Your profit is lower than last year and you want to cut costs. Cut the wrong cost and you lose customers or good staff. Cut the right one and nearly the whole saving adds to your profit. Start with your numbers, not with a list of ideas.
Read 12 months of expenses
Print your profit and loss by account for the last 12 months. Sort the lines from largest to smallest. Compare each line with the year before. Costs which creep up without a decision behind them are your first targets.
Costs worth questioning
– Subscriptions, software licences, phone plans and GIRO deductions. List every one and cancel those nobody used in the last 3 months.
– Your top five suppliers. Ask two other suppliers for a quote, then ask your current supplier to match the lower price.
– Rent and utilities. Check your lease end date and talk to your landlord well before renewal.
– Insurance. Ask for quotes at each renewal instead of signing the renewal notice.
– Overtime. A pattern of overtime in one team means a scheduling problem or a hiring decision, so look at the cause.
– Stock. Goods sitting on the shelf for months tie up cash and often end in a markdown.
Costs to leave alone
Keep a cost when stopping the payment would stop revenue or break a legal duty. Salaries of staff who serve customers, marketing with a record of bringing in enquiries, insurance, CPF, audit and ACRA filings all pass this test. Test every line by asking what stops next month if you stop paying.
When cuts are due
Act within weeks, not at year end, when your cash balance falls three months in a row, when profit drops while sales stay flat, or when you pay suppliers late. Waiting leaves fewer choices later.
What a saving does to your tax
The corporate tax rate is 17% for YA2026, but the partial exemption means your extra profit is taxed at less than 17% until chargeable income passes S$200,000. Take a company with chargeable income of S$150,000.
– Before the cut: exempt amount S$77,500, taxable amount S$72,500, company tax S$12,325.
– You cut S$10,000 of deductible cost. Chargeable income becomes S$160,000.
– After the cut: exempt amount S$82,500, taxable amount S$77,500, company tax S$13,175.
Tax rises by S$850, so you keep S$9,150 of the S$10,000. Above S$200,000 of chargeable income, the same saving adds S$1,700 of tax and you keep S$8,300. This example ignores the YA2026 corporate tax rebate, which lowers the tax bill further. In your first three years of assessment the start-up exemption gives different figures.
Only a cost you deducted changes your tax. Private costs and capital items were never deductible, so cutting them saves cash and leaves your tax alone.
Record each decision
Write down what you cut, the monthly amount and the date. Review the list after three months against your profit and loss. If a cut cost you a customer, restore the cost.
Want a second look at your expense lines? Send your latest profit figure or your question by WhatsApp to +65 9876 3553 or by email to henry@cschow.com.sg.
Henry Chow
Public Accountant, C S Chow & Co