We’re all looking for effective ways to reduce business expenses, save money and increase our profits. We’ve also all got our own ideas on how to do so. Every business will have expenses that must be budgeted for in order to help it run smoothly. Depending on your industry, those expenses will differ in both type and quantity. Rather than focus on a specific industry, we’re going to look at the most common business expenses and suggest ways you can lower your outgoing costs for them.
What Are the Most Common Business Expenses?
When we talk about business expenses, we’re thinking about things such as:
- Home office or rent
- Phone and internet
- Electricity and power
- Advertising and marketing
- Recruitment and uniforms
- Professional development
- Tools, machinery and maintenance
- Computers, devices and internet
- Stationary and postage
- Bank fees
- Interest and loan repayments
- Vehicle expenses and parking
- Product purchasing and storage
- Accounting, bookkeeping and professional services
You’re not necessarily going to have all of these expenses, and the amount you pay will be different from others. What you will need to have done though, is identify your expected business expenses and ensure you have money allocated in your budget to cover them.
Ways to Reduce Business Expenses
Here comes the fun bit; working out where you can cut costs, save money and increase your profits. From number crunching to switching insurance companies, there are plenty of things you can try. Some of our favourites include:
- Marketing – from print to radio and internet, you have a few different options to try when marketing. The traditional print, radio and tv are normally highly-priced, with online advertising usually at a much lower level. However, as well as being selective with the place where you spend your dollar, there are other types of low-cost marketing you can try. Content marketing, social media marketing, SEO, word of mouth and competitions are generally quite effective.
- Negotiating – now, you’ll not be able to contact your power company and ask for a discount, but a landlord just may be more receptive. Negotiating for a lower rate by signing a longer lease or purchasing in bulk is a valid and effective way to reduce business expenses.
- Share office spaces – instead of renting an office alone, why not use a coworking space? There are many places offering either fixed or hot seat offices, which also have the advantage of letting you network with other business owners too.
- Perform a regular cash flow analysis – each month be sure to track where your money is being spent. Having a clear understanding of where your costs are, helps you identify where your money is going. This means you are able to target those expenses specifically if necessary.
- Go paperless – photocopying and filing are expenses you don’t necessarily need to pay for anymore. Instead, you could keep all of your documents digital by using secure cloud storage.
- Reduce power consumption – an oldie but a goodie, this means turning off lights and heaters when you’re not in the room etc. Also using energy-efficient appliances can save significant amounts too.
- Equipment and tools – depending on your industry, it may be possible for you to purchase high-quality secondhand tools, machinery and computers. This can save you considerable amounts of cash but has the potential to cost you some too. If the machinery was not well maintained, then you may be chasing good money after bad. It would pay to do some serious due diligence first. Purchasing used furniture is another way you could cut your costs too.
- Office supplies – do you really need to purchase brand name paper, or will a budget version suit? Here it is all about taking a look at the brands and quantity of supplies you purchase and identifying areas where you could purchase less or swap to a cheaper brand. This could mean changing suppliers also.
- Preventative maintenance – it is far cheaper to be proactive and undertake a regular maintenance schedule with your equipment than to wait until something goes wrong.
- Fees and charges – credit cards and memberships are two areas where you’ll be charged fees for being able to use the services they provide. Analyse the services you are subscribed with to decide if they are truly necessary for you. If not, then cancel them. If they are, see if you can negotiate a lower rate or swap to another service provider.
- Outsource – it may seem silly paying for someone to do something you could do, but it’s actually being strategically smart. For instance, you could do your finances each month. The problem is though, it takes you hours, you hate numbers and you are much better at writing content for your website. This is when you would be strategically smarter to hire a bookkeeper to keep everything on track and who could do it in a shorter time than you could. You’re left with time where you could create website content which helps you bring in new customers instead.
- Reducing inventory levels – do you really need 20, 50 or 100 blue teddy bears sitting in storage? They’ll be a balance to work out, but keeping fewer products in your inventory can significantly save on costs. This is especially important if you have products which are seasonal, can expire or become unfashionably quickly. It would be better to make regular and smaller orders (but double-check this as buying in bulk can also make financial sense).
- Online meetings – rather than travelling to meet clients and business professionals, chat online with them instead. This saves travelling costs, and also entertainment costs too. Also take note of the number of meetings you have, and see if you can reduce those too.
- Work remotely – why not work remotely for one day a week, or let your employees do so? This can save on electricity and consumable costs.
- Four day work week – could you limit the days your business is open for? This could mean you work longer on those four days, but you get a day off to compensate for it. This can reduce office consumables, electricity and travel expenses.
- Sponsoring – is being sponsored by other businesses or agencies a possibility for you? This may fit when holding events or fundraisers.
- Automation – what can you set in place to automate repetitive tasks in your business? Automating tasks can cost you initially, but pay you back in both time and cash in the future.
As mentioned earlier, to be able to reduce business expenses, you first need to understand what they are, how much they are costing you and analyse your usage of them. That’s where we can help. Our business development team can help you identify ways in which you can lower your expenses, helping you to raise your profit margin. Let’s get together and chat: get in touch today.