• 5 MIN READ
How Can a Business Cut Costs
August 1, 2022
The profitability of any corporation can be impacted by even the slightest sales growth or, alternatively, cost-cutting. The good news is that a comprehensive company revamp is not required.
Here are some of the easiest ways to cut business costs significantly and improve profitability, something every business owner could use, especially after global inflation due to COVID-19:
Examine Overhead Expenses
Your overhead expenses are fixed costs that you incur on a monthly or annual basis. When checking your fixed expenses, consider the following questions:
- Are there any subscription services that you pay for?
- Does your business utilise unused transportation or automobile services?
- Do you work with a potential cut-out vendor?
Monitoring overhead expenses frequently is crucial to ensure that business costs remain low. In addition, It can help you see if resources are being used efficiently or not.
Lower Financial Expenses
If you want to start saving money, look at your financial records and insurance plans. Here are several ways you can do this:
- Save money on insurance by shopping around for the best deal, then request a price match from your current lender or insurer.
- If you can, combine your bank accounts or insurance policies.
- Make sure you are not overinsured or using duplicate coverage by reviewing your insurance policy.
- Avoid taking on additional debt. When thinking about business expansion, conduct a detailed cost-benefit analysis and future projections. Think about the opportunity costs and how loan repayments affect cash flow. The company's rating, interest rates, and future borrowing capacity are all impacted by excessive debt.
Utilize Virtual Technology to Reduce Costs
Include virtual technologies in your cost-cutting plan. The pandemic's consequences have demonstrated how successful firms can be when they operate remotely.
Virtual offices can replace the requirement for real space, and virtual meetings reduce travel costs. Of course, we shouldn't completely forgo human interaction, but reserve it for when it will be most helpful.
As an alternative to using paper, technologies centralise business documents and product cooperation. You can significantly reduce your spending on office supplies like ink, printer paper, and even mail by utilising virtual document sharing.
This proves to be a much more efficient way of storing information since it can be viewed from anywhere in the world, and the risk of losing data is much less likely as compared to physical storage.
Narrow Your Focus
Narrowing your focus has proven to be one of the most effective strategies for cutting costs in a business. By limiting the types of products and services you offer, you can spend time perfecting your strengths.
In addition, if you work on a large scale and take orders for limited products/services, you can enjoy economies of scale through bulk buying. It will also be easier for you to deal with customer feedback and improve your offerings.
Another way to narrow your business focus is to subcontract. Rather than turning away business, maximize your capacity by subcontracting projects whenever possible.
More projects equal more revenue, while subcontracting equals lower expenses (Fun fact: Frequently, outsourcing is much cheaper than producing in-house. This is why Apple, despite being a trillion-dollar company, buys phone screens from its rival Samsung).
Make the Most of Your Staff's Abilities
You might evaluate how your employee's experience and skills are currently being utilised if you're still looking for ways to reduce business expenses. For example, you can lose money if you hire people for incorrect positions, you can lose money.
Employees with the best expertise and efficiency in certain areas should be given responsibility. For example, use "numbers" workers instead of expert salespeople for design tasks or word processing.
Although it's frequently necessary for one person to handle a variety of activities, think about delegating some of those responsibilities to someone more effectively.
Another option is to hire Management Trainees to carry out job rotations. While you will have to spend initially, you will better be able to gauge which employee is most productive in a given department; thus, offering long-term profitability.
Ditch the "Belt and Suspenders" Mentality
In the past, the no-surprises criteria were used to evaluate managers. The "good" ones were ready for any situation.
However, this approach has predictably resulted in excess expenses because it rewards managers for taking precautions against low-probability, low-consequence situations.
Examine where you spend money on the off chance that particular occurrences might occur:
- Has it been five years since the events took place?
- Would they be embarrassing but not expensive if they did happen?
If the answer to either of these questions is yes, you're probably squandering those resources.
Keeping extensive records when the information you may need in the future can be obtained from other sources is an example of exercising care in excess.
In conclusion, while contingency planning is good and should be carried out, it is important not to spend excessive resources and time on it.
Use The Right Technology
Investing in technology can streamline business processes and help you run your business more efficiently.
Payrow allows you to manage payments with a high level of security, create invoices, and process taxes. Our optimisation of financial flows and management provide the necessary individual support at every stage of the business cycle.
Read more about Corporation Tax Changes in the UK in 2023.
Using our services, you can:
- Make local and international business payments without complications and hidden costs.
- Create sub-accounts in GBP and EUR, if you work with several currencies
- Get detailed information on payments and invoices (All transaction data, deposits, and expenses are taken into account automatically).
- Transfer money between Payrow accounts for free. We have no fees for internal transfers.
- Get detailed information on payments for the required period or any statements you need in your Payrow account.
- Use the reporting function and download data for the selected period in a convenient format.
- Set dates for automated creation and distribution of statements.
When we talk about statement distribution, we understand that often several departments are included in the business, and in large companies, it can be hundreds of people.
If you set up regularity in the transmission of information, you will not get confused about deadlines. We suggest adding multiple recipients if you deem it necessary.