Business owners in Rochdale, when you look at your profit, it’s easy to focus on sales, for example: more customers, more turnover equals more growth. But in many small businesses, profit isn't lost due to a lack of sales, it slips away quietly through small, overlooked costs that build up over time.
These hidden costs are often easy to miss. The good news is they are usually within your control.
Below, the team at DWilkinson&Company have identified the most common hidden costs we see, and what you can do about them.
Subscriptions you no longer use
Monthly subscriptions are one of the biggest silent profit killers. Software, apps, memberships, online tools. They often start out useful but are forgotten over time. Similarly, they often start at a reduced rate to encourage you to sign up, but the costs creep up over time. While spending £20 here and £50 there might not feel like much at the time, over a year, it adds up.
You should regularly review your bank statements and direct debits and cancel anything you don’t actively use. Also, check for duplicate tools that do the same job and cost less.
A simple review can quickly reduce unnecessary spending.
Inefficient processes cost time and money
Time is one of your most valuable resources and inefficient processes waste it. Manual data entry, chasing paperwork, or repeating the same tasks can quietly increase your costs.
To overcome this, you should try to step back and identify where time is being lost in your business. Where possible use packages such as accounting software to automate routine tasks. You should also try to streamline the flow of information through your business.
If you or your team are spending hours on admin, that’s time not spent generating income.
Rising supplier costs
Many businesses use the same suppliers without reviewing their costs and over time, those prices will increase. If you’re not checking your supplier's prices regularly, your margins can shrink without you noticing.
To keep on top of supplier costs you should review their pricing at least once a year and, where possible, compare alternatives in the market. In doing so you should be able to identify opportunities to negotiate better terms where possible.
Even small reductions in cost can have a direct impact on your bottom line.
Poor credit control
Late payments don’t just affect cash flow. They also increase admin time and can lead to bad debts. If you’re constantly chasing payments, it costs you both time and money.
To improve your credit control you should set clear payment terms with your customers from the start and remind existing ones of them too. Always invoice promptly and follow up on overdue invoices quickly.
If you identify repeat offenders who are constantly late in paying their bills, it might be time to stop supplying them.
Missing allowable expenses
Many small business owners miss out on claiming legitimate expenses, which could mean you’re paying more tax than necessary.
Examples of unclaimed allowable expenses include office costs, travel expenses and business-related subscriptions. HMRC provides a full list of allowable expenses here: https://www.gov.uk/expenses-if-youre-self-employed.
You can reduce the likelihood of missing allowable expenses by keeping accurate and up to date records and tracking all business-related spending.
If you're unsure what you can claim, get in touch with DWilkinson&Company and we'll be happy to advise on what you can and can't claim.
Allowable expenses reduce your taxable profit, so missing them directly impacts your bottom line.
Not reviewing your numbers regularly
One of the biggest issues is simply not knowing where your money is going. If you only look at your figures once a year, problems can build up unnoticed.
Small inefficiencies become bigger issues over time, so to avoid this, review your financial information monthly and look for trends in costs and profit. If something doesn't look right, act on it sooner rather than later.
Regular reviews give you control, but waiting until the year-end limits your options. With the introduction of HMRC’s Making Tax Digital for both VAT and Income Tax, it is now easier for business owners to keep track of their expenditure on a quarterly basis.
Small changes can create a big impact on your business
Increasing your profitability isn't always about increasing sales. In many cases the quickest wins come from tightening control over your costs. Reducing unnecessary spending, improving efficiency, and staying on top of your numbers can make a significant difference.
Hidden costs are part of every business. The key is spotting them early and taking action. A simple review of your expenses and processes could uncover opportunities to improve profit straight away.
If you’d like help reviewing your numbers or identifying where your business could be more efficient, DWilkinson&Company can help. Please contact us to arrange a free consultation to discuss your business and how to get it back on track.
