How to maximise profits in your business with cost management

Dan Sullivan
December 3, 2025

How are your profits looking?

This question is more important than ever, especially for small to medium businesses.

With creeping costs, customers shifting the way they buy and competitors always ready to snatch a slice of your market, every decision you make has a direct hit – or boost – on your bottom line. According to ABS stats, company gross operating profits have fallen 2.4% this year.

Keeping the lights on isn’t enough anymore. We need to work smarter, spot inefficiencies before they drain our margins and make every dollar count. And this starts with cost management.

Start with budget reviews

The first and most important step in maximising your profits with cost management is regular, structured budget reviews. This will show you where your money is going and highlight any opportunities to up efficiency.

Aim to review your budget results monthly. Compare your actual results against your planned budget, keeping an eye on cash flow to ensure you have enough working capital to fund operations and growth – and investigate any unexpected variances.

Are costs creeping up in certain areas? If margins are off, do we know why? Has wastage increased? Are processes taking longer than they should?

Dig deeper into the numbers: track not just overall costs, but also labour efficiency, material usage and overheads. Identify patterns over several months. Small inefficiencies that appear minor can add up and significantly impact your margins.

Benchmark to get context

Once you have a clear picture of your own numbers, it’s time to benchmark your key financials against industry standards. Benchmarking helps you understand your financial performance relative to peers and spot opportunities to strengthen your financial health, such as:

Negotiating better supplier terms by leveraging your purchasing volume or adjusting payment schedules.
Streamlining workflows if labour hours or resource use are higher than peers.
Identifying products or processes with higher-than-average costs and targeting them for efficiency improvements.
Adopting value-based pricing to ensure your products and services are priced according to the value they deliver to customers, not just production costs.

You may find benchmarking data through industry associations, the ATO has some basic ones, or ask your accountant, who might be able to provide them.

Make moves to maximise profits

Armed with both internal data and industry benchmarks, you can implement targeted corrective measures. Timely action ensures small inefficiencies don’t become expensive problems and helps you boost profitability without compromising quality.

Here are key strategies to decrease costs depending on what your budget reviews and benchmarking throw up:

Negotiate with your suppliers

Supplier agreements can have a big impact on your costs.

Look for opportunities to:

Secure better pricing by committing to higher monthly or yearly volumes.
Agree to shorter payment terms in exchange for discounts – for example, switching from 60 days to 30 days.
Explore alternative suppliers for more competitive offers.

Even small improvements in supplier terms can generate significant annual savings, especially if your SME has high-volume purchases.

Tidy up your operations

Evaluate how your resources are being used:

Are tasks taking longer than they should?
Is a one-person job being done by two and pushing up labour costs?
Is there wastage due to faulty products, inefficient material use, leakage or unnecessary processes?
Can workflows be streamlined, or systems and machinery upgraded to improve output?

To nip operational inefficiencies in the bud and maximise profit, you need a strategic plan to tidy up your processes and get your resources working smarter, not harder.

Empower your employees

Your team plays a critical role in driving efficiency and cost savings:

Equip employees with the right tech, for example, AI, to do their jobs smarter and faster.
Give them the authority to challenge the status quo and suggest improvements.
Involve the right people in reviewing processes and controls – those closest to the work often spot opportunities others miss.

Engaged employees often spot hidden inefficiencies and come up with practical fixes you might never have thought of.

Review your product or service portfolio

Not every product or service pulls its weight when it comes to profitability. To make smart decisions:

Know the real cost of producing each product or delivering each service.
Tweak your accounting if you need clearer insights.
Don’t be afraid to drop or redesign offerings that aren’t pulling their weight.

Doing this helps you focus your time, money and energy on the products and services that really drive value and increase revenue.

Stay ahead of market trends

To manage costs effectively, you need to look beyond your business and stay tuned to what’s happening in the market.

Ask yourself:

How is technology changing the way customers interact with your business?
Are sales moving online, in-store, or a bit of both?
What’s the future customer demand for your products or services?

Keeping tabs on trends means you can adapt quickly, update your offerings, and invest in products that will still be relevant tomorrow – avoiding wasted spend on areas that no longer deliver value.

Customer satisfaction is just as important as cutting costs. Happy, engaged customers help protect your profits and make all your efficiency efforts pay off.

Put it into a strategic business plan

Finally, bring all your corrective measures together in a cohesive strategic plan. This ensures your actions aren’t one-off fixes but part of a structured approach to continuous improvement.

A well-crafted plan sets priorities, aligns resources, and keeps your team focused on what drives long-term profitability. Regularly revisit and refine it to stay on top of internal performance and market changes, turning insights into sustainable results and business success.