How to Cut Business Expenses Like a Boss
During an uncertain economy, every penny will count and even the tiniest reduction in expenses or increase in your revenue can have a big impact on your business’ profitability. Large-scale company overhaul may not be necessary and it can be simple steps that can improve your bottom line, especially for smaller businesses.
There are numerous ways to cut business expenses. Not every business is going to be able to cut expenses in the same way but take a look at some of the ideas and see which ones can apply to your business and start getting to work.
Reduce Supply Expenses
Comparison Shopping
You can save money on your business supplies by contacting vendors to let them know you are price shopping. You may even want to consider looking outside the pool of traditional vendors. Large discount suppliers, such as Walmart and Amazon, may beat office supply vendor prices and allow you to cut business expenses. You should constantly be monitoring supply costs. While you may find it embarrassing to ask for discounts, you shouldn’t. If you are a regular purchaser then many businesses may even offer you discounts on your products or services.
Pay Bills On Time
One way to be more likely to get a discount is to make yourself popular by paying your bills on time. Late payment fees can add up and suppliers may not want to work with you. Some suppliers may even give you discounts for early payments.
Cooperation
Co-operation can be another way to reduce supply costs. That means finding other businesses and pooling resources to save money on goods and supplies. You can extend this to other areas of your business, such as advertising costs.
Cut Vehicle Expenses
If you have a business that relies on vehicles then you know how expensive vehicle costs can be and how they affect your bottom line. Servicing costs and fuel for larger vehicles such as crew cabs or vans can be very high. While you can only reduce your business vehicle use so much, there are other ways to reduce your business vehicle expenses.
You want to begin by not spending too much on the vehicle to start with. Maybe you can settle for something that isn’t new by keeping an eye out for a used vehicle that is in decent condition.
If you are going to be racking up a lot of miles on the vehicle then you want to reduce fuel consumption. Hybrid and diesel vehicles can be more expensive in the beginning but pay off in the long run when it comes to maintenance and fuel savings. Take advantage of online tools that can allow you to calculate the payback period for non-hybrid versus hybrid vehicles. The more miles you drive a year, the quicker this period is going to be.
If your finances are tight or you are just starting out in your business then you may want to lease a vehicle. Some leasing companies will even offer purchase agreements so you are able to buy the vehicle at the end of the lease if it makes financial sense at that time.
Work On Lowering Production Costs
As a business owner, it’s likely that you are always looking for ways to optimize your resources and cut material costs. There are a number of suggestions that can help you lower your production costs.
Some include selling leftover metal, paper, and cardboard instead of just sending it to a recycling center. You may want to use the waste in order to create another product.
You want to make sure you are getting the most of your production space. Consolidate or centralize the space that is necessary for production. Lease any unused space to another individual or business, whether it’s just a small office or a big warehouse space.
Start tracking so you can measure the operational efficiency of your business. This way, you can adjust and optimize available resources as needed. Take this a step further and set performance parameters that can be about your efficiency goals and give incentives when the goals are met.
Depending on what you need for production, you may be able to buy used. Used buys might be good for office technology, vehicles, storage equipment, packaging and assembly equipment, or furniture.
Lower Your Financial Expenditures
Look at financial accounts, such as insurance policies, and find ways to save money. For example, in order to save money on insurance, compare different providers and look for the most competitive rate. Ask your current insurance provider to match that low rate. Consolidate bank accounts or insurance policies if possible. Take a look at your insurance policies in order to make sure that you aren’t duplicating coverage and that you aren’t over-insured. When you do this, you may find that you could be under-insured and you want to make sure you have the right coverage for your business, especially if you have recently expanded, to help in the event of a disaster.
One thing you really want to focus on is not taking on unnecessary debt. Go through a cost-benefit analysis, as well as future forecasting, to see if it makes sense when thinking about a business expansion. You want to consider opportunity costs and the effect of debt payments on cash flow. Excess debt not only costs money but also can affect your interest rates, the company’s rate, and your ability to borrow in the future. Taking on debt needs to be worth it.
Learn How To Manage Your Bills Easily And the Best Ways To Cut Them
Optimize Your Marketing Efforts
Marketing is a huge part of any business, whether it’s big or small. You don’t want to eliminate any advertising that is working but it may be worth it to look at cheaper alternatives: Some cheap ways to market include:
Building a customer email list to implement a referral program.
You can also network more and advertise less. This could work in your favor since a customer may be more likely to hire a business with a face they recognize.
You can lower your marketing costs by doing more in house.
Try using social media more to reduce efforts on traditional marketing.
Email can be a low-cost marketing solution to send out discounts, tips, news and other information.
Word of mouth marketing is also great to use. It can come in many different options depending on your company. The best word of mouth strategy will take into account your target audience’s buying habits, demographic habits, and response to sales and marketing efforts.
Work On Time Management Strategies
Optimizing your productivity can lower your cost of doing business. Any wasted time is actually wasted money. Minimize distractions too and limit access to known time wasters. Use apps like Rescue Time or Focus Booster in order to help your employees focus so they are able to concentrate on the tasks at hand to increase productivity. You can use software such as Toggle to track employee time usage.
You can see the time spent on different work projects or activities and billable hours and then, once you have this data, you can work on a plan in order to improve time waste. Even when you are trying to be more productive, it’s still important to set expectations for a reasonable time to complete certain types of tasks or projects. Then offer incentives for exceeding or meeting those expectations. Make sure it’s actually in doable time limits so employees don’t get discouraged. Encourage employees to adhere to daily or weekly schedules and schedule these activities.
Meetings can sometimes be a waste of time. Schedule predetermined time for meetings. Make it clear that participants should be on time and then make sure to stick to the agenda so that you can wrap up at the scheduled time and everyone can resume their activities.
Use Virtual Technology
You may be able to reduce business costs by using virtual technology when possible. For example, virtual meetings can help minimize any travel expenses and a virtual office can eliminate the need for physical office space. You may not want to eliminate personal contact altogether but you can save personal contact for instances when it is going to be the most beneficial. Technology such as Google Drive can help centralize product collaboration and company documents and can be an alternative to meetings and paper documents.
Cloud computing and other online services, such as online billing for small business, can be a great way to reduce ongoing expenses and capital costs. There is no need to purchase, as well as maintain, expensive servers onsite and you don’t have to pay for ongoing software upgrades. When you use the cloud, you will have access to the latest versions of your business applications and it will be even easier to increase your storage or bandwidth on demand. A cloud provider can also take care of many data recovery issues, which frees up your business from having to maintain a complex IT disaster recovery plan.
Another benefit of using the cloud is that it will allow you to always access your business data across different platforms, such as your laptop or tablet, and allow for more a collaborative work environment.
Optimize Business Taxes
Minimizing your tax bill can save you a lot of money and improve your bottom line. In order to minimize your business tax bill, you have to maximize your available business deductions, which will help reduce your tax liability.
Begin by getting in the habit of tracking all of your business expenses and saving receipts.
Record vehicle mileage when traveling. If you have family members that work in your business, remember they are treated just like any other employee for tax purposes and this means they are a business tax deduction. In order to make sure that you qualify for the deduction, each family member should properly record his or her hours worked, just like regular employees. The contract rate and salary must also be correct with the position.
Narrow Your Focus
For a small business, narrowing your focus may be the most effective strategy. If you are limiting the type of services or projects you offer or accept then you can be more productive, as well as produce higher quality work.
If you aren’t able to do this, you can decide to subcontract as a way to narrow your focus. Instead of turning away business, you can maximize capacity by still subcontracting. More projects do equal more revenue but subcontracting can help lower your expenses.
Make the Most Of Your Office Space
Take a look at your current use of physical office space. Do you have too many supplies, piles of papers, inefficient placement of equipment and furniture, or overflowing storage? These are all examples of common space wasters.
Centralize and consolidate different departments and functions so you can use space for dual purposes.
For example, a meeting room can double as a break room. The opportunities to make the most out of your space are going to vary, depending on your own business, but there are opportunities if you get creative.
If you don’t need office space, consider if you can operate your business from your home or go completely mobile. Businesses such as electrical and plumbing companies and services such as bookkeeping can be ideal home-based businesses. In addition to saving on the cost of actual office space, operating your business from home can also save you money on utilities, business taxes, or insurance. However, before you convert to home-based businesses, do some research. You need to make sure there aren’t any zoning issues that could prevent this in your neighborhood. You also want to check with your family to see if it’s okay that they live with a business every day.
Reduce Staffing Costs
You can reduce your staffing costs by using family members in your business. If you have children of an appropriate age then you can get them involved in your business if possible. Learning about business will be a great experience for children and helps keep money in the family. If you have older children that are unemployed, employing them in your business can offer some valuable work experience that they can use in the future. Sometimes you can save on staffing costs by hiring freelance or contract workers to save on taxes but you need to make sure you are following the IRS guidelines on what constitutes an employee versus a contract worker.
It’s important to invest in your employees since it can cost a lot to hire just one employee with some in-demand skills. It makes sense to spend money to retain your talented and star employees, even if it means spending a bit more on benefits and salaries, in order to save on recruiting and onboarding costs.
Utilize Your Employees' Skills
It’s time to maximize the skills your employees have and make sure that they are in the best position to use those skills. Take a look at the current usage of your employees’ skills and experience. Give out responsibilities to the employees that have the most efficiency and skill in certain areas. For example, don’t use expert sales people for word processing jobs. If you have people that are more numbers people then don’t use them for designing. It can be necessary for one employee to share and be responsible for many different tasks but you may want to exchange some of those tasks with others who show better efficiency in that area.
Use Your Business Experience To Barter
This can be an untraditional way to cut business expenses but may be able to work for you. Bartering has also been a popular way for people to exchange goods and services in the past. There could be business bartering opportunities in your area but there can also be a number of different online barter exchanges. In order for bartering to be successful, both parties will need to fulfill their obligations. Sometimes a service-to-service exchange can be a problem, unless there is a specific timeline established for providing the service. Just like with any other business relationship, you should do your homework before you enter into an agreement with someone you don’t know.
Bartering will be treated as a normal business transaction and you are technically getting payment for the goods and services you provided so the benefit you get is taxable. Bartering may be a good way to help get your business through slow periods since it builds up valuable relationships with other businesses.
Focus On Quality
Remember that quality sells, whether it’s services or products. Having happy customers will increase your sales through repeat purchases or referrals. Higher quality leads to a solid reputation that will allow you to charge higher prices, which will then equal higher revenue and a better bottom line.
In Conclusion
There are plenty of different ways to cut business expenses. Start by looking at your current business expenses list and then see which of the above ideas can work for you. While it’s not possible to reduce every category of business expense, reducing what you can will allow you to pad your bottom line and have more money to weather out any economic downturns.