Understand & reduce your operating costs
October 18, 2021
It can be daunting to look at balance sheets and income statements. After all, coming across terms you’re unfamiliar with when you’re already trying to juggle business accounting only adds to your stress. Luckily, most of the terms are fairly self-explanatory.
We already know that every penny counts in a business and it’s a good idea to keep an eye on any outgoings. By familiarising yourself with key terms, you’re already putting an effort towards making your business more cost-effective and profitable. By reducing certain outgoings, you can capitalise on profit and show your stakeholders just how profitable you are.
As we come out of lockdown, a lot of small and medium-sized businesses are struggling financially. Unfortunately, we saw a lot of businesses go under during the pandemic and now we’re just starting to creep out. Now is the time to educate yourself on the outgoings of your company and start putting cost-cutting measures in place to keep these outgoings low.
One of the outgoing terms that you will probably be coming across is “operating costs”.
What are operating costs?
These are the outgoings of payments to keep up with admin, maintenance and facilities. One of the most important parts of operating costs is the cost of goods sold (COGS) - the direct costs of producing your business’s goods or services.
But operating costs can also include:
- Sales commissions
- Maintenance costs (facilities, utilities, equipment)
- Labour costs (staff, payroll)
- Employee benefits, health insurance, tax, pensions
- Depreciation
- Amortisation
When you know how to measure and record your operating costs, you’re in a much better position to start reducing these outgoings.
How can I cut operating costs?
There’s no one answer for every business and often it takes using several of these ideas in tandem to experiment with what works best for your business. It depends on your industry, the nature of your business, your management team, and your business goals.
We’ve outlined some guidelines to reducing operating costs that should provide a sounding board.
1. Automate processes with new technology
It’s true that technology is often more efficient than human labour. Automated machines can work quicker and more accurately than human workers, improving supply chain models and processes, as well as increasing working times.
But more than using machinery for the manufacturing, packaging, or processing aspects of your business, you should look into digitising other elements, especially admin. If you haven’t already, take your accounting and organisational records onto digital spreadsheets on your computer. Use a cloud network and email to instantly share files with your employees and clients.
Technologically apt companies are swiftly becoming more appealing to clients and stakeholders.
2. Shop around for more affordable rates
You should always keep an eye on alternative vendors but a fantastic way to drive costs down is to ask three separate vendors for quotes and then pit them against each other.
Whenever going to a vendor for a quote, always make sure to supply all the possible information they could need. Gaps in information could affect the quoted rate and even drive the price way up.
3. Hire interns
Interns are paid less than standard workers but are usually interested in your industry and in bettering their employability. Give them opportunities to shadow or meet with management, so that in return, you can work closely with schools, colleges, and universities to organise placement and internship schemes.
4. Turn away from traditional marketing methods and embrace the digital
Gone are the days of flyers, posters and newspaper advertising. These costly physical materials are often big holes in the pockets of businesses that should be making more profit than they are.
The most effective form of marketing is online – on the internet and on social media. Focus on developing your business’s Instagram, Facebook, Twitter, and TikTok to attract customers and clients this way. If you still send letters, turn to companies that will send regular newsletters to all of your email addresses on file.
5. Focus On SEO
SEO stands for search engine optimisation and means that the text on your website or social media is written specifically to make sure that it appears at the top of any internet search by potential clients. This is one of the easiest and cheapest ways to market your company.
6. Buy supplies and try not to lease
If you’re planning to use equipment or supplies long-term, then the financially wise decision is to buy instead of leasing. Buying assets can also provide an immediate, large tax deduction.
For all of your accounting needs, get in touch with 360 Accounting Services today.
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Staying Organised: Financial Document Management Tips In today's fast-paced world, keeping your financial documents in order can seem like a daunting task. However, proper financial document management is crucial for everything from tax season to personal financial planning. This blog post will provide you with practical tips to help you stay organised and on top of your finances. Why is Financial Document Management Important? Effective financial document management offers several benefits: ● Easier Tax Preparation: Having all your documents readily available makes tax season less stressful and reduces the chances of errors. ● Improved Financial Planning: A clear overview of your financial records allows for better budgeting and future planning. ● Protection Against Fraud: Organised documents can help you quickly identify and report suspicious activity. ● Access to Important Information: Whether it's for a loan application or an insurance claim, quick access to your documents is invaluable. Essential Tips for Financial Document Management 1. Digitise Your Documents One of the most effective ways to manage your financial documents is to go paperless where possible. ● Scan and Save: Use a scanner or a scanning app on your smartphone to convert physical documents into digital files. Save them in a secure, cloud-based storage system like Google Drive or Dropbox. ● E-Statements: Opt for electronic statements from your bank, credit card companies, and utility providers. This reduces paper clutter and often provides immediate access to your statements. 2. Create a Consistent Filing System Whether you prefer physical or digital files, a consistent and logical filing system is key. ● Categories: Create clear categories for your documents, such as: ○ Bank Statements ○ Credit Card Statements ○ Loan Documents ○ Investment Records ○ Tax Documents ○ Insurance Policies ○ Utility Bills ● Sub-Categories: Within each category, consider sub-categories by year or type. ● Naming Convention (Digital): For digital files, use a consistent naming convention (e.g., "Bank_Statement_2025_October"). 3. Implement Regular Review and Purge Cycles Don't let documents pile up. Schedule regular times to review and purge unnecessary papers and files. ● Monthly Review: Dedicate an hour each month to sort through new documents, file them, and shred anything you no longer need. ● Annual Purge: Before the end of the year, do a comprehensive review of all your financial documents. Dispose of anything that has exceeded its retention period. 4. Secure Your Documents Protecting your financial information is paramount. ● Physical Documents: Store important physical documents (e.g., property deeds, birth certificates) in a fireproof safe or safety deposit box. ● Digital Documents: ○ Use strong, unique passwords for your online accounts and cloud storage. ○ Enable two-factor authentication (2FA) wherever possible. ○ Back up your digital files regularly to an external hard drive or another secure cloud service. 5. Know What to Keep and For How Long It's important to understand the retention periods for different types of financial documents. Document Type Tax Returns & Records Bank Statements Credit Card Statements Loan Documents Investment Statements Insurance Policies Utility Bills Property Deeds 6. Utilise Financial Management Software Consider using personal finance software or apps to help track expenses, manage budgets, and even link to your bank accounts for automated categorisation. This can significantly reduce the amount of manual organisation required. Conclusion Organising your financial documents doesn't have to be overwhelming. By implementing these tips – digitising, creating a consistent filing system, regular reviews, securing your information, and understanding retention periods – you can achieve a more streamlined and less stressful approach to financial management. Start today, and give yourself the peace of mind that comes with being financially organised. For more financial tips and advice, subscribe to our newsletter and follow us on social media!
Simple Financial Habits for Business Owners Running a business comes with a myriad of responsibilities, and sometimes, financial management can feel overwhelming. However, by adopting a few simple financial habits, business owners can maintain better control over their finances, ensure long-term stability, and reduce stress. This blog post will outline some essential practices that can make a significant difference. 1. Separate Business and Personal Finances This is perhaps the most fundamental rule for any business owner. Commingling funds can lead to confusion, complicate tax filings, and make it difficult to accurately assess your business's financial health. ● Open Separate Accounts: Set up distinct bank accounts and credit cards for your business. ● Avoid Personal Expenses from Business Accounts: Even small, seemingly insignificant personal purchases from your business account can create headaches. ● Pay Yourself a Salary: Treat yourself as an employee of your business and pay yourself a regular salary. 2. Track All Income and Expenses Accurate record-keeping is crucial for understanding where your money comes from and where it goes. This information is vital for budgeting, forecasting, and tax preparation. ● Use Bookkeeping Software: Invest in reliable accounting software like MYOB, Xero, or QuickBooks. These tools automate many tasks and provide clear financial reports. ● Categorise Transactions: Consistently categorise your income and expenses. This helps you identify spending patterns and areas for improvement. ● Keep Receipts: Digitise or keep physical copies of all business-related receipts. This is essential for auditing and expense verification. 3. Regular Review of Financial Statements Don't just record transactions; understand what they mean. Regularly reviewing your financial statements will provide insights into your business's performance. ● Profit and Loss (P&L) Statement: Review your P&L monthly to see your revenues, costs, and profits. ● Balance Sheet: Check your balance sheet quarterly to understand your assets, liabilities, and equity. ● Cash Flow Statement: Analyse your cash flow regularly to ensure you have enough liquidity to meet your obligations. 4. Create and Stick to a Budget A budget is your financial roadmap. It helps you allocate resources effectively, prevent overspending, and work towards your financial goals. ● Develop a Realistic Budget: Base your budget on historical data and realistic projections. ● Monitor and Adjust: Regularly compare your actual spending to your budget and make adjustments as needed. ● Allocate Funds for Taxes: Set aside a portion of your income for taxes, as estimated taxes can be a significant surprise if not planned for. 5. Build an Emergency Fund Just like personal finances, businesses need an emergency fund to weather unexpected challenges, such as a sudden drop in sales, equipment breakdown, or economic downturns. ● Set a Target: Aim to have at least 3-6 months of operating expenses saved. ● Automate Savings: Set up automatic transfers from your operating account to your savings account. 6. Regularly Reconcile Bank Statements Bank reconciliation ensures that your internal records match your bank statements. This helps catch errors, detect fraud, and verify the accuracy of your books. ● Monthly Reconciliation: Reconcile your bank accounts and credit card statements every month. ● Investigate Discrepancies: Promptly investigate any differences between your records and the bank's records. 7. Seek Professional Advice While these habits provide a strong foundation, there will be times when you need expert guidance. ● Consult a Bookkeeper or Accountant: A professional bookkeeper or accountant can help set up your systems, ensure compliance, and provide strategic financial advice. ● Tax Planning: Work with a tax professional to optimise your tax strategy and ensure you're taking advantage of all eligible deductions. By consistently practicing these simple financial habits, business owners can gain a clearer picture of their financial health, make informed decisions, and pave the way for sustainable growth. Start implementing these habits today, and watch your business thrive. For more detailed guidance and personalised support, contact us at 360 Accounting Bookkeeping Services. We're here to help your business succeed. Contact Us: Phone: Parikshit Kikla (PK) Email: pkikla@360accountingservices.com.au Website: https://www.360accountingservices.com.au/
How Automation Can Transform Your Business Finances
Staying Organised: Financial Document Management Tips In today's fast-paced world, keeping your financial documents in order can seem like a daunting task. However, proper financial document management is crucial for everything from tax season to personal financial planning. This blog post will provide you with practical tips to help you stay organised and on top of your finances. Why is Financial Document Management Important? Effective financial document management offers several benefits: ● Easier Tax Preparation: Having all your documents readily available makes tax season less stressful and reduces the chances of errors. ● Improved Financial Planning: A clear overview of your financial records allows for better budgeting and future planning. ● Protection Against Fraud: Organised documents can help you quickly identify and report suspicious activity. ● Access to Important Information: Whether it's for a loan application or an insurance claim, quick access to your documents is invaluable. Essential Tips for Financial Document Management 1. Digitise Your Documents One of the most effective ways to manage your financial documents is to go paperless where possible. ● Scan and Save: Use a scanner or a scanning app on your smartphone to convert physical documents into digital files. Save them in a secure, cloud-based storage system like Google Drive or Dropbox. ● E-Statements: Opt for electronic statements from your bank, credit card companies, and utility providers. This reduces paper clutter and often provides immediate access to your statements. 2. Create a Consistent Filing System Whether you prefer physical or digital files, a consistent and logical filing system is key. ● Categories: Create clear categories for your documents, such as: ○ Bank Statements ○ Credit Card Statements ○ Loan Documents ○ Investment Records ○ Tax Documents ○ Insurance Policies ○ Utility Bills ● Sub-Categories: Within each category, consider sub-categories by year or type. ● Naming Convention (Digital): For digital files, use a consistent naming convention (e.g., "Bank_Statement_2025_October"). 3. Implement Regular Review and Purge Cycles Don't let documents pile up. Schedule regular times to review and purge unnecessary papers and files. ● Monthly Review: Dedicate an hour each month to sort through new documents, file them, and shred anything you no longer need. ● Annual Purge: Before the end of the year, do a comprehensive review of all your financial documents. Dispose of anything that has exceeded its retention period. 4. Secure Your Documents Protecting your financial information is paramount. ● Physical Documents: Store important physical documents (e.g., property deeds, birth certificates) in a fireproof safe or safety deposit box. ● Digital Documents: ○ Use strong, unique passwords for your online accounts and cloud storage. ○ Enable two-factor authentication (2FA) wherever possible. ○ Back up your digital files regularly to an external hard drive or another secure cloud service. 5. Know What to Keep and For How Long It's important to understand the retention periods for different types of financial documents. Document Type Tax Returns & Records Bank Statements Credit Card Statements Loan Documents Investment Statements Insurance Policies Utility Bills Property Deeds 6. Utilise Financial Management Software Consider using personal finance software or apps to help track expenses, manage budgets, and even link to your bank accounts for automated categorisation. This can significantly reduce the amount of manual organisation required. Conclusion Organising your financial documents doesn't have to be overwhelming. By implementing these tips – digitising, creating a consistent filing system, regular reviews, securing your information, and understanding retention periods – you can achieve a more streamlined and less stressful approach to financial management. Start today, and give yourself the peace of mind that comes with being financially organised. For more financial tips and advice, subscribe to our newsletter and follow us on social media!
Simple Financial Habits for Business Owners Running a business comes with a myriad of responsibilities, and sometimes, financial management can feel overwhelming. However, by adopting a few simple financial habits, business owners can maintain better control over their finances, ensure long-term stability, and reduce stress. This blog post will outline some essential practices that can make a significant difference. 1. Separate Business and Personal Finances This is perhaps the most fundamental rule for any business owner. Commingling funds can lead to confusion, complicate tax filings, and make it difficult to accurately assess your business's financial health. ● Open Separate Accounts: Set up distinct bank accounts and credit cards for your business. ● Avoid Personal Expenses from Business Accounts: Even small, seemingly insignificant personal purchases from your business account can create headaches. ● Pay Yourself a Salary: Treat yourself as an employee of your business and pay yourself a regular salary. 2. Track All Income and Expenses Accurate record-keeping is crucial for understanding where your money comes from and where it goes. This information is vital for budgeting, forecasting, and tax preparation. ● Use Bookkeeping Software: Invest in reliable accounting software like MYOB, Xero, or QuickBooks. These tools automate many tasks and provide clear financial reports. ● Categorise Transactions: Consistently categorise your income and expenses. This helps you identify spending patterns and areas for improvement. ● Keep Receipts: Digitise or keep physical copies of all business-related receipts. This is essential for auditing and expense verification. 3. Regular Review of Financial Statements Don't just record transactions; understand what they mean. Regularly reviewing your financial statements will provide insights into your business's performance. ● Profit and Loss (P&L) Statement: Review your P&L monthly to see your revenues, costs, and profits. ● Balance Sheet: Check your balance sheet quarterly to understand your assets, liabilities, and equity. ● Cash Flow Statement: Analyse your cash flow regularly to ensure you have enough liquidity to meet your obligations. 4. Create and Stick to a Budget A budget is your financial roadmap. It helps you allocate resources effectively, prevent overspending, and work towards your financial goals. ● Develop a Realistic Budget: Base your budget on historical data and realistic projections. ● Monitor and Adjust: Regularly compare your actual spending to your budget and make adjustments as needed. ● Allocate Funds for Taxes: Set aside a portion of your income for taxes, as estimated taxes can be a significant surprise if not planned for. 5. Build an Emergency Fund Just like personal finances, businesses need an emergency fund to weather unexpected challenges, such as a sudden drop in sales, equipment breakdown, or economic downturns. ● Set a Target: Aim to have at least 3-6 months of operating expenses saved. ● Automate Savings: Set up automatic transfers from your operating account to your savings account. 6. Regularly Reconcile Bank Statements Bank reconciliation ensures that your internal records match your bank statements. This helps catch errors, detect fraud, and verify the accuracy of your books. ● Monthly Reconciliation: Reconcile your bank accounts and credit card statements every month. ● Investigate Discrepancies: Promptly investigate any differences between your records and the bank's records. 7. Seek Professional Advice While these habits provide a strong foundation, there will be times when you need expert guidance. ● Consult a Bookkeeper or Accountant: A professional bookkeeper or accountant can help set up your systems, ensure compliance, and provide strategic financial advice. ● Tax Planning: Work with a tax professional to optimise your tax strategy and ensure you're taking advantage of all eligible deductions. By consistently practicing these simple financial habits, business owners can gain a clearer picture of their financial health, make informed decisions, and pave the way for sustainable growth. Start implementing these habits today, and watch your business thrive. For more detailed guidance and personalised support, contact us at 360 Accounting Bookkeeping Services. We're here to help your business succeed. Contact Us: Phone: Parikshit Kikla (PK) Email: pkikla@360accountingservices.com.au Website: https://www.360accountingservices.com.au/
How Automation Can Transform Your Business Finances
