As a small business, cutting cost on basic business expenses without compromising quality is a great way to increase your margins. Profit margin is a simple mathematical equation that depends on two factors: revenue and expense. For achieving higher margins, you have only two choices, either to increase your revenue or to reduce the expenses.
In an uncertain economy when every penny counts, even the smallest increase in revenue or reduction in expenses can have an impact on a business profitability. The more you can cut off your business expenses, the better off you’ll be. The savings can be used to keep your business afloat, expand into new ventures, or improve your bottom line.
Here are some easy, simple ways to save money on your business expenses.
1. Embrace Technology
There are numerous online systems and software programs that can automate both essential and non-essential business functions that will save you a lot of time, money, and manpower. Most notable of examples of these are computerized invoicing & accounting systems, integrated payroll systems, and cloud-based collaboration platforms.
2. Keep Salary Costs Down.
As long as you hire highly qualified and vetted freelancers, you can save a bundle over hiring full-time employees. Just make sure that you interview candidates correctly, and let them understand what’s expected. This is a lot better than hiring full-time employees, and you can save on payroll expenses as well.
3. Negotiate Better Prices.
If you work with vendors and suppliers often, negotiating better prices can have a tremendous impact on your expenses. Ask your supplier if a renegotiation is possible, and if they decline, re-approach them with quotes from 3-4 other suppliers. By saving even a few cents on every product you sell, you can decrease expenses and increase profits, significantly.
4. Save On Utility Costs
Cut on utilities such as electricity consumption by turning off unused office equipment after hours and on weekends and holidays. Generally reduce the cost to heat, cool, and light your workspace. Use energy-efficient office equipment to reduce electrical usage.
5. Reduce Financial Services Cost
Instead of employing a team of accountants and finance officers, you can improve your payroll efficiency by incorporating a payroll software into your business operations. It would eventually help you to make a decent saving on employee wages compared to outsourcing it to a service provider.
6. Operate Proactively Not Reactively
At a high level, adopting a proactive instead of reactive mentality can significantly improve the state of your business. Proactive organizations are constantly analyzing, evaluating, and optimizing their performance in relation to their business environments.
7. Reduce waste and improve team efficiency.
Knowing how to maximize your teams’ efficiency is a great way to reduce expenses. The great thing about this strategy is you don’t have to cut back and risk growth. You just have to find ways to allocate resources properly and put people in roles that maximize their talent. This can decrease expenses because your team members will be more productive, meaning more and better quality work will get done in less time.
8. Embrace A Remote Work Environment.
Businesses save more cost by allowing employees to work remotely. It provides them with a better work-life balance. This helps businesses save money on recruiting and training of new employees (because it improves employee retention) and also on expensive office setup (alternatively make use of co-working spaces) which allows you to run a lean business.
The most effective way to reduce expenses and operating cost is to know exactly where your money is going and consistently audit your expenditures. This means keeping detailed books and always thinking about ways to optimize. Are you paying monthly for a SaaS tool that you aren’t using? Are you overpaying for internet? Are your employees being utilized to their fullest potential?
These are the types of questions you need to consider on a regular basis to make sure you are keeping your expenses and operating costs in check. When you find extraneous costs, eliminate them.