Six practical ways to cut business costs
Running a business can be hard enough, so it’s no surprise that there’s a significant failure rate in the first two years. And the Covid 19 pandemic has made it even more difficult for many to keep their businesses afloat.
Companies that were once thriving and ready to expand can barely keep their doors open, and many have sent workers home indefinitely. If you are struggling to run your enterprise profitably, here are six practical ways to cut costs.
1) Track your expenses
The first step in cost-cutting is getting a clear picture of where your funds are going. If you don’t have an in-house accounting team, hire someone temporarily to examine your expense logs and draft a report. You can also use an expense tracking software to monitor your expenses real time.
You may be shocked to see how much money goes to areas like pricey cleaning services, take-out meals, stationery, etc. Tracking expenses can also help you identify instances of fraud, allowing you to take action before things get out of hand. Diligently track expenses even after the cost-saving exercise is complete.
2) Use cheaper fuel cards
As much as you try to cut back, the reality is that you cannot do away with many essential business expenses, such as paying for fuel for company vehicles if you have them. Investigate what options of fuel cards are available for your kind of business. Take advantage of subsidized fuel cards and monitor the change in expenditure over several months.
3) Reduce your production costs
Production comes with a hefty price tag for procuring raw materials, sometimes from overseas. Shipping from certain countries like China has become more difficult due to political turmoil and supply chain issues. The aftermath of the pandemic also means business costs are skyrocketing, with can make it harder to turn a profit.
Selling your leftover materials to other companies and consolidating operations are viable methods of cutting costs. If you have several outlets, consider where the main production plant should be instead of having different teams working on the assembly line.
4) Try smart lighting
Green buildings have become increasingly popular in recent years as cities strive to curtail energy consumption. Even if your building was not originally built with green technology in mind, there are a few tweaks you can make. Invest in intelligent lighting to keep electric bills low.
For example, smart bulbs go off when nobody is using the room, and you can adjust their brightness to suit the time of day. A programmable thermostat will save you the cost of heating during winter or when employees are working late nights or early mornings.
Blackout curtains on the windows facing the sun can reduce passive heating and intrusion of light during sunny days. In the same breath, consider installing solar panels for heating, especially if you live in a warmer climate.
5) Eliminate redundancies
Removing redundancies is another approach to cost reduction. For instance, do you need two receptionists at the front desk? Perhaps one can join the sales team which is short-staffed. Unnecessary processes are not only time-consuming but can also dampen staff morale.
Speak to managers to understand bottlenecks and other problems that only cost money with little to no returns. Unfortunately, elimination could also mean outsourcing periodic services like IT, recruitment, and accounting as you deem appropriate.
6) Use technology
Lockdown procedures during the Covid 19 pandemic have forced companies to be more innovative in executing things like meetings. Use the convenience of technology like Zoom and other platforms to hold conferences with your teams rather than spending money on travel and accommodation.
Telecommuting is gradually becoming popular with many companies. If some employees can work offsite, this will save renting and maintaining office space.
