Costs savings, Reducing Business Costs & Tips to Cut Business Costs

Expenses rise and income falls. Profits are squeezed. Every business - even highly successful ones - experience those times. What can you do when expenses are on the rise? How can you manage your costs? Here are some ideas for you.

Recently, I had a DVD that was late from the movie rental store. I was about to jump in my car and drive there when I realized that with higher gas prices, it would actually be more expensive for me to drive to the store to drop off the movie than to pay the fine for one extra day. Things can be expensive, but if you approach your expenses with the right mindset, you can help to reduce them.

Profit is the amount of income left over after expenses. Unfortunately, expenses can be… expensive! How are your expenses? Is there a way you can decrease them? Here are some creative ideas:

  • Rather than hiring a security guard to patrol your building after hours, why not consider a time shifting method for employees: have some come in as early as 5 or 6 in the morning, have others come in later and stay until 10 p.m. or midnight. Hire a night shift worker to do administrative work in the middle of the night. Someone will be in your building, but work will be done at the same time and as you grow, you’ll be able to share office space for longer before needing to move into a bigger building. Your employees will likely be happier (reducing turnover) because they no longer have to scramble through rush hour to drop the kids off at the daycare before getting to work. Instead, they can arrange a schedule that suits them.
  • Consider offering your employees a work-at-home option after a few faithful years in the office. Supplying a computer, fax/printer, and phone line is a lot cheaper than an entire office and some employees will love being able to work during their peak hours rather than when they have to work. After all, with the exception of sales staff, there is very little that HAS to be done onsite. To reduce expenses further, consider subdividing your office and renting out the newly found unused space.
  • One area that’s technically not an expense but provides a lot of opportunity is your accounts receivable. Rather than getting a separate department to work your accounts receivable, get your sales staff to do their own. You’ll find that sales may drop but sales-to- receivables will improve because your staff will pay much closer attention to underwriting skills when they have to collect. And sales- to-receivables is a good number to improve because it drives up the overall worth of your inventory- after all, a sale that’s not paid for is more costly in wages than theft!
  • Rather than buying items for every desk that seem small but quickly add up and often go missing (like sticky notes, stapler, hole punch, etc.) create a resource center at an unused work station where people go to staple or punch holes.
  • Consider reducing inventory but managing it with a computer system for a quicker turnaround. Some managers balk at this idea because of the “what if” scenario (“What if we get more orders than we can handle?”) but a review of inventory overages can help you find an accurate number to hold your inventory at, and the cost of buying emergency inventory at above-wholesale prices is often still cheaper than your warehousing costs.

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