The key to reducing expenses is to regularly review the effect of the change on your business.
In times of recession or changing economic conditions, business owners must look for ways to reduce their expenses in preparation for difficult times. A few years ago, when I wrote the book Profit Yourself Healthy, I came up with this list of 107 ways to cut expenses. I’ve updated this with 10 more key areas to reduce your costs. Choose a few of these and calculate how much money you could save in any given year. The number might surprise you!
Ask your provider about cash discounts for early payment.
Keep cash as long as possible if there are no discounts.
Require two signatures on all checks, contracts, etc.
Charge interest on late payments from customers.
Credit cards must be paid on time to avoid charges.
Avoid issuing company credit cards to employees.
Consider hiring payroll services.
Avoid late payments to suppliers to avoid sanctions.
Set up alerts to schedule payments.
Read your account statements regularly to monitor cash flow.
Avoid giving credit to your customers whenever possible – you are not their bank and offering credit will likely cost you money.
Have a dynamic accounts receivable collection process to improve cash flow.
Check the fees you are charged for accepting credit cards and ask for better prices on a regular basis.
For extra money, consider investing it in a short-term GIC to earn interest.
Accounting and Insurance:
Get multiple insurance quotes regularly.
Consider self-insurance programs for employee health benefits.
Increase deductibles to reduce insurance costs.
Ask your insurance agent what you can do in your business to reduce risk and get better rates.
Consider internal accounting.
Consider outsourcing your bookkeeping.
Ask your accountant for a reduced rate.
Be sure to take the time with your accountant to get a clear financial understanding of your business.
Review your advertising costs quarterly and compare them with the results.
Contact vendors for co-op advertising spend dollars.
Never advertise just because everyone else is: have a plan.
Cut your ad budget in half for a year and see what happens. I did it once and my sales went up.
Try new and cheaper advertising methods.
Start a blog.
Use Facebook, LinkedIn, and other social networks, if you can keep up with them.
Use YouTube for promotion.
Start an email newsletter and cancel the paper one.
Fill your customers with information and offers that will bring them back to your business.
Offer free seminars to your customers using your staff and vendors as speakers.
Try to get publicity for free!
Please review all consulting fees regularly to ensure value for money.
Consider outsourcing those things that are costing you money and labor.
Pay consultants to train your sales staff for better results.
Consider free training for people just starting out in the consulting business and looking for jobs.
Keep an eye on rising consulting costs and consider hiring your consultant as an employee if this will save you money.
Hire freelancers who will work at home and you will reduce your costs.
Monitor your shifts and use inventory systems for just-in-time inventory practices.
Sell unused inventory at reduced prices to turn that inventory into cash.
Put the products on sale before the expiration dates.
Shopping smart can save you money, but don’t overbuy because something is on sale.
Use an inventory management system to manage purchases and inventory levels.
Train your inventory ordering staff to adhere to your system and make smart decisions.
Lease and Rent:
Look for ways to lower your rent and lease costs. Ask about reduced rates.
Consider your long-term strategic plan before going into extended leases.
Look for ways to purchase your building or site as a way to reduce costs and increase your investments.
Reduce the size of your rental space by eliminating products that don’t sell and focusing on your key products.
Operate your business from home if you can.
Consider buying your own building and leasing off unused areas.
Consider giving your staff daily rates instead of blanket meal coverage.
Eliminate alcohol: Many companies no longer pay for their staff to drink, and neither should you.
Find ways to get your vendors to take their staff to training dinners.
Consider potluck dinners for company events.
Don’t hold gatherings where you have to buy meals.
Check your memberships regularly to see if you are benefiting from them.
Take full advantage of association benefits to reduce insurance, travel and shipping costs.
At trade shows and association events, have a plan for coming up with a money-making idea.
Look for opportunities to join buying groups or alliances to reduce costs.
Repairs and maintenance:
Keep track of your equipment by asking contractors to sign a sheet attached to the equipment each time it is serviced.
Eliminate equipment that costs you to repair and replace it with new or gently used alternatives.
Get multiple quotes for expensive repairs.
Learn to fix things yourself.
Find contractors who will work at lower rates for smaller projects.
Only buy products in bulk if you are going to use them a lot. Don’t buy two years of anything.
Go paperless if you can.
Get a service contract for copiers and printers to reduce expensive toner prices.
Keep track of supplies to prevent employee home use.
Check the prices of your office providers.
Avoid travel whenever possible to reduce costs.
Use technology for meetings whenever possible.
Never fly first class. Instead, use budget hotels and airlines when possible, and save fancy flights for when you travel with your family.
Book early or use points.
Have one staff member travel instead of a full group and ask them to present what they learned when they return.
Rent vehicles to ride with unlimited miles instead of paying your staff mileage rates.
Avoid company cell phones handed out to employees. Pay lump sums every month to avoid contracts and reduce abuse.
Consider VOIP phone services to cut costs.
Consider removing your landlines.
Eliminate extra phone services you no longer use or need.
Save energy by painting bright colors and using natural light.
Turn off your computers at night, saving you $50 per computer per year.
Turn off air conditioners and heaters when no one is in your building to save energy.
Change your filters regularly to reduce energy use.
Buy only energy efficient equipment when you replace or invest.
Get a free energy audit.
Look for energy credits to reduce your load.
Replace expensive, energy-burning lights with new, efficient ones.
Use technology to reduce energy costs.
Look for cheap local web hosting.
Use cloud storage instead of on-premises servers to reduce energy costs.
Buy used vehicles for your business whenever possible to reduce investment loss.
Have vehicle logbooks to guarantee their correct use.
Eliminate collision insurance on older vehicles to reduce costs.
Trade vehicle repairs for your goods and services.
Consider offering mileage rates to your staff instead of purchasing company vehicles.
Salaries and benefits:
Review your programming schedules weekly.
Consider reducing your hours of operation by keeping a close eye on your customer activities and patronage times.
Offer unpaid leave and wellness days to staff members you want to keep.
Review your staff compensation regularly to ensure it is fair and to prevent staff turnover.
Consider profit sharing programs to incentivize staff.
Be slow to hire and quick to fire.
Have regular employee performance reviews to ensure they are focused on their work and know what is expected of them.
Consider doing internships or crowdsourcing when possible to reduce your costs.
Stagger work hours to ensure your business is properly staffed during times when your customers need your help.
Close on holidays or days when business is slow.
Send staff home when you’re slow asking who wants to take the rest of the day off.
Outsource human resources and payroll to outside providers where feasible to save money.
Consider part-time employees when possible. In some cases, this can result in labor cost savings and give you additional capacity when needed.
Quote your waste contracts on an annual basis.
Recycle as much as possible.
Look at where your business generates waste and try to eliminate it at the source.
Reduce downtime by making sure your equipment is in good working order.
Review your workflow to increase efficiency.
Eliminate waste in your operating process by reducing reject rates.
Implement the use of an operations manual and Standard Operating Procedures to avoid confusion and ensure standardization.
While you may have some other specific areas depending on your organization, the key to reducing expenses is to regularly review the effect of change on the business, including changes to your income statement. Why have certain things changed? What are you doing different? By operating lean, you can reduce your debt levels, increase profitability, and ensure that your business is sustainable through good times and bad.
Dave Fuller, MBA, is an award-winning business coach and partner at Pivotleader Inc.
For interview requests, click here.
The opinions expressed by our columnists and contributors are theirs alone and do not inherently or expressly reflect the views of our publication.