Small costs and expenses may not seem like a big deal on an individual basis, but they can add up and have a rather significant impact on cash flow. Implementing a cost-reduction plan will save you a lot of money over time.
4 Ideas for Reducing Business Expenses
There are two basic ways for a company to improve cash flow and grow profits. You can either bring in revenue through increased sales, or you can reduce expenses and create more room in your budget.
The first method is obviously a chief objective for every business, but it’s also largely outside of your control. You can’t just will your business into growing revenue. There are certainly active steps you can take and strategic decisions you can make that influence sales, but there are also lots of indirect factors in play.
The second method is much more within your realm of control and influence. Expenses can almost always be trimmed back, removed, or readjusted. Hence controlling expenses is an important key for business profitability.
Here are some specific ideas:
Encourage Energy Efficiency in the Office
Utilities often account for a significant portion of overhead costs. If you can find a way to increase energy efficiency in the office, you’ll enjoy some significant cost savings.
Heating and cooling is one thing to look at. A programmable and/or smart thermostat system may allow you to cut climate control costs without compromising on comfort.
“Use a programmable thermostat to customize your facility’s climate control schedule: at a 9-to-5 office, that probably means increasing the heat or AC in the morning and dialing it back (or turning it off completely) in the evening and overnight,” entrepreneur Brian Martucci says. “In larger facilities, you’ll need multi-zone thermostats or multiple thermostats to handle climate control needs on different floors or suites.”
Reduce Paper Consumption
Going 100 percent paperless may not be practical in your current situation, but you can always save some money by reducing paper consumption.
Reduced paper consumption means fewer paper purchases, lower storage costs, and greater efficiency. Spend some time digitizing paper processes and you’ll never turn back.
Use Blanket Orders for Consumable Products
Order quantity obviously has an impact on price. If you order 500 units of an item from a supplier, it’s going to cost you a lot less than if you order 50 units – this is basic business mathematics. The problem is that, when it comes to consumable products that you use around the office or warehouse, you don’t always have the space or upfront cash to buy in bulk and enjoy the cost savings. The solution is a blanket order.
“A blanket order is a purchase order the customer makes with its supplier which contains multiple delivery dates over a period of time,” United Ad Label explains. “It is normally used when there is a recurring need for a consumable product. There are different types of blanket order programs that vary depending upon your needs.”
Buy Generic or Used Items
You don’t need to buy brand new or name brand products for your office. While there are times where it makes sense to do so, there’s significant savings to be enjoyed when you open your business up to purchasing generic and/or used items.
Used items often cost 50 to 75 percent less than brand new items, even when they’re in perfect working condition. Nobody is judging you on how new your equipment is – and it becomes used as soon as you operate it the first time. Why not save some money?
Regularly Revisit Your Budget
Your budget shouldn’t be stagnant. While a lot of companies have annual or quarterly budget meetings, the reality is that you should be managing and tweaking your budget in real time. By staying on top of it, you reduce the risk of falling behind and finding yourself in a situation where you have to dig and claw your way out. While you may update your overall business plan once per year, you should at least take a look at your budget every month and compare projected versus actual expenses.