January 15, 2008

Cutting Costs for Your Business

For a business to be profitable, revenue must exceed expenses. To increase the amount of revenue, many businesses look for ways to reduce expenses. Start by analyzing your current expenses. Categorize them into two distinct groups, one for expenses you have to have, and the other for expenses you can possibly lower or eliminate from your business budget.

Travel and entertainment
The areas most businesses can drastically cut down on are travel and entertainment expenses. You can still have a Christmas party, but scale it down to the staff only rather than inviting spouses. Change the location to save on cost. If your company is in jeopardy of survival your employees will understand. Discuss the reasons why such changes are taking place in advance.

Necessary expenses
Take a look at expenditures including insurance and cleaning. Have your insurance and other variable expenses re-evaluated. You may be eligible for additional discounts. Comparison shop with other companies as well to ensure the best rates possible for the coverage you need. If you are spending large amounts of money to have the office cleaned, consider cutting the services back one or two days per week. This will result in a large savings over time.

High phone and utility bills are often an area most businesses can reduce costs in. Make sure lights and business equipment are turned off when not in use. Have employees keep a log of long distance phone calls. Avoid making them if at all possible. Try alternate communication methods including email and letters.

Standardize your business equipment. Make sure all staff is well trained in their operations. This will result in more productivity and less down time overall. Make sure the use of office supplies is not abused. Recycle paper and binders whenever possible. Consider changing to lower wattage light bulbs to further reduce the utility costs.

Buy in bulk
Another great way to save on business expenses is to purchase items in bulk through a wholesaler. By cutting out the middleman, you will reduce your costs. Reduce the amount of inventory you have on head. It is expensive to store it. If you operate a business with seasonal fluctuations, consider running consistently all year long. This will eliminate the expense of paying overtime during the busy season.

It is very easy for business expenses to spiral out of control it they are not carefully monitored. It is important to evaluate your expenses on a regular basis, and make adjustments as necessary. Keeping your expenses as low as possible will enable the business to increase revenue without increasing production or marketing.

Consider asking your employees to contribute ways the business can save money. Since they are on the front line every day, they can often pick up on things that management doesn't see as easily. Every little change can add up to large savings over the course of time. Employees who take pride in their work are more likely to be conservative at work with supplies and resources. Do your best to keep the work environment positive and inviting.