Every business wants to find them, but they sure don’t make it easy. We’re talking about cost cuts: clear and substantial ways to lower expenses, thereby strengthening cash flow and giving you a better shot at strong profitability.
Obvious places to slash costs — such as wages, benefits and overhead — often aren’t a viable option because the very stability of your operation may depend on them. But there might be other ways to lower expenses if you dig deeply enough. Here are three ways to perhaps uncover some cost-cutting opportunities.
1. Study your suppliers
Many companies find that just a few of their suppliers account for most of their spending. By identifying these vendors and consolidating spending with them, you may be able to put yourself in a stronger position to negotiate volume discounts. Consolidating your supplier base also tends to streamline the administrative work associated with purchasing.
On a related note, how well do you know your suppliers? One way to ensure you’re working off an abundance of relevant information is to conduct a supplier audit. This is a formal process for collecting key data points regarding a supplier’s performance to manage quality control and ensure you’re getting an acceptable return on investment.
2. Go green
Going green can, under the right circumstances, save you money. Refurbished computers or office furniture often can be found at substantial savings compared with their brand-new counterparts. If you no longer need equipment, computing devices or office furniture, you may be able to sell them to a liquidator or dealer. You’ll not only bring in some money on the sales, but also free yourself of the need to store and maintain the items.
In addition, look at your facilities. If you own the property on which you operate, research energy efficient upgrades to the HVAC and lighting systems. Naturally, making such upgrades will cost you money initially, but you may be able to lower energy costs over the long term. What’s more, you might qualify for tax credits for installing certain items.
3. Explore outsourcing, tech upgrades
Many business owners try to cut costs by doing everything in-house — from accounting to payroll to HR. But if the staffing and expertise just aren’t there, these companies often suffer losses because of mistakes and mismanagement. Although you’ll obviously incur costs when outsourcing, the time and labor it saves you could end up being a net gain.
Carefully chosen and implemented technology upgrades can serve a similar purpose. Many products on the market today are so robust and fully featured, upgrading to them is almost comparable to outsourcing.
Again, you’ll need to spend money in the near term but, eventually, you could lower the cost of doing business. For example, the right customer relationship management system can help you generate sales leads and focus on your most profitable existing customers.
Snip, snip, snip
Lowering expenses is often difficult, but looking for ways to do it is an important activity to undertake regularly. This is particularly true now that inflation is a major factor in the economic landscape.