Reduce Business Costs
How to cut business costs without sacrificing quality
Managing your small business effectively means being able to reduce business costs and expenses without cutting into your profits or sacrificing the quality of your finished product. No matter what field you're in, keeping a close eye on your expenses will help you identify what you need and what can be cut to lower business costs.
Start by assessing all expenditures
To decide how to cut business costs, write down all your expenses and transactions for three months. Look for repetitive expenses, especially larger transactions, and make a list. You should also audit your business assets. List everything your company owns, from desktop computers to storage units and extra land. Since companies don't update their assets every year, you might be surprised to find you're paying taxes and insurance on items you no longer own. This is a prime place to start reducing business costs. This will also allow you the opportunity to get rid of any excess furniture, phones and computers for a little extra cash.
While you're at it, examine your inventory management system. Working to eliminate gaps in your inventory will not only allow you to use that storage space more efficiently, but also give you the opportunity to sell off old inventory.
Don't cut business expenses you need to grow
When you're looking to save money and lower business costs, it may be tempting to just cut the largest business expenses first. However, there are several expenses you want to be more cautious about eliminating, as not investing in them could restrict the growth of your small business.
- Advertising: You want to keep your company present in the minds of consumers, even in down economic times. If you cut advertising, you risk losing out on new clients. Press releases and online media can be affordable advertising opportunities that will keep you visible in the market without breaking your budget.
- Training: Instead of hiring expensive, seasoned employees, consider investing in training for interns and recent college graduates. You can afford to pay them less than someone more experienced, and if you increase your training budget and initiatives, they could be just as effective.
- Salaries: Cutting salaries and firing employees may result in low workforce morale. Instead, try postponing raises and find ways to motivate your employees to work more efficiently. Laying off employees should be your last resort.
- Safety measures: Don't sacrifice the safety of your employees to save a few bucks. Make sure all your equipment is up to date and meets health regulations.
- Quality: The last thing you want is to lose customers when you're trying to lower business costs. Avoid purchasing cheaper supplies that might hurt the overall quality of your finished product.
- Insurance: Many companies cut fire or flood insurance, thinking it won't happen to them. In reality, having this coverage will save you a lot of money and may even save your business in the event of an accident or disaster.
Lower business costs by effectively managing overhead
When you need to lower business costs, look first to any excessive spending, like donuts for the office, travel expenses or even employee cell phone plans. After you've taken a look at your everyday costs for the last three months, consider some of the following methods to cut common business expenses:
- Work with your landlord for more favorable lease terms. You could also consider subletting unused office space or moving to a shared office suite with other companies.
- Purchase used furniture, computers and phones when possible, and barter with other businesses for goods or services.
- Use modern technology to reduce costs: Email is cheaper than postage and encouraging your employees to telecommute can save on office space.
- Do your own cleaning, repairs, shopping and errands.
- Outsource payroll, employee benefit services and HR.
- Save on utility costs by putting your lights on a timers or motion sensors and installing a programmable thermostat.
Trust your everyday small business banking needs to Citizens Bank
Work with Citizens Bank to find bank accounts that work for you. With online banking options, merchant services and cash rewards for paperless statements, you can save more when you trust us with your small business banking needs. Call today at 1-800-428-7463 to speak with one of our business bankers about how we can help you reduce business costs.