Your business need not cut back on services or staff pay if you budget wisely. Mary Evans shops around for tips
Nursery managers struggling to balance the books and keep costs in line with income could do well to recall the old adage, 'take care of the pennies and the pounds will look after themselves'.
The perennial problem facing proprietors of early years settings is that, with fixed staffing levels on the one hand and a need to keep fees under control on the other, there is so little scope to manoeuvre between expenditure and income. However, according to North Yorkshire chartered accountant Edward Wood, careful control of spending can achieve savings of up to 10 per cent without having to tighten the belt or make cuts.
He says, 'There are successful firms making a healthy living from examining the spending of institutions which are household names and showing them how to save money. These are efficient, well-run organisations, but still they can be more cost-effective.
'It is possible to save money with no change in consumption and no belt tightening. We all need to take time to examine our corporate consumption levels to see what we are spending and if it could be done more effectively.'
He says that nursery managers can embark on their own exercise by listing every single item of expenditure. 'You need to start with a forensic fact-finding exercise and itemise what you are buying and what you are paying for these items, so you know your starting position. For example, how much do you pay for pencils, books, uniforms? Then you have to see if you can get these items at a better price.'
Mr Wood maintains that savings can be made in almost every area of consumption, from bank charges to telephone bills and from insurance premiums to India rubbers.
'People have to think, are they running their business for themselves or to enrich their suppliers?' he says. 'If you really shop around you can save around 10 per cent on your spending.'
Sylvia Archer, who opened 'the children's house' in Stallingborough, Lincolnshire, with her sister Theresa Ellerby in the spring, says the biggest challenge is to manage cash flow. 'There are dips in the year when income falls, such as the summer holidays, and you have to watch that you do not spend money that just isn't there. We have put items like business rates, insurance and utilities on direct debit to avoid having to pay large bills.
'We didn't have time to shop around for the best deal on utilities, and that is a task for me at the end of this year. I think we could get a better deal here and save about 60 a year, which, I know, is not a massive saving, but it would be useful.
'We did shop around for banking and compared charges and services and went to LloydsTSB, which offered free banking for the first year. We have said we won't implement any direct debits from parents until we have been with the bank for a year to see if we are happy with the service, but if we are not we will go elsewhere offering free banking.
'When you are buying equipment, suppliers often do not tell you that they will give a discount. You have to ask. People see the catalogue price and think that is it, but it is always worth asking for a discount, particularly when you are spending a lot of money.'
Ann Beadle, who runs the ABC nursery in Copland, West Cumbria, with her business partner Margaret Petre, says people should be careful to read the small print when changing utility suppliers and ensure that a switch is going to be cost-effective.
'Sometimes people change companies for their phones and electricity and it's just not worth it - the savings or the service are not as good as they thought and then they have to spend a lot of time putting things right. You should remember your time is money.
'When it comes to buying equipment and provisions, we always look for the best deal. I buy at exhibitions when goods are offered at a discount. We always look for best-value offers or three for the price of two. We make a lot of our own things at nursery which saves money. We have made up our own story sacks rather than bought expensive ready-made ones. We often find nice things in the charity shops.
'You must also beware of false economies. One of my staff saw some balloons that had been greatly reduced and bought them for the next Christmas. But by the time December came round they had perished. They were a complete waste of money.
'There's a sharp learning curve. You have to learn what is worth buying in bulk and what will not keep, and which bargain is a good bargain and which is not.'
Take care of the pennies
Apparently people are more likely to get divorced than change bank accounts. Many of us put up with a bank which we no longer believe looks after our best interests because we cannot face the upheaval of changing. Before you move to new financial pastures, research thoroughly what deals are available in the high street as well as from telephone and internet banking.
Shop around and don't be afraid to negotiate. Ask for a reduction on a package for your premises and contents. If you install extra security, ask for a reduction in your premiums. Some companies offer discounts if you buy their policies off the internet.
Time is money. Who does the donkeywork in preparing your accounts? If it is you or your bookkeeper, make sure that fact is reflected in the fees charged by your accountant. If you need to consult a professional adviser, for example, a solicitor or surveyor, check their fees beforehand and always go to meetings fully briefed and armed with all relevant paperwork, to avoid wasting time.
Remember to count the cost of reprinting stationery if changing telephone companies means changing telephone numbers. Oftel, the industry regulator, telecoms companies and small business user groups have formed a task force to improve the provision of information to small business about telecoms services and products. It recently launched an informative website: www.TelecomsAdvice.org.uk
Everyone in Britain now has a choice of electricity and gas suppliers. But although there are savings to be had, few of us have taken advantage of them, no doubt because the welter of options and offers available are so confusing. The official energy regulator Ofgem (Office of Gas and Electricity Markets) runs a useful website with information on how to change suppliers: www.ofgem.gov.uk