7 Ways to Cut the Cost of Operations
When it comes to cutting the cost of operations, most business owners tend to think in terms of the worst case scenario. However, there are simple ways to cut back without having to eliminate staff or make big changes in the way you do business.
Increase Performance
In order to lower the cost of labor, you won’t have to make layoffs if you can help your staff increase performance and productivity. When staff underperforms, you can end up spending more money to pick up the slack. Instead, you can help improve the performance of current staff members by increasing expectations and creating stricter policies for those who don’t make the cut. When hiring new staff, make sure to put the effort into hiring the best people for the available positions to decrease turnover and improve overall team performance.
Make a Budget . . .
Budgeting is one of the best ways to determine areas where your company is wasting money. Start by looking at several months’ worth of expenses and categorizing them to assess where the cash flow goes each month. Once you have an idea of what you are currently spending in each area, start finding places where you can cut back. Use caution when placing orders and make sure that you will make good use of all items in the order, especially if buying in bulk. It may seem like a good deal at the moment, but if you end up wasting items, it isn’t helping your bottom line.
. . . And Then Stick to It
Once you have created your budget, it won’t do much good if you don’t continue to track expenses and stay under the targeted totals. Don’t develop a budget that is so tight that you simply can’t meet it, or you are just setting yourself up to fail. Look for small ways you can cut costs to help your budget, such as using compact fluorescent or LED light bulbs or upgrade insulation and windows to lessen heating costs during the winter.
Provide Flexible Work Options
Image via Flickr by Mike McCune
If you are spending a lot of money on office space rental, phone lines, Internet, and other overhead costs associated with the building in which you work, consider offering telecommuting as an option to staff. For those who don’t need to be at work in person to accomplish tasks, this can be a great option that many of your employees will appreciate as well, since it helps them to save on commuting costs and time. You may find that employees become more productive when working from home.
Improve Marketing
When you market your business, look at returns on investment and make sure you are spending this portion of your budget wisely. Advertising can easily eat up large chunks of money, but if you don’t know whether it is effective, it isn’t doing its job. Ask your marketing team (if you have one) to develop strategies and analyze returns before launching new campaigns, and look for ideas that don’t cost anything, such as using social media and other online marketing.
Utilize Online Tools
There are many software options available online, and some companies offer basic versions for free to allow you to test them out before buying. You can use Sage One free online accounting software to help with your budget and other accounting needs. Not only does the cloud accounting software eliminate the need to hire a dedicated accountant, it also gives businesses the chance to review built-in reports and statements that let them know if they’re making money or burning cash.
Lessen Equipment Costs
If your company uses any kind of equipment, from specialized tools to printers and scanners, consider leasing or buying them used. Leasing allows you to pay a small fee each month, then upgrade to newer equipment when the lease period ends, without having to spend so much up front. Buying used equipment from an authorized reseller is another great way to get newer items for lower prices.
Your business can continue to succeed if you look at ways to lessen your operational expenses and increase profits. Involve staff members in these changes so they understand the need for reducing costs and how they can help to achieve this goal for the company.
