Controlling costs and boosting your bottom line with tech, tax breaks, grants, and outsourcing
17 July 2023
In the current economic climate, businesses must proactively practise controlling costs to minimise and get rid of unnecessary business expenses and identify ways they can maximise their profits. It is the only way to protect revenues and sustain operations and businesses that don't, simply won’t be able to compete in this inflationary environment.
Accessing grants, outsourcing non-core activities, digital optimisation and taking advantage of tax breaks are strategies that all businesses can take advantage of to help control costs and boost the bottom line.
This guide will take a deep dive into how each of them work and explain how you can leverage them to help you successfully navigate the challenging economic environment.
Grant funding opportunities for business
Grants are forms of financial assistance or support that are awarded for various purposes, such as to support a project, typically without the expectation of repayment.
There are more than 4,000 grant programs worth over $50B in Australia suited to businesses of all sizes and industries. While they are a great way to help offset business expenses, monitoring the market for suitable grants, preparing applications and qualifying funding opportunities takes a significant amount of effort and time. The grant application alone can take more than 35 hours to complete if you do it on your own.
If you or your team don't have experience in grant writing or don't have the time or staff to handle the process, which can be resource- and time-intensive, outsourcing to a specialist who can find grant opportunities and write the application for you could be a worthwhile investment.
Available grants for Australian businesses
There are numerous grants available for Australian businesses, catering to various sectors and objectives. Some notable grants include the:
Early Stage Venture Capital Limited Partnerships (ESVCLP): provides fund managers and investors with support to help stimulate early stage venture capital investments.
Growing Regions Program: funding for community infrastructure to improve regional areas.
Agtech Grants Program VIC: funding for Victorian early-stage Agtech startups.
Emissions Reduction Fund: financial incentives for businesses to reduce their carbon emissions
Wage Subsidies: financial incentives for businesses to hire new staff.
Apprenticeship Wage Subsidies and Hiring Incentives: financial support to hire an apprentice.
MRFF 2022 Frontier Health and Medical Research Grant: Funding to innovate medical research
Most grants have eligibility criteria you must meet to qualify for the benefits or assistance. It may include business size, location, research focus, alignment with goals and priorities, etc. You should thoroughly review the eligibility criteria for each programme to determine if you meet the requirements before committing resources to pursue.
Outsourcing non-core activities to reduce overhead costs
Outsourcing is delegating non-core tasks, functions, or processes to an external third party. Non-core activities are those not directly related to the core operations of a business. Taking a small retail business as an example, non-core activities might include managed payroll processing, bookkeeping and customer service, whereas core activities might include product sourcing and inventory management.
Outsourcing allows you as the business owner to add more value to your business. Instead of spending your time dealing with non-core activities, you can outsource these to specialised service providers without having to maintain the overheads of hiring an in-house resource. It also means you don't have the overheads of physical and digital infrastructure like servers and software systems, which allows you to scale up and down to optimise costs with changing business needs.
For example, if a business decides they need the strategic insights of a Chief Financial Officer but they’re not quite at the size or scale where they can justify the overheads of a full-time resource, they might outsource this to a Virtual CFO, which provides the same service on a part-time or contract basis and can scale up and down with the business’ needs.
Some other non-core business operations that can be outsourced include:
Management reports and financial reporting
IT services and support
Customer service and call centres
Manufacturing and production
Advantages of outsourcing
There are several advantages to outsourcing but reducing labour costs is probably the biggest. Outsourcing allows your business to avoid the costs of hiring and maintaining a full team and equipment. The burden of hiring, managing, paying, and providing office space for the team is shifted to the service provider.
Another important advantage is access to specialised expertise. It is hard to find the expertise you need to run all processes in-house with the current competition for talent. Third-party providers often have years of experience in their fields, which you can't replicate in-house at the cost.
Additionally, outsourcing can help streamline your business operations by increasing efficiency in the outsourced functions and optimising internal resources to focus on core functions.
Digital optimisation and technology implementation levels the playing field
With most technology and automation tools accessible to the public, small and medium-sized enterprises can leverage the same technology advantages as larger enterprises. This can completely level the playing field for your business, meaning you can compete with the leading companies in your industry.
You also don't have to spend time and resources building custom platforms or conducting costly analyses of existing platforms to compete. Several well-established technology platforms like Xero and MYOB apps have been widely adopted for their track record of delivering efficient and effective results for various needs. Using them saves time, reduces costs, and mitigates the risks of developing custom or trying new solutions.
The benefits of investing in technology and automation
The benefits of investing in technology and automation go beyond cost control; they can significantly impact your business's efficiency, productivity, and bottom line. By delving into digital optimisation and implementing the right technological tools, your business can unlock a multitude of advantages.
Automating repetitive tasks
Automation can revolutionise how your business operates by eliminating the need for manual labour in time-consuming activities such as data entry, order processing, and inventory management. By automating these repetitive tasks, you can reduce errors, save valuable time, and enhance overall productivity. With less time spent on mundane tasks, your team can redirect their efforts towards more strategic activities that drive business growth.
For instance, instead of manually inputting data from invoices, OCR technology can automatically extract relevant information and populate it into your systems, streamlining the entire process and freeing up hours of your teams’ time.
Streamlining workflow processes
Digital tools and systems can transform how information flows within your organisation. Workflow automation software, like project management platforms or task management tools, enables seamless collaboration, information sharing, and task tracking across teams, departments, and systems. By streamlining workflows, you can minimise bottlenecks and optimise resource allocation.
For example, using a project management tool with task assignment and deadline tracking features ensures that every team member knows their responsibilities, deadlines, and progress, leading to improved efficiency and smoother operations.
Enhancing employee effectiveness
Technology can help empower your employees to work more effectively and efficiently. A practical example is the implementation of a customer relationship management (CRM) system. By providing a centralised platform for organising and analysing customer information, a CRM system enhances sales representatives' interpersonal and communication skills. It allows them to track customer interactions, identify trends, and develop effective strategies for improving customer relationships and increasing sales productivity. Additionally, providing collaboration tools like team messaging apps or project management software can foster better communication, knowledge sharing, and teamwork among employees, resulting in enhanced effectiveness.
Leveraging data for business insights
The abundance of data available today offers valuable opportunities for businesses. By leveraging data analytics tools and technologies, you are better positioned to extract meaningful insights to drive informed decision-making. For example, using business intelligence software or data visualisation tools, you can analyse customer data to identify buying patterns, preferences, and trends, enabling you to tailor marketing campaigns and improve customer experiences. Additionally, leveraging financial data with accounting software or cloud-based platforms allows you to monitor cashflow, identify cost-saving opportunities, and make data-driven financial decisions.
Tapping tax breaks
A tax break is a benefit the government provides to reduce the tax liability of taxpayers. The government offers them to incentivise certain activities, behaviours, or investments. There are several forms of tax breaks. The main ones include:
Tax deduction – Reduces taxable income.
Tax credit – Dollar-for-dollar reduction in the total tax owed to the government.
Tax exemption – Providing relief from taxes or reducing tax rates for certain organisations like charities and churches.
Types of tax breaks available for Australian businesses
When it comes to supporting and incentivising Australian businesses, there are several types of tax breaks available.
Depreciation deductions allow you to claim tax benefits by accounting for the wear and tear or decline in value of your business assets over time. By deducting the depreciation expenses, you can reduce your taxable income and lower your overall tax liability. For instance, if you purchase machinery or equipment for your manufacturing business, you can claim depreciation deductions on those assets. This helps you recover a portion of the asset's cost each year, providing a tax advantage and reflecting the asset's diminishing value.
Research and development (R&D) tax incentives
The Australian government encourages innovation by providing tax incentives for businesses engaged in research and development activities. Through the R&D tax incentive program, eligible businesses can claim tax offsets or deductions on their R&D expenses. These incentives aim to support businesses in their pursuit of new technologies, products, or processes. For example, if your software development company invests in R&D activities to create innovative software solutions, you can claim tax offsets on the associated expenses, reducing your tax liability.
Various concessions are available to provide relief for small businesses in Australia. One notable example is small business capital gains tax (CGT) concessions, which allow eligible businesses to reduce, disregard, or defer all or part of the capital gain when disposing of an active asset used in the business. This concession aims to encourage entrepreneurship and reinvestment in business growth. For instance, if you sell a commercial property that has been used in your small business, you may be eligible to access these concessions, resulting in significant tax savings.
Instant asset write-off
The instant asset write-off is a valuable tax break that enables businesses to immediately deduct the cost of eligible assets they acquire, rather than depreciating them over time. This initiative is designed to stimulate investment and boost business growth. The Australian government has set a threshold that determines the maximum value of assets eligible for instant write-off. For example, if you operate a construction company and purchase new tools or machinery below the specified threshold, you can instantly deduct the full cost of those assets in the financial year they were acquired, reducing your taxable income.
Leveraging tax breaks like these can help your business effectively manage its tax obligations, free up cash flow, and reinvest in its growth and development.
It’s important to understand the requirements and limitations of each tax break to maximise its benefits. A business accountant can help you navigate the complexities of tax and optimise your tax planning strategies.
How tax breaks can help when cutting costs
Some of the key advantages of using tax breaks in controlling costs include:
Reducing your tax liability meaning you keep more of your earnings, which you can reinvest for growth and other operational needs.
Reducing tax payments increases your cash flow, giving you more working capital for daily operations.
Minimising tax expenses increases retained earnings.
Helping your business to purchase or maintain new equipment and commercial assets through concessions and incentives.
Controlling costs with Findex
In the face of high inflation rates, escalating debt, intensified competition, and a looming recession, many businesses are finding it hard to generate the level of profit they would easily generate just a few years ago. To combat this, controlling costs to protect business revenue and finding ways to boost your profit margin has become critical to avoid failure.
Accessing grants and incentives, outsourcing non-core activities, investing in technology and automation, and taking advantage of tax breaks are all strategies you can take advantage of today.
See how our accounting and business advisory team can help recession proof your business. Book a complimentary cost-cutting assessment today to identify all your cost-cutting opportunities and ways to boost your profits.
The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex.