It’s always good to reassess the bottom line. But especially when costs are rising and income is stagnant, you need to take a good look at where you can cut expenses.
To effectively make cuts, you should first review all of your expenses and then trim areas that will have the least impact on day-to-day operations. When choosing where to ultimately cut, remember to not take anything away from service to your clients. Many business owners immediately cut back on advertising and marketing, which is often a large expense. But experts rule against cutting down in this area because you will need to maintain that lifeline, especially at a time when your competitors minimize their efforts in those areas. Personnel is another place where cuts are often made. But layoffs kill staff morale and are an outward sign of trouble to your customers.
A few simple changes in how you run your business can save you thousands of dollars a year and allow you to remain competitive in tough economic times. Here are six areas in which to consider cutting expenses:
- Technology: The latest wave of technology has spoiled many business owners and their employees. Does everyone in the office need a new printer, or would one printer for several people suffice? Do you need the latest version of each software program? An assessment of technology requirements can be an eye-opener for many companies. Determine what you really need and what is a luxury and you’ll be able to save money.
- Telephones: The phone companies are highly competitive, so there is a very good possibility that if you shop around, someone will beat your current deal. You can play one offer against another and then lock in at the negotiated rate. By reviewing all of the options, reading the fine print on the contract before signing, and eliminating extras for which there are fees, you can save thousands of dollars on your telephone expenses. In addition, if you hold frequent business meetings by phone, you can opt for Web conferencing, which is typically less expensive.
- Energy: Along with the environmental benefits of a greener office, you can cut your expenses by minimizing your energy usage. Something as simple as replacing incandescent light bulbs with much longer lasting compact florescent light bulbs will mean buying fewer bulbs over the course of the year. Also, turning off lights, computers, and other equipment that are often left running overnight will result in energy savings. However, if you really want to make a dent in your energy bills, shut off your climate control system more often. By utilizing skylights, open windows, and proper shading, you can benefit from what is called passive solar energy, whereby you trap warm air by day and cool air by night by shutting doors and windows to trap air inside. Research passive solar energy on the Internet to learn more about saving money on energy bills.
- Business travel: Many companies are reducing expenses by replacing business excursions with teleconferencing or Web conferencing. For those who must travel, compare the costs of trains, buses, and rental cars to airfare.
- Supplies: Ordering in smaller quantities may save you money. Some companies have closets and stock rooms filled with excess supplies. People will use whatever is available. But if employees don’t have a choice of four different colors of sticky notes and five different colors of pens, they won’t miss them. Take a realistic look at the supplies you use most often and only order what you need. One of the biggest office supply expenses is copy paper. You can minimize your paper usage by asking people to read reports online. And when you do need to print something, get in the habit of pressing that double-sided button and cut your paper expenditures in half.
- Inventory: Not unlike supplies, many businesses are stocking far more inventory than they need. Over-ordering is costly; in many cases maintaining inventory adds up. And having your money tied up in inventory rather than in more liquid assets means you may need to borrow money. Avoid excess inventory by keeping better track of what you use and when. Moderation in ordering can result in lower overhead, which may even allow you to downsize to a smaller, less expensive location.