Simple ways to reduce business operating costs

Evaluating and managing your business expenses aren’t as easy as they look. In today’s uncertain condition of the economy, every shilling counts. Any fluctuation in the expenses can impact the financial statements. An increase in expenses can affect your profitability and hence, it is important to keep a check on your operating costs. And among the key reasons behind the disaster, it’s the lack of sufficient capital or absence of proper capital management basics is to be blamed. How you handle your operating expenses play a decisive role in your sustenance in the market.

However, not to worry as the post below lists down tips to reduce the operating expense for businesses.

Put in systems

Some businesses lack clearly defined processes that enable them to run more efficiently. The consequences can be substantial. In most of these cases, business owners end up spending more on employees. They hire more employees than they need. The employees make mistakes in their work because of a lack of established protocol and they defer all questions to the business owner, even if they’ve personally handled those problems before.

Think of outsourcing

Save money on office supplies by contacting vendors to let them know you’re prices-shopping. Look outside your pool of traditional vendors. Large discount suppliers can often beat traditional office supply vendor prices.

Cut production costs

As a business owner, you're always looking for ways to cut material costs, and optimise your resources. Track and measure the operational efficiency of your business, in order to adjust and optimise the use of available resources. Set performance parameters that reflect your efficiency goals and offer incentives when those goals are met.

Automate

Automation sometimes works hand in hand with systemisation, since making your business more efficient may require the use of computerised software. This technology allows you to do more with less manual involvement, which also means you can redirect your resources towards more high-level, profitable activity.

Review your administrative costs

Look at your insurance policies and financial accounts for places to save money. Save money on insurance by comparing providers for the most competitive rate; then ask your current lender or insurance provider to match that rate. Don’t take on unnecessary debt. Do a thorough cost-benefit analysis and future forecasting when considering business expansion. Consider the opportunity costs and the effect of debt payments on cash flow. Excess debt affects company rating, interest rates and the ability to borrow in the future.

Modernise your marketing efforts

Of course, you don't want to eliminate paid advertising that is working; however, it can be worthwhile to take a look at some cheaper alternatives. Build your customer e-mail list, social media and implement a referral programme. A recommendation from a current customer is far more likely to result in a sale than traditional marketing.

Use efficient time strategies

Optimising productivity effectively lowers your cost of doing business. Remember, wasted time equals wasted shilling. Minimise distractions and limit access to time wasters. Utilize software to track employee time usage, time spent on different types of work activities or projects and billable hours. Set expectations for a reasonable amount of time to complete certain types of activities or tasks. Schedule a predetermined block of time for meetings. Make it clear that you expect participants to be on time, to stick closely to the agenda and to wrap up at the appointed time.

Meet clients virtually

Reduce business costs by operating in a virtual manner whenever possible. Virtual meetings help minimize travel expenses and virtual offices can eliminate the need for physical space. While we certainly don't want to eliminate personal contact altogether, save it for the instances when it's most beneficial.

Make the most of your space

Analyse your current use of physical space. Overflowing storage, too many supplies, piles of paper files and inefficient placement of furniture and equipment are common space wasters. Consolidate or centralize the different functions or departments of your business. Use space for dual purposes. The opportunities will vary depending upon the nature of your business.

Maximise your employees' skills

Assess the current usage of employee experience and skills. Give responsibilities to the employees with the most skill and efficiency in those areas. It's often necessary for one person to be responsible for a variety of tasks, but consider exchanging some of those tasks with another individual who shows greater efficiency.

Focus on quality. Quality sells whether in the form of products or services. Satisfied customers increase sales through referrals and repeat purchases. Higher quality and a solid reputation allows you to charge higher prices, which equals higher revenue and a healthier bottom line.

If you’re overwhelmed and unsure where to start, the first thing to do is to create a list of all your expenses. Lay it all out and find out what is costing the most. Also, don’t forget to look at the greatest inefficiencies in your business. Chances are good that if you eliminate bottlenecks in your processes, you’ll see your costs go down. Many business owners find that they themselves end up being the biggest bottlenecks of all, because everything must go through them.