How to run a cost review in a small business

Key takeaways

A cost review for a small business is a structured look at what the business spends and what it gets for it. Most reviews stop at supplier bills. A useful one also covers people's time, which is usually the largest cost and the one where hidden waste sits. Half a day, once a year, is enough.

• Half a day, once a year, with 12 months of figures.
• 3 passes: supplier spend, people time, then hidden costs.
• People cost is usually the largest line and the least examined.
• Finish with 5 ranked actions, an owner and a date for each.

What is a cost review?

A cost review is a periodic examination of a business's costs to confirm each is necessary, competitively priced and delivering value. It differs from cost cutting, which starts with a target. A review starts with questions and may conclude that some spending should rise.

• The hidden costs of doing everything in-house
• What are hidden costs in a business?

What should you look at first?

Look at supplier spend first because it is quick. Export 12 months of payments, group them by supplier and sort by size.

• Subscriptions: who uses each, and is there overlap?
• Contracts auto-renewed without comparison.
• Insurance, energy, telecoms and card fees.
• Agencies and contractors: what did each deliver?

• Shadow IT in a small business: risks and fixes

How do you review people costs?

Review people costs by looking at how time is used, not at headcount. Under 2026/27 GOV.UK rates an employee on £30,000 costs about £34,463 a year before overheads. The question is what share of that goes on the work they were hired for.

• Split each role's week into core work, support work and idle or waiting time.
• Identify senior people doing routine tasks.
• Identify tasks done by several people part-time.
• Check overtime and where it arises.

• Activity based costing for small businesses
• How to benchmark in-house team performance

How do you bring in the hidden costs?

Bring in the hidden costs with the five lines of the GBL Hidden Cost Audit: focus, rework, delay, fragility and stack. Score each from 0 to 2 and price the highest. These rarely appear in a review based on invoices, and they are often larger than anything a supplier negotiation will save.

• The hidden cost audit: score your business in an hour

What should you not cut?

Do not cut what protects revenue or prevents larger costs: marketing that demonstrably produces enquiries, training, security and anything customers notice. A review that only removes cost can leave the business weaker. The aim is value for each pound.

What do you need before you start?

Gather the material first so the half day is spent deciding, not searching.

• Twelve months of bank and card transactions, exported.
• The profit and loss account by month.
• A list of contracts with renewal and notice dates.
• Headcount by role, with salaries.
• A rough split of how each role spends its week.

How do you rank what you find?

Rank by yearly value and by effort. A change worth £6,000 a year that takes a day is ahead of one worth £10,000 that takes three months. Write each opportunity as a sentence with a number: move invoice chasing from the director to an administrator, worth about £4,000 a year. Vague entries such as reduce admin never get done.

What does a worked example look like?

A 12-person firm reviews its costs. Supplier spend yields £900 a year from cancelled subscriptions and £400 from a renegotiated phone contract. The people-time pass finds a director spending 6 hours a week on scheduling and invoicing: at £40 an hour, about £11,000 a year, which an administrator or managed team could do for a third of that. The hidden cost pass finds two processes with no cover.

The supplier savings took most of the morning. The people-time finding took twenty minutes and was worth eight times as much.

What mistakes do small businesses make?

Common mistakes are reviewing only what is easy to see, cutting something that was quietly producing revenue, setting no owner for each action, and treating the review as a one-off. Book the next one before you finish this one.

What does this look like in practice?

A pattern we see in annual reviews: an hour is spent negotiating £30 a month off the phone contract, and nobody questions a director spending a day a week on tasks an administrator could do. The second is worth far more.

Across our client work, back-office cost per task has fallen by 42% once the process was written down and run by a managed team.

• See client work
• BPO Solutions for UK businesses

Cost review checklist

Set aside half a day.

• Export 12 months of spend by supplier.
• List subscriptions and owners.
• Split each role's time into core, support and idle.
• Score the five hidden cost lines.
• Rank opportunities by yearly value.
• Assign five actions with owners and dates.
• Book next year's review.

• How to reduce hidden costs in a business

Next step

Tell us your team size and the roles that carry the most support work. We will help you size the people-time part of your review in a 30-minute call.