4 ways to cut business costs

by Citizens Staff

Whether cost cutting is a necessity or a just a step to improve financial health, it's important to make changes with business objectives in mind. Some cost reductions may help a company stay on course, while others can negatively impact the ability to compete and succeed. Use these four tips to learn about cost-cutting strategies and how to make smart decisions about each reduction.

1. Use free tools and services

Tools and services that support business optimization are essential to strong customer relationships, but you may be able to maintain the same level of service and efficiency using lower-cost versions of current tools. While you may not want to change up core services such as payroll, invoicing, or bill payment, shifting to free or low-cost versions of communication, collaboration, and marketing services may help lower costs. Test new services on a short-term basis before jumping to a new vendor.

Options change frequently, but some examples of free services include:

• Communication: Free Conference Call lets you hold audio and video conferences and record them, Otter.ai transcribes video into text, and AI assistants like Spiral automate repetitive tasks such as writing proposals or emails.
• Collaboration: Free office software suites such as LibreOffice have word processing and presentation capabilities, Trello lets teams share and organize project work, file-sharing services like Box and WeTransfer offer free plans for a limited number of files.
• Business planning: While it's important to consult with your legal counsel about any legal document you create and use, tools to review and create documents can do part of the job. Xodo Sign creates templates for contracts and documents and enables e-signatures from anywhere.
• Email marketing: Mailchimp, Sender, and Brevo have free options that provide a limited number of features that support email and general marketing initiatives.
• Social media: Free tools such as Hootsuite can help create and manage social posts, a free Canva account may be used to design social posts, logos, presentations, and other collateral.

2. Reduce staff costs

While letting people go is a tough decision, it's sometimes an unavoidable aspect of expense management. Reducing the number of staff you have overall may be the only way to save other jobs in the company and preserve the health of your business.

If layoffs are necessary, and your advisors agree, carefully consider where reductions make the most long-term sense. It might be tempting to let go of the last people hired, but if they bring important skills your company needs — digital fluency, supply chain, customer service expertise, or industry know-how, you may need to make the very tough choice of releasing more tenured employees. If you feel the need for staff reductions might only be short-term, consider options such as reduced hours, job-sharing, and cutting back on overtime. Outsourcing for certain functions may also reduce the need for internal staff. Always consult with an attorney before making any staffing modifications.

3. Refocus benefits

Since employee benefits are one of the biggest business expenses, it may pay to understand what benefits matter most to your team. With this information, it may be possible to substitute low- or no-cost perks for more costly benefits to improve your bottom line. Flexible work schedules are one example of this, and a recent survey from Paychex found 41% of businesses plan to prioritize flexible schedules as a benefit.¹ Another low-cost, high value benefit is providing quick access to wages. Two popular options are paycards, which are loaded with employees' wages and are available for immediate use, and on-demand or instant pay, which gives early access to wages for hours worked — before payday. To assess what benefits matter most to employees, conduct an online survey. While this may sound daunting, it is actually quite easy with low-cost tools such as SurveyMonkey or QuestionPro.

4. Renegotiate payments

During difficult economic times, making cuts and raising prices aren't the only alternatives. While it’s best to avoid deferring too many payments, which may result in a large financial burden down the road, it may pay to investigate payment flexibility and better vendor terms.

Speak with your financial advisor or CPA to discuss cash flow planning and tax implications of any planned changes. Some potential areas for negotiation include:

• Suppliers and vendors: Leverage relationships with trusted vendors to modify payment terms where possible. They may be able to offer discounts for bulk purchases or suggest similar, lower-cost options for the items you buy.
• Utilities: Contact utility companies to determine if it's possible to defer payments or establish a payment program that reduces your near-term expenses.
• Equipment: Payments for leased equipment — such as office furniture, hardware, and vehicles — may possibly be temporarily suspended, or equipment can be returned. However, depending on the situation or terms of the lease, early contract termination may carry a fee.
• Real estate: Contact your landlord — someone who has a vested interest in your success — to inquire about a lower rent or more time to pay. Depending on the real estate market in your area and your past payment record, your landlord may be willing to negotiate.

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