Are Your Overheads Too High?

Overheads can quietly eat away at your business profits, like termites in the walls. They’re not as obvious as direct costs, but they can drain your margins if left unchecked.

Whether you’re a growing SME or an established firm with multiple departments, monitoring overheads monthly is a simple but powerful way to protect profitability.

So, how do you know if your overheads are too high? This blog is your go-to checklist.

What Are Overheads?

Overheads are all the costs your business incurs that aren’t directly tied to producing your product or delivering your service. Think rent, admin wages, software, subscriptions, insurance, phones, utilities, and more.

They’re necessary but the challenge is making sure they’re adding value, not just inflating your cost base.

The Overheads Health Checklist

1. Rent and Property Costs

• Are you paying for more space than you need?

  Why it matters: Unused space is wasted money. Downsizing or subletting can significantly reduce fixed costs.

  
  

• Could you sublet unused areas or renegotiate your lease?

  Why it matters: Subletting or negotiating can turn a static cost into a shared asset or reduced liability.

  
  

• Would remote/hybrid working reduce your need for physical space?

  Why it matters: Embracing flexible work can lower overheads while maintaining team productivity.

  
  

2. Software & Subscriptions

• Are you paying for duplicate tools across teams?

  Why it matters: Redundancy in software costs often goes unnoticed, reviewing licenses can trim fat fast.

  
  

• Do you use all features you’re paying for?

  Why it matters: Underused platforms indicate you're not getting return on spend.

  
  

• Could switching to annual billing save 10–20%?

  Why it matters: Many providers offer discounts for upfront annual payments, it’s free savings.

  
  

3. Wages (Admin & Back Office)

• Is headcount aligned with output and revenue growth?

  Why it matters: Staffing costs that outpaces revenue is a red flag for bloated operations.

  
  

• Do you have legacy roles or inefficiencies that automation could solve?

  Why it matters: Outdated roles can often be replaced with technology, saving costs and increasing accuracy.

  
  

• Are overtime costs creeping up each month?

  Why it matters: Repeated overtime may point to workload imbalance or process inefficiencies.

  
  

4. Professional Fees

• Are you being over-serviced by advisors or agencies?

  Why it matters: Paying premium fees for basic or low-impact services erodes ROI.

  
  

• Could your accountant offer more for less?

  Why it matters: Your accountant should be a growth partner, not just a compliance cost.

  
  

• Are legal retainers or consultants still delivering ROI?

  Why it matters: Regular evaluation ensures you’re only paying for services with tangible value.

  
  

5. Insurance & Compliance

• Are you over-insured or duplicating cover?

  Why it matters: Excessive cover or overlap adds no benefit and inflates premiums.

  
  

• Have you reviewed the market for better deals recently?

  Why it matters: Sticking with the same provider without comparison often leads to overpaying.

  
  

6. Utilities & Communication

• When was the last time you reviewed your broadband, phone or electricity rates?

  Why it matters: Rates change frequently, staying locked into old tariffs can waste thousands.

  
  

• Are all staff using company mobiles or software licenses effectively?

  Why it matters: Unused devices and licenses create hidden, recurring waste.

  
  

7. Marketing Spend

• What’s the actual return on your marketing budget?

  Why it matters: Marketing should be tracked for direct revenue impact, not just activity.

  
  

• Are you spending out of habit or based on results?

  Why it matters: Legacy channels may be comfortable but ineffective, regular review is essential.

  
  

• Could internal reporting better track ROI on campaigns?

  Why it matters: Without reporting, you can’t optimise what works or cut what doesn’t.

Signs Your Overheads Are Too High

• Net profit hasn’t improved even with higher sales

• You’re regularly dipping into overdrafts or delaying supplier payments

• Your breakeven point keeps increasing

• You’re paying for things nobody uses or understands

Strategic View: Good Overheads vs Bad Overheads

Not all overheads are bad, some are investments in performance, efficiency, and scalability.

• Good overheads: CRM software that streamlines sales, hiring a finance manager who catches cost risks early, or proactive marketing that wins long-term clients. These overheads contribute to business resilience and growth.

  
  

• Bad overheads: Underused subscriptions, outdated contracts, inefficient workflows, or vanity spend. These drain resources without generating return.

  
  

Strategically managing overheads means aligning them with growth goals. Each pound spent should either protect margin, increase capacity, or enable revenue. Anything that doesn’t should be flagged, reduced, or restructured.

How Jfa Helps

We help businesses run smarter, not just leaner.

At Jfa, we:

• Review your overhead structure against industry benchmarks

• Set up financial reporting to track admin cost % versus revenue and margin

• Help clients renegotiate contracts and streamline unnecessary expenses

• Deliver a 60-minute free finance health check to spot hidden costs and leakage

Final Thought

Overheads won’t break your business in a month, but they can quietly choke your profit over a year.

With a structured checklist, clear reporting, and strategic insight, you can make sure every cost earns its keep.

Wrapping up today’s insights, tomorrow we simplify another accounting challenge