Business costs build up in an insidious way, creeping up over time as the company grows. This affects the long-term bottom line and limits the profit you’re able to make.
Cutting overhead costs used to mean firing people. Before you take such drastic action to rein in the expenses, consider other ways to save hundreds or thousands of dollars each quarter.
Some business savings take a bit of up-front capital investment, such as more efficient software, but the time and long-term cost-benefit outweighs the initial expense. Other savings strategies cost little to nothing to put in place, and you’ll see immediate cost reductions, too!
Eight Easy Ways to Slash Overhead Costs
Get your business expenses back into shape with just a few simple and easy hacks that’ll make a huge difference to your profit margin.
1. Install Smart Eco-Tech to Save Energy Costs
Invest in some gadgets to reduce the energy bills for your office and production facilities. It’ll also improve your business credentials, as you cut your carbon footprint by saving energy wherever possible.
For example, install motion sensors for non-essential room lighting. Lights left on when people leave offices, conference rooms, or staff areas will cost you a significant chunk of wasted money every year. Installing a sensor to switch off the lights after a period of inactivity in the area will ensure you’re not wasting your money.
2. Rent Premises Instead of Buying
Tying up your capital by buying premises impacts on your cash flow and limits your scalability and flexibility as a business.
Renting may feel like ‘lost money’, but it allows you to move premises to accommodate your changing business needs. Buying premises limits your growth potential – or becomes an expensive asset if you want to downsize.
If you’re already renting, try to renegotiate your contract terms. See if you can have utilities included in the rent, or a discount if you pay rent upfront instead of monthly.
Don’t be scared of an office relocation, either. You could significantly reduce your overheads by changing your location to somewhere out of town. This also means you could gain more office space for less rent than you currently pay.
3. Allow Staff to Remote Work
Remote working reduces your immediate costs. Fewer people in the office means lower overheads: there are fewer workstations, less electricity is required, and you won’t need to subsidize as many office perks such as free coffee.
Some businesses are able to entirely eliminate the cost of rent, utility bills, and business rates by moving 100% of the workforce to a remote working contract. This may not be possible for your organization, but reducing the number of on-site staff to a minimum will significantly improve your savings.
Remote working also saves each employee an average of $5000 dollars a year, as their costs, such as commuting and lunches, are lowered or totally eliminated.
The flexibility of remote working allows you to hire the best talent, too. When you can hire the best of the best – not tied to a location – your workforce becomes more efficient and motivated, improving profits.
4. Update Legacy Software into One System
As your business grows, you’ll take on systems and software to cope with increasing demands. These programs, however, may not be integrated with each other, are outdated, or you could be spending on licenses for several programs when one will do the same job.
Your accounting files, for example, should link into your customer records for easy and fast access. If you use two different types of software for them, it takes time to manually cross-reference records.
Assess your current IT systems and determine which software is useful, which needs to be updated, and which ones are defunct. Shop around for new all-in-one management systems and price the cost of implementation against the multiple licenses you currently pay for several different programs.
5. Streamline Your Fulfillment Processes
Processing your package fulfillment and shipping takes time – and space. Space equals rent, as well as additional employees to manage the packing and fulfillment logistics.
Using a service such as Fulfilltopia allows you to manage your costs and processes in one go. Hire an external fulfillment company and you’ve immediately slashed the overheads of the space, and workforce, required to manage the process in-house.
6. Use Airline Miles, Cashback Sites, and Discount Codes
Just as you’d use discounts, coupons, and offers to save money on your personal spending, extend this to your business accounts too.
For example, buy your business insurance through a cashback site such as Topcashback and you’ll receive a percentage of the purchase back. You could even set aside any earned cashback to spend on other areas of the company, such as employee rewards and events, to save overall.
Make sure any company credit cards work for you, too. Look at those offering cashback, or even airline miles if your staff travel often. Use airline clubs, too, to maximize employee perks when they are requested to travel – at no extra cost to you.
7. Review Subscriptions and Memberships
From trade magazines to business memberships, there are many monthly and annual costs you’ll have accrued over time. You may not even be aware of some older subscriptions – particularly when employees have left the company – which means you’re paying for nothing.
Review all outgoings every month over the course of a year. This will help you to identify any unknown, or surplus, subscriptions, and memberships so that you can cancel them to save costs.
If you have subscriptions you still need but have several employees with access, consider restricting access to fewer employees or negotiating a group discount with the supplier.
8. Assess Your Supplier Performance and Renegotiate Contracts
How often have late suppliers affected your production chain or ability to deliver a service to your end customer?
Mistakes happen, sure, but if a supplier continues to let you down, or makes errors that could have been easily avoided, it’s costing you money. Analyze your contracts, supplier performance, and working relationships to see where you can renegotiate for lower costs.
If a supplier has cost you significant delays, reputation damage, or repeated difficulties, it’s time to put your contract out to tender. This will help you find a new supplier and allow you to negotiate cost savings.
Hire a Professional Accountant
Hiring an external supplier to manage an in-house process like accounting may not seem like a great way to save on overhead costs.
However, a trained eye over your current business situation, combined with expert knowledge of ways to save – and spend – creatively, makes a huge difference to your profit potential.
Outsourcing your accounting to an external supplier also allows you to further control costs. You don’t need the expenses of a full-time in-house accountant, but instead, you’re paying only for services as and when you need them.
Make sure you’re getting the best accountant for the job by first reading our guide about choosing your business accountant.