Most businesses have similar costs: things such as staff, stock, rent, rates, bank charges (including interest on loans), insurance, legal and accountancy fees, training, maintenance, advertising, computer licences, membership of professional and business groups, utilities (heating, lighting, telephone and broadband) and consumables (bags, stationery, etc). Before any of these costs can be managed, they need to be understood.

Some of the costs that you think could be cut back would result in relatively small savings. On their own, these probably do not warrant a great deal of time spent reviewing them and finding alternative and cheaper suppliers. However, a regular annual review of these might identify appropriate savings, and this is worth including in your annual plan of activity.

The greatest costs, and consequently those whose management will give the greatest benefits, are usually:

• Stock
• Staff.

Staff are often acknowledged as the greatest asset of any business. Yet staff costs are also a large and regular cost for any business and are often seen as the first thing to attack when trying to reduce costs. Cutting staff costs without careful consideration can result in a number of unwanted consequences.

Indiscriminate cutting of staff hours can lead to difficulties in delivering adequate levels of customer service, meeting dispensing deadlines and delivering services, all of which can result in lost income. To rationalise staff effectively, you need to consider two things:

• Business profile
• Skill mix profile.