the best value for money, seeking quotes from alternative suppliers if necessary.
- Having refined your list of preferred suppliers, talk to them about establishing long-term contracts in return for discounts and preferential payment terms.
- Schedule in regular reviews to ensure you continue receiving the value you expect.
3. Focus on your core business
Refreshing your business plan is also an opportunity to confirm your strategic direction and refocus your team. Concentrating on your core business helps you cut costs and increase efficiency by building a successful, repeatable formula for consistently delivering the same product or service, rather than trying to be all things to all people. Consider:
- Do you need to refine your value proposition or target audience in response to a changing market? Are you selling to the same customer segments, or have they changed?
- How do your margins differ across products, services or customers? Can you shift resources to higher margin opportunities?
- Do you have a clear understanding of how your staff are spending their time? How much effort are they expending on lower value or non-core activities that could be outsourced or automated?
4. Build a cost-control culture
While cost reduction needs to be led from the top, it’s most effective when you build a culture across the business where everyone is responsible for ensuring you operate as efficiently as possible.
Create the right culture by:
- Making sure costs are accurately tracked and categorised, then regularly sharing that data with your staff.
- Creating budgets for key staff and teams within your business, then delegating responsibility for managing costs within authorised limits.
- Setting key performance indicators (KPIs) and rewarding staff appropriately when they manage costs well.
- Asking your staff for their ideas on potential savings and productivity improvements. Remember, they’re the ones who know the details of your business best.
- Scheduling regular reviews of key metrics, including fixed costs, cost of sales, gross and net margins, and budget variances.
5. Make the most of your finance
If you have business finance, you need to ensure you’re making the most of it. Our solutions come with a range of features you can use to tailor your finance to your current business situation: Here are some options to consider:
- If you have a BetterBusiness Loan you may be able to switch to a fixed interest rate so you can plan ahead with certainty, or change to interest-only payments to reduce cash flow pressure. With a variable rate loan, you can also use spare cash to make extra repayments on your loan, then redraw them when you need extra funds.
- A Business Overdraft can help you access funds instantly when you need them and repay them at your own pace, while only paying interest on the amount you use.
- Stream Working Capital can help you unlock the value of unpaid invoices by borrowing against them, then repaying the funds when you get paid.
To understand your options and how to make the most of them, contact your local Business Banking Specialist for a business financial health check. It’s quick, confidential and free.