What costs should be cut first in a downturn?

Start with costs that don't affect what the client actually experiences — unused software subscriptions, renegotiable supplier contracts, and admin inefficiencies. These rarely show up to clients at all, unlike cuts to staff, materials quality, or service levels.

Is cutting marketing spend a good way to reduce costs in a recession?

Usually not entirely. Cutting marketing completely tends to create a revenue problem six to twelve months later, just as the market recovers. A better approach is reviewing what's actually generating return and trimming what isn't, rather than cutting the whole budget.

How do I know if a cost is actually optional?

Ask whether removing it changes what the client experiences, whether it protects revenue or compliance, and whether it's been reviewed in the last 12 months. Costs that fail all three tests — invisible to clients, not protecting revenue, never reviewed — are usually the safest to cut first.

Can a bookkeeper help identify which costs to cut?

Yes. A bookkeeper with a properly categorised chart of accounts can show you exactly where money is going by category, which is the starting point for any genuine cost review — most owners are surprised by what they find once costs are actually broken down.

Cutting Costs in a Recession Without Cutting Quality

Published June 2026By True Tally Bookkeeping6 min read

The Wrong Way to Cut Costs

The fastest way to damage a business in a downturn isn't slow trade — it's panicked cost-cutting that hits the things clients actually notice. Cutting materials quality, losing key staff, or pulling back on service all save money in the short term and cost far more in lost trust and lost clients later.

The right approach is slower and more deliberate: find the costs that don't matter to the client experience, and protect everything that does.

Start With What's Invisible to the Client

Unused software subscriptions — most businesses are paying for at least one tool nobody uses anymore.
Supplier contracts never renegotiated — rates locked in years ago are often above current market.
Admin inefficiencies — manual processes that cost time rather than money still cost money, just less visibly.
Duplicate tools — two systems doing the same job because no one's consolidated them.

None of these affect what a client experiences. They're the safest place to start.

Be Careful With Marketing

Cutting marketing spend entirely feels like an easy saving, but it tends to create a revenue problem six to twelve months later, right as the market recovers and you're no longer visible. Review what's actually generating return rather than cutting the whole budget.

        The three-question test: for any cost, ask — does the client notice if this disappears? Does it protect revenue or compliance? Has it been reviewed in the last 12 months? If the answer is no to all three, it's a safe place to start cutting.
      

Protect What Actually Drives Revenue

Quality materials, skilled staff, and responsive service are usually what's actually winning and keeping clients — not the line items that feel easiest to cut. Cutting here to save money in a downturn often accelerates the downturn for your specific business, even if the broader market recovers.

Know Where the Money Is Actually Going

Most business owners can't answer "what do we spend on X" with any precision — it's scattered across categories that were never set up to make this visible. A properly categorised chart of accounts in Xero turns this from a guessing exercise into a five-minute report.

Review, Don't Slash

A genuine cost review takes a few hours and a clear head — not a panicked afternoon. Go through every recurring expense, apply the three-question test, and make deliberate decisions rather than blanket cuts.

True Tally — clear numbers for Melbourne businesses

We help Melbourne trades, allied health and service businesses see exactly where their money goes, so cost decisions are deliberate, not panicked. Book a free call to talk through your numbers.

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