Getting costs down is the top priority for SMEs trying to combat the impact of inflation. We look at some of the options that can free your clients’ businesses up for growth.
As inflation and economic challenges continue to bite into a 3rd year, Australian SMEs are being nimble in response. Banjo SME Compass 2024, an annual survey of over 1000 SMEs nationwide, has found that more businesses are now cutting costs to manage inflation’s impact, instead of the price rises they opted for in 2023.
Many SMEs will no doubt be conscious that, like them, their customers are battling high interest rates and inflation, and are less tolerant of further price rises.

Managing costs is a fundamental aspect of running a business, and the challenge is to find where your client can make further savings without impacting their revenue, nor stifling their growth.
There are plenty of opportunities for strengthening cost management, which can be divided into tactical and strategic elements, according to Paul Pesavento, CFO of Banjo.

Tactical cost control

“A key tactic is putting controls around spend,” says Paul.
“For an SME, options include:
  • Analyse spending patterns to identify areas where they can save money.
  • Review their budget to assess what they can afford, and who can spend it.
  • Implement a policy of providing a business case for non-BAU items, to ensure they look harder at discretionary expenditure.”
An equally important tactic is reviewing the terms on their debtors. Could they be more stringent, for example making payment terms tighter? If debtors are repeatedly lagging, look at directing some resources towards chasing up debt.

On the supply side, the tried-and-true tactic is to sit down with suppliers and negotiate. These are tough times for everyone, so while price reductions may be a long shot, getting a better deal in some other way such as longer terms, could be an option.

Strategic cost management

Strategically, there are five key areas where costs can be better managed.


Could outputs be increased while keeping costs the same or stable? For example, if a business produces physical goods, can they significantly improve output without increasing their expenses, and therefore boost margins?


Discuss opportunities for automation, process re-engineering, innovation or AI (artificial intelligence). Tasks like invoicing, payments, accounting or even customer service can all to some extent be automated, or even cost-effectively outsourced.Explore the low-cost, easy to source and often easy to install options in this space.

Head count

Do they have the right, high performing people in the business? To retain or attract good staff, you don’t have to rely totally on remuneration. Many potential employees will place a high value on things like flexible hours, or a dynamic culture with opportunities for upskilling.

Risk management

Any business can suffer unforeseen operational or technology issues, which are often highly costly and can even be ruinous.
“If there was a single piece of advice I could give any business, it would be to invest in a risk management exercise to evaluate their exposure, and get advice on any preventative actions,” says Paul. “It can save you eye-watering amounts of money in mitigation or remediation costs, lost reputation or contracts.”
— Paul Pesavento, CFO, Banjo Loans
“For example, becoming a victim of cyber crime is an all too common hazard,” says Paul. “A risk evaluation in this area alone is an essential investment.”

There are various risk management options on the market, from a consultant for a regular assessment, to more budget-friendly online tools.

Investing for growth

Using funding to invest in new or upgraded machinery can be a powerful way to manage costs, increase efficiencies and support growth. If plant, equipment, or vehicles are old and needing constant maintenance there’s merit in investing in newer or upgraded versions using asset finance.

Similarly, funding can be used to purchase new technology to improve accuracy, reduce staff costs and streamline processes. Cloud based tools are usually cost-effective and easy to scale up as the business grows.

Remember to factor in opportunity costs. When an SME needs to be able to jump on a business opportunity, working capital can quickly give the flexibility to grab that chance.

If your SME client is hesitant about getting funding to support opportunities, it can be helpful for them to understand the ROI (return on investment). Sit down with them to help evaluate how margins or revenue can be enhanced from undertaking that investment.

Finally, a strong cash flow forecast is a major element of managing costs. Invite them to take some time to plan ahead and forecast what they think their business can achieve, and whether they have sufficient capacity to support that.

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