Reducing expenses falls into the category of minimising cash out. 

Example – exploring ways to reduce expenses

Sarah is running her own small business. She has used the Business performance check tool to help her find areas to improve within her business.


The results are suggesting that her expenses seem to be a little higher than those in other businesses like hers. She should consider ways to reduce her expenses and pick those that work best for her business.

When looking for opportunities to reduce your expenses think about where you are spending money. A good starting point is to identify which costs are necessary for you to generate your income and which aren’t.

Consider whether there are some expenses that can be reduced to improve your cash flow.

Where possible look for opportunities to take advantage of credit arrangements and discounts.

Here are some potential actions and considerations for reducing expenses:

• reduce discretionary spending
• reduce overheads

Discretionary spending is spending money on things that aren’t 100% necessary for your business – instead they are optional for your business. 

When looking at your discretionary or optional expenses have a think about the following things that may help improve your cash flow.

• Are there expenses that could be deferred?
• Can you negotiate these expenses on better terms such as credit policies or discounts for early payment?
• Are there any non-essential expenses which the business is currently paying?

When exploring options to reduce your overhead expenses you consider whether you can renegotiate prices on different operating expenses such as utilities, rent or maintenance services. 

Another option is to consider if there are cheaper alternatives for services you are currently using, such as bundled technology packages or multi-channel marketing and advertising deals.