Reduce Overheads - Company Rescue

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Reduce Overheads

Finding ways to reduce overheads may seem like minor adjustments where big changes are need, especially if your debt problem is substantial.

However, it can be one of the most effective tools in avoiding insolvency and often eliminates much more financial waste than you could imagine. Reviewing your business overheads should be a regular and important operation within your company, and it should become of utmost importance when your business is experiencing cash flow problems.

Big cuts in your overheads will almost certainly make a big difference to your financial situation, so take the time out to perform the analysis that.s required.
Begin by investigating your net margin to see where cuts can be made, even if they're just cheaper ways of receiving the same service.

Evaluate Necessities
In difficult times, advertising and research and development budgets are often the first to go or be dramatically cut almost instantaneously. Other areas such as capital goods and property costs will require a much greater amount of time for your business to see a financial return.

Staffing costs are often a fast way for businesses to cut costs, with overtime and work hours amongst the areas for reduction. If your business is really struggling, you may have to consider terminating employees' contracts. This may seem counter intuitive, as redundancy payments will be of great cost in the short term, but you may not have much choice for the long term.

There are big side effects that come with redundancy, especially for small businesses. Morale often takes a big hit, with key staff often feeling insecure and choosing to leave the company. Many businesses benefit from interacting with the staff to try and find alternatives to redundancy.

Purchases of new equipment may have to be delayed to give you some time to reconsider your business' position.

Alternative Options

There are some alternative options that may be available to you.

  • Sub-Letting: You may be able to sub-let or even rent an area of your business premises. Be sure to check with the owner or your mortgage company, as sub-letting may not be allowed and approval may be required.
  • Leasing: Consider leasing any equipment that you need, as buying it outright can be a financial burden that you business doesn't need.
  • Renegotiate with Suppliers: Speak with your suppliers about your contracts. Quite often, it's possible to get your credit limit raised with long-term suppliers. If this can be done with several suppliers, it may just give your business the breathing space it needs to grow.

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This website has been written and intended for registered limited companies in the UK only. The site contains general information and resources for limited companies only in financial trouble. Insolvency Helpline only work with limited companies to offer solutions for their business debt problems. Insolvency Helpline cannot offer help or advice any other entity except limited companies. Insolvency Helpline does not advise individuals, sole traders or partnerships seeking debt advice. If you are an individual, sole trader or partnership seeking advice, we recommend using an alternative service.

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