Why it’s important to keep track of the little costs in your business, not just stock
It’s the time of year where suppliers and service providers tell us that prices are going up… The start of a new year, they have absorbed their own increases all of last year…blah blah!
We appreciate that all businesses need to earn a profit, but don’t let your lack of control on your costs impede on your profit margin… neglecting your cost control over several months can have a terrible (negative) effect on your business.
Don’t ignore the letters or emails
What do you do when you receive price increases from supplier for your stock? Correct answer is READ the email, go through each item you are stocking or need to order, and review if they have increased their RRP price too. Then TAKE action, update your own prices. You can do this discreetly by amending on your website or on stock in your shop, or you can announce that “due to price increases from your suppliers” you have had to take a review on your own prices.
But do you track your other costs too? As part of running a business, there are many other products that you purchase for your business: printer paper, pens, tea / coffee, subscriptions, networking meetings, website hosting, PayPal fees, app fees, postage, packaging supplies, labels, hangers, marketing costs… the list goes on.
But most businesses rarely have an idea on how much all these things cost, and certainly would have no clue as to when the price increased or how much the price would differ if they bought twice as much and got a bulk saving. Yet all these costs eat into your profit margins, call them cost of sales, running costs or overheads, they all impede on your bottom line.
Let’s take stationery costs… how much stationery do you use in your business? Not a lot? I beg to differ. Let’s take A4 white copier paper… we all use it, we buy it as we need it, but we seem to use a lot. We print dispatch notes, orders, reports & spreadsheets, and as much as we try to be paper free, we still use a reasonable amount of the A4 white paper.
So, we buy 1 ream from Rymans, the cost for 500 sheets, 80gsm white A4 copies paper is £4.99. If we bought 5 of these a year, it would cost us £24.95
But if we bought 5 reams in a bulk box, in one purchase, from Staples, same spec, 80gsm A4, it would cost us £13.19 (£12.35 if we bought 2 boxes!), a saving in a year of £11.76. It doesn’t sound much, but if you applied this thought process to many other items in your business, you will most certainly be surprised at how much you are spending, but also have the potential to save if you buy more carefully, shop around and buy in bulk.
And there’s services to be aware of….
Services are another cost drain… sending parcels, bank charges, website hosting are all sneaky little costs that can easily get out of control. Who knew that some banks charge per transaction, or that your website hosting had automatically renewed before you had a chance to check it, or that postage rates have increased by 40p???? Each of these little increases all add up and eventually we realise that we didn’t pass on these increases to the customer by updating our own retail prices.
To conclude, set yourself a spreadsheet, note down all the products and services you source, how many you buy and the last cost you saved. Then grab a coffee and shop around… you’ll be amazed at how much you can save.
Still not sure how you should be monitoring your costs? Why not book a 1:1 power hour with me, take a look at how I work and support small businesses just like yours http://www.rbqconsultancy.co.uk/small-and-medium-businesses/