Cost of living: tips to help your business deal with rising costs
Complete a budget sheet
Completing a budget sheet for your business will help you understand what is affordable for your business, and it may help you to identify areas where business costs can be reduced.
If you run your business as a sole trader or as a business partnership, you may use our Your budget tool to complete a budget for your business.
For a limited company, you can use the sample budget in our Limited companies fact sheet.
Reducing business costs
When you have completed a budget for your business, look through it to see if there any business expenses that you may be able to reduce. Some examples of how you may be able to cut costs are listed below.
- Check if your business is paying out for subscriptions or services that it no longer uses, and whether there are cheaper alternatives for any current expenses. For example, buying from a domestic supplier might work out cheaper if you currently pay high import costs.
- If your business holds stock or material, complete a review of the inventory. Overstocking can result in cash being tied up in inventory as well as potentially adding further cost to your business, for example higher storage costs. You can search for free inventory management software on the internet to help ensure that your business does not understock or overstock.
- If you have business premises, consider whether you can do anything to make your business more energy efficient. Even small steps like lowering the heating by one degree can result in big savings. See the Energy efficiency section of our Commercial energy debt fact sheet for energy-saving tips.
- If you rent business premises, assess whether it is an option to reduce overheads by running your business from home. If you think this may work for your business, you will need to check the agreement with your landlord to understand how and when you can end the agreement. See the GOV.UK page Running a business from home for information on other points you may need to think about.
- If your business uses a third party to provide any services, check if you can save money by renegotiating a lower price, finding a cheaper service provider or even looking into whether you are able to do something yourself rather than having to pay somebody else.
- If your business has employees, carry out an audit of staffing levels. Consider whether the business may be able to save money by reducing its staff’s working hours or by making redundancies. You will need to make sure that you comply with employment law if you do make any employment changes. Contact the Advisory, Conciliation and Arbitration Service (Acas) on 0300 123 1100 for free employment law and workplace advice.
Getting paid on time
As well as helping with your business’s cash flow, getting paid on time can help save money as time and resources do not have to get lost in chasing unpaid invoices. If you do provide services or goods on credit, you may be able to take some steps to ensure your customers pay you promptly.
- You may be able to carry out checks that help identify customers where there may be a bigger risk of late payment. This could include credit reference checks, obtaining company accounts if a customer is a limited company and using our sample letter to request a trade reference.
- Agree terms and conditions in writing that clearly state when you should be paid and what costs will be added if there is late payment.
- Have processes in place so that unpaid invoices are flagged up and chased promptly.
See our Managing business finances fact sheet for information on setting up good credit control procedures, dealing with unpaid invoices and how the Small Business Commissioner may be able to help if a larger business has not paid you.
You may be reluctant to raise prices, especially since your customers are likely to have been affected by the rising costs of living. However, if your costs have increased, you might have no choice but to increase prices.
- Rather than applying higher prices across all products or services that you offer, think about whether you can target price increases more effectively. For example, you may want to apply bigger increases to services or goods that you know are not offered by your competitors.
- Communicate the reasons for any price increases clearly and preferably in advance. Giving examples of how your expenses have increased may help customers accept the higher price.
- Think about whether there is a low-cost offering that you can package with any price increases. For example, a photo gift shop may be able to offer a free greetings card containing a personalised message with every purchase.
You can use the GOV.UK tool Finance and support for your business to search for expert advice, grants or finance for your business. The left-hand side of the page allows you to filter information, for example by region, by industry and by the type of support you are looking for.
If you do consider taking out finance to help your business through the cost-of-living crisis, you should check whether the new credit will be affordable. If you are a sole trader or business partnership, complete our Your budget tool to help you assess your situation. If you have a limited company, speak to your accountant or bookkeeper to check what is affordable.