8 Practical Areas of Business Advice to Reduce Costs

Successful business owners increase their profits in two ways – they increase their sales and they reduce their costs. Businesses can reduce their costs in many ways; some are more complex than others. Here are some simple and quick ways to increase profit by reducing costs.

1. Prepare a Budget and Continually Monitor It

A practical and comprehensive budget enables managers to monitor expenditure and to lower costs wherever possible.

Zero-based budgeting demands that every “usual” cost is looked at to see how valuable that expense is to a project or to the business as a whole. The alternative to zero based budgeting is simply to assume a particular expense is needed because it has always been there. Simple, focused and frequent expense justification cuts costs quickly. Make it standard practice for annual, quarterly or by-project expenses are totally justifiable.

2. Go Paperless. Use the Cloud

Few businesses can go totally paperless, but they can reduce paper, ink, toner and office equipment maintenance costs by:-

  • Printing only what must be printed.
  • Using electronic invoicing and payment systems rather than primarily mailing out paper invoices and receiving checks.
  • Using Software as a Service (SaaS) services to store their data off-site, in another computer-based data bank. It is the modern equivalent of computer bureau services. It makes it easy to retrieve information from anywhere (so time and money doesn’t go into duplicating or downloading records that several people may need, or that they will need on client sites, for example.

SaaS also means that software is always up to date, so new copies do not need to be bought and installed every time there is an updated version available.

3. Use Technology to Reduce Travel Costs

Everyone must make some face-to-face visits, but you can also use your laptop to ‘meet’ remotely when you can. Facetime and GoToMeeting services all mean individuals and groups can meet without incurring travel costs. Not having to travel to a meeting, also means more time will be available for other tasks.

4. Factor Out Sales Invoices

Invoice factoring is the B2B equivalent of accepting payment by credit card. The invoice is paid within a couple of days, for a slightly reduced amount; the equivalent of credit card merchant fees. Businesses can exchange high-interest overdrafts or loan facilities with a discounted immediate-pay factoring agreement. These agreements also do away with a bank’s set-up fees.

5. Pool the Benefits

Insurance and other professional advisers may know of ways to sensibly lower insurance cover by removing elements of the policy that will never be used, or suggest group benefits programs that may lead to reduced premiums.

6. Outsource Specialist Work

Some key employees are essential to any business. There may be some, however, where the business can outsource some essential activities rather than hire in full-time employees. Obvious examples include book keeping, payroll and CFO advice.

7. Job-Share

When an employee leaves, instead of automatically replacing them, see if their work can be shared by others. Use the equivalent of zero based budgeting for hiring decisions. It may be just as productive, and improve motivation, if loyal employees take on that work and get paid more as a result. This approach may save money that can be allocated to more important areas..

8. Sub-Let Unused Space

Some businesses have more space than they actually need. Some customers and suppliers may need more space than they currently have. It may be, for example, materials or product storage, or local office space their own road warriors can use occasionally. Let your contacts know that you have work or storage areas available, that you will sub-let to them.

This turns empty space into a profit center. It may also improve a working relationship that will, eventually, lead to new business.

The Take-Away

There are many ways to increase profits by reducing costs. Some of the ways are more usual than others. These eight ideas are time-tested.  Business advice may be sophisticated and complex, or it may be simple, obvious and straightforward.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

For more information on business analysis, business planning, and ways to grow your small business profitably, please check out our website www.portalcfo.com.

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