Eight ways to cut business costs in 2023

The cost-of-living crisis is hitting UK households hard, but businesses are also feeling the pinch. So how can you cut business costs without compromising on quality?

Here are eight low-impact ways you can keep your business costs down in 2023.

1. Budget effectively

The first step in cutting costs is to review your budget. However, it’s important that any savings you make are not at the expense of the quality of your offering. While switching to cheaper materials or scaling back on customer services may save some cash, it could end up cheapening your brand and denting sales.

When creating your budget, your customers’ expectations are just as important as average monthly income and the needs of your business model. Look for areas where you can save that aren’t going to have an overly negative effect on quality for customers. Remember, providing value should always be a top consideration.

2. Use technology

Technology can be a powerful tool to reduce expenses. And with novel services and software always emerging, it pays to keep track of the latest developments.

From routine tasks to complex processes, automation can significantly improve efficiency. Not only does this save money on labour costs, but it also frees up your employees to work on more important projects.

You can apply automation to almost every branch of your business, from customer experience to compliance and from accounting to IT services.

Another great tip is to cut back on any unnecessary or expensive software. Review the computer programs your company’s subscribed to and remove anything that doesn’t benefit the business. You can also look for more affordable or free alternatives to any software that you need.

3. Cut energy costs

Energy costs can be a huge expenditure for some businesses, and they’ll likely continue to rise in 2023, particularly if it starts with a cold winter. Furthermore, as announced in the Autumn Statement, the government will be scaling back its support for the cost of energy bills in April. This could lead to a spike in prices.

Some quick wins include switching to energy-efficient lightbulbs and turning down the heating or air con. With the latter, make sure you tell your employees of any changes so they can dress appropriately, and remember to keep the temperature at a reasonable level!

Another low-hanging fruit is to encourage your employees to become energy conscious, shutting down computers at the end of the day and turning lights off when no one’s in a room. These are actions that we tend to do at home but people don’t see it as their responsibility in the office, so some gentle prompting could go a long way.

More drastic action includes switching suppliers to get a better deal. Be sure you look closely at different energy companies’ offers as some may advertise low usage rates while tacking on a high standing charge.

For long-term savings, it may be worth looking into installing solar panels or increasing energy efficiency. While these interventions come with an initial cost, they could save you money in the long run. And you may be able to get a government grant to help pay for the installation.

4. Adopt an agile work approach

Speaking of cutting energy costs, allowing employees to work remotely can reduce a number of overheads, including energy bills.

You may also see savings in food and drink – such as coffee, tea and milk, or work lunches – as well as cleaning services and rubbish disposal.

Depending on your workplace arrangement, you might save some money on your rent too. By hot-desking or making some positions fully remote, you could downsize your office to a smaller, more affordable space.

5. Keep staff happy

Offering some kind of flexible or agile work approach has other potentially cost-cutting benefits. Research suggests that – when done right – homeworking leads to happier employees, which in turn reduces absenteeism and boosts productivity.

When reducing expenditures it can be tempting to resist employee pay rises. But this can be counterproductive. With the labour market as tight as it is, and with inflation set to remain elevated for some time, workers expect a competitive salary, so they might look elsewhere if they feel undervalued. And having a high turnover of staff can be costly.

Instead, prioritise retention over recruitment. A reasonable pay rise may be less than the cost of searching for, interviewing and recruiting new candidates. And long-serving employees gain invaluable institutional knowledge and role-specific skills.

6. Reduce employee perks

This may sound like an odd suggestion after saying you need to keep staff happy, but hear us out. Employee perks are great, and you should continue to offer them, but there might still be cost-saving opportunities to be found.

The key rule here is to not just get rid of perks. Instead, see if you can swap them out for cheaper and more appropriate options.

You can do this in dialogue with your staff to find out what’s important to them and whether or not they’re making full use of the current perks you offer them. Use the feedback to revamp your perks package while trimming the overall cost.

7. Using a currency specialist

If you trade abroad, using the right currency broker can save significant amounts on your overseas transfers.

Not only do currency brokers tend to offer more competitive exchange rates than banks or payment processors, but they also have a wide range of tools that you can use to get the most out of your transactions.

This is particularly important at times of heightened volatility, as we’ve seen over the last year. Central bank policy, global economic uncertainty and the Russian invasion of Ukraine have all caused sharp and unpredictable movements in the currency market.

In 2022, EUR/GBP fluctuated between highs of over £0.89 and lows of £0.82. On a €250,000 transfer, that seven-penny difference amounts to £17,500.

At Currencies Direct, we offer expert support and guidance. We can also help build a personalised risk management strategy using a variety of products.

For instance, by fixing an exchange rate using a forward contract, you can protect against negative movements in the currency market. It also makes your cash flow more predictable, allowing you to budget effectively.

8. Foster financial wellbeing

While you’re trying to cut business costs, remember that your workforce is probably feeling the cost-of-living squeeze just as keenly as you are. Luckily, there are ways you can help them look after their financial wellbeing – which is crucial for keeping staff happy. And remember, happy employees are more productive.

Going back to the subject of employee perks, you can offer benefits that help your staff better cope with the rising cost of living. A cycle-to-work scheme enables staff to get a significant discount on the cost of a bike, which can then lead to savings on travel costs. As an employer, you’ll save money through the associated tax breaks.

Other perks include offering discounts, either through a savings scheme or by fostering partnerships with local businesses. You could also look at working with a benefits provider that offers salary-deducted loans, as these can give staff a low-interest lifeline in case of a financial emergency.

Whatever your perks package, make sure your employees are fully aware of all the benefits you offer and how they can make the most of them.

You could also encourage your employees to car share and save on the rising cost of fuel. Staff members usually organise car shares among themselves, but if you have employees spread across different departments then they may not know one another. By actively encouraging it, you give your staff the opportunity to car share with people they might not have known otherwise and perhaps form new friendships.

While the first half of 2022 has shown that the challenges aren’t over, it also presents an opportunity. Businesses that can build resilience and continue to provide value despite rising costs could thrive in the long run. Hopefully these tips will help you stay strong and competitive well into the future.